California's Solar Panel Mandate

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In May 2018, California became the first state to impose a solar panel mandate on residential “new builds,” including houses and condos up to three stories. While the order isn’t slated to go into effect until 2020, legislators, homeowners, and real estate agents are assessing the impact this will have on the housing industry and building products sector. 

According to a report released by the state, construction costs are expected to increase as a result of the new requirement, leading to an average upfront fee of $9,365. However, the savings in utilities over the long term is expected to balance out the additional expenses at the outset. The California Energy Commission estimates that homeowners will save $19,000 in energy bills and maintenance over 30 years, meaning it would take about 15 years for homeowners to break even with the additional cost of complying with the mandate.

Environmental advocates support the mandate because greenhouse gas emissions would also decrease, as these buildings use solar panels rather than forms of energy that rely on fossil fuels. With California’s growing population and tech industries, switching to clean energy and slowing the effects of climate change is a high priority for the state government.

While the effects on the environment may be promising, the mandate also drives up new housing prices in an already expensive market and could have a negative impact on affordable housing development. Some estimate that up to 40% of the costs for a new home in California based on adhering to regulations—before the first hole dