The Nation Watches as California Mandates Solar Power

Filed in Codes and Regulations, Environmental by on May 30, 2018 18 Comments

solar panelCalifornia has long pushed the envelope on energy and environmental policies.

Right now, people are abuzz with the California Energy Commission’s proposed requirements for the the state’s 2020 energy code, which includes mandates on solar energy generation for all new residential construction beginning in January 2020.

The ruling applies to most single-family homes as well as multifamily buildings up to three stories. Options to meet the mandate will include installing solar panels on individual homes or joining a community solar system.

The 2020 code will also require additional insulation and increased window and appliance efficiencies.

The California Building Standards Commission typically accepts energy commission recommendations without change.

The solar mandate requirement is being driven by California’s net zero energy goals. Other states and cities across the United States also are working toward net zero goals and may enact similar requirements.

California builders saw the writing on the wall with the mandate, and worked with the commission to maximize flexibility and minimize implementation costs.

“We knew this was going to pass,” said Bob Raymer, senior engineer and technical director at the California Building Industry Association (CBIA). “We decided we needed to get on this train and see it going down a more affordable track. And thanks to our good working relationship with the commission, we were able to keep costs down.”

One CBIA victory, he said, was a solar lease option. This will give home owners the choice to lease solar panels rather than buying them upfront.

“It will be some time before we find out whether mandating solar panels for homes in California is a good idea,” said Craig Drumheller, NAHB Assistant Vice President of Construction, Codes and Standards. “The high price for electricity and excellent solar resources throughout most of the state make California one of the better states for this experiment to take place. However, there is a concern that a large percentage of the homes with solar systems will not provide a positive cash flow for the home owner, especially outside of California and in unsubsidized environments.”

However, the new requirements are still likely to increase the price of a new home. And the banking and appraisal industries’ limited awareness of the value of green building practices and how they affect the “total cost of ownership” benefits may make it harder for buyers to secure mortgage loans for homes at the higher initial price, even though they will save on monthly utilities.

“Utility costs are less, but one problem is that lenders don’t recognize this,” said Mike Hodgson, a member of NAHB’s Sustainability and Green Building Subcommittee and president of ConSol, an energy-efficiency consulting firm in Stockton, Calif. “For buyers to be a better mortgage risk, we need to have the lenders recognize these savings.”

This involves housing stakeholders emphasizing to appraisers and mortgage underwriters that high-performance homes can save money over time. These conversations may lead to better assessments of high-performance features, more accurate appraisals, and additional financing mechanisms that reward spending upfront to save on long-term costs.

These appraisal efforts are particularly important in a state like California with such high housing costs. Building professionals are on high alert about any measure that can price people — especially newcomers — out of the market.

“Affordability is such a big factor in California, and it’s something we watch closely,” said Cassandra Cherry, a member of NAHB’s Sustainability and Green Building Subcommittee and marketing director at Danielian Associates, an architecture and design firm in Irvine, Calif. “While people are keen on incorporating green technologies, millennials are not necessarily willing to pay for those features in their homes.”

Raymer agreed, saying affordability often takes a back seat to other housing policies in California.

“We are happy with this outcome, but wish they [the commission] would have waited on the mandate,” said CBIA’s Raymer. “You can’t go a couple days without hearing how dire the housing situation is here.”

For additional information about national energy codes, contact Joel Martell, NAHB’s codes and standards program manager, and for NAHB high-performance building initiatives, contact Michelle Dusseau Diller.

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  1. David Koster says:

    “It will be some time before we find out whether mandating solar panels for homes in California is a good idea,” said Craig Drumheller, NAHB Assistant Vice President of Construction, Codes and Standards.

    I hope this quote was taken out of context. It is NEVER a good idea to for government to mandate these additional costs that keep so many citizens out of the home-ownership class, much less have NAHB equivocate on the merits of any such mandate. It is helpful, but only on the margins, to get recognition from lenders and appraisers for the cost of these mandates, but the truth is the consumer still has to bear the cost burdens of these mandates and there is no reasonable economically rational payback period, especially if the cost is rolled into the mortgage.

    The mandate may have been unavoidable, but to hear that this mandated was supported by the Builders Association is stunning.

    • NAHB Now says:

      Thank you, David. We asked Craig, and he said, “The quote was meant to emphasize that time will be necessary to determine the long-term impact of the solar mandate in California. We plan to follow the situation in California carefully and evaluate the mandate’s effect on home prices, affordability and homeownership.”

    • I have worked in the building industry for 35 years. Currently I am managing the sales for a builder in a city just west of Sacramento. This small university town has already required builders to install solar on all new construction.

      We offer leases or home buyers can purchase their systems. We also sold 14 units under an affordable housing requirement where there were solar leases.

      Our first homes are coming to completions and it will be interesting to see just how effective these systems will be. Many of our market rate buyers are purchasing their systems and appraisals are happening. Soon the rest of the story on value for these systems will become evident.

  2. Allan Cory says:

    Near Zero Energy Consumption houses will be the standard in a decade is what I believe and the biggest hurdle will be getting the extra costs associated with this type of construction through appraisals and bank/loan companies approval. Yet our study says that recovery of these extra costs pays for itself in 5 to 10 years, usually 8 years then the savings really start. Gas and electric bills are soaring and will only keep rising. We all have experienced the cost of utilities on today’s newer homes with gas and electric running near $1,000.00 per month and certainly several thousands per year, money which will be available to the home owner of Near Zero Energy Consumption houses for other purchases. The money saved on utility costs starts the first month you live in the house and is available for the mortgage payments each month.

    • David Koster says:

      So if those number are real why aren’t consumers clamoring for that technology? The payback periods that I’ve seen are generally in the 20-30 year time frame. But again, if it is such a wonderful thing consumers will figure it out and buy it. Maybe one day we can stop the direct subsidies.

      And I don’t know what new home building product you are getting your utility bills from,but we are building 2500 sf. typical homes in the deep south with no special energy certifications and our customers are reporting average bills of less than $150/month.

      • Steve Henson says:

        I agree with David Koster, if this is the next great thing in home building, why aren’t people lining up for it, and more importantly why do they require tax payer subsidies? Obviously the solar and wind energy industry cannot support itself without these subsidies. The NAHB has no business supporting these initiatives. Even in Germany where electricity costs are about double that in the USA, solar energy has to be subsiidized by the government. We pay about .10 per kilowatt hour and have the most reliable and efficient energy grid in the world. Government mandates, government subsidies, no thanks.

        • NAHB Now says:

          The National Association of Home Builders did not and has no intention of supporting mandatory installation of photovoltaic panels in the future. The California Building Industry Association chose to support the requirement for political reasons and because it was the best deal that it could negotiate.

        • concerned citizen says:

          Oil and gas are heavily subsidized by the taxpayer and have been for decades, yet they have detrimental effects on the environment and human health, interesting how for renewables everyone is a free marketeer, yet tax payer subsidies for oil and gas go unmentioned. Additionally think of the savings to taxpayers if just lighting in government buildings was powered from renewable energy.

          • David Koster says:

            So there are no savings if the up front cost of installing the renewable sources are factored in, especially since we have to borrow the money to fund it.

            So , my mothers admonition that two wrongs don’t make a right comes to mind. But, oil and gas subsidies are largely a myth. Check the effective tax rates for U.S. producers compared to other manufacturing companies.

            Moreover, the main argument here is not necessarily the merit of tax subsidies of solar , but the mandating of the inclusion of solar on all new homes, which continues to drive up the cost of new homes and keeps many people out of the market, and often keeps them in less energy efficient older homes or trailers.

  3. Nice article. Just for your information, gas and electric prices are not “soaring”. Many parties overstate prices and price increases to overestimate savings. If you look at US Energy Information Administration data, in 2007 the average US residential electric price was 10.8 cents / kWh. In 2017, the average price was 13.2 cents per kWh. So that is about a 1.8% increase per year – less than inflation, and certainly not “soaring”. On the gas side, in 2007, the average US residential price was $1.328 per therm, and in 2017, the average was $1.022 per therm – a 23% nominal decrease in the price (before accounting for inflation).

    In California, they use “Time Dependent Valuation” of energy for both electricity and gas, which includes externalities (such as the social cost of carbon) which overstate future prices and future price increases.

  4. On the day they made the decision (May 9, 2018), the CA ISO had to curtail over 1,000 MW of solar due to conditions on the California grid. See the following link for more details:

    http://www.caiso.com/Documents/Wind_SolarReal-TimeDispatchCurtailmentReportMay09_2018.pdf

    On May 31, 2018, they had to curtail over 2,000 MW of solar due to grid conditions. See:

    http://www.caiso.com/Documents/Wind_SolarReal-TimeDispatchCurtailmentReportMay31_2018.pdf

  5. The reality is that California is, or is going, to mandate solar. If it works other states will follow. One can put their head in the sand just for so long. I concur with the strategy of the California BIA in getting inside the tent for dinner instead of being the menu. If they had opposed this the result would have been worse I am sure-especially with the political realitS A NATIONAL ENERGY EFFICIENCY AND GREEN BUILDING CONSULTANT, I vehemently oppose government mandates and always work toward illustrating market distinction as the greatest benefit of these initiatives. Sometimes governments, like on the Left Coast, just do not see it that way.

    I, too, serve on the NAHB Sustainability and Green Building subcommittee and recommend that this subcommittee be charged by NAHB Senior Officers to aggressively pursue a strategy working with the Appraisal Institute to achieve greater use and acceptance of the Appraisal Institute’s own addendum, Form 820.04, Residential Green and Energy Efficient Addendum. We need builders pursuing National Green Building Standard (NGBS), LEED or ENERGY STAR and Department of Energy Zero Energy programs to demand banks to secure appraisals from AI Green certified appraisers. Contrary to popular belie,f builders still have this right though they cannot further influence who the appraiser is ( thanks to my state’s Governor when he was NY State Attorney General-Andrew Cuomo). AI needs to step up and get more of their appraisers green-certified so there are qualified appraisers in all markets to address this potential demand. Then and only then will green, energy-efficient and zero energy certified homes get their full value recognition in the marketplace.

    We can sit on the sidelines and just say NO and have mandates adopted over our opposition or we can try our best to find the most economical and efficient methods to move home building forward in a positive way.

    • David Koster says:

      No one is suggesting that we sit on the sidelines and just say NO. Quite the contrary. We can all agree, I think, that as an industry we sometimes have to accept that government is clearly not on our side and we aren’t going to get everything we want. In those cases, we engage with our regulator and legislators and negotiate as hard and as best as we can. We have to accept the outcome of that process, but we most assuredly do not have to publicly endorse it. I don’t live or build in California and they can do what their voters will allow as a state and the BIA can certainly do what they believe is in the best interests of its members.

      But that doesn’t mean that some comments from NAHB (since clarified above)or the California BIA doesn’t give many us legitimate cause for alarm.

  6. Randy Strauss says:

    As I see it, this mandate and the costs to comply are skewed as the true costs are masked by the federal tax credits. These credits are offered as incentives for a home owner/buyer to install solar and other energy saving systems into housing. So now that California is mandating solar, I find it wrong that the rest of the country will bear the cost in the form of reduced federal tax income. If California believes this is a positive direction, so be it, but the voluntary tax incentives should be repealed when the improvement is no longer voluntary.

  7. mark says:

    First I am in favor of efforts to build sustainably. However it is unfortunate that government is shoving solar and energy efficiency down the throats of the taxpayer and builders. This movement is relying on subsidies payed for by the taxpayer without representation. The cost of housing is spiraling out of control especially in blue states. Next we will have a requirement that every home be ready for electrical vehicles also supported by tax payer subsidies. Maybe high net worth consumers can handle the increase but the majority of middle class consumers are seeing their American dream getting more expensive and out of reach.

    The banks and their appraisers are comparing high performance homes to pre-existing non-conforming leaking sieves when considering mortgages. This is ludicrous and I doubt the banks and appraisers really care.

    If solar is going to make it should not be based on government mandates instead on free market basics.

  8. Tom says:

    Dump the subsidies or move to Texas.

  9. Kyle Stone says:

    Great great move by California, although I would like something that would address their housing crisis.

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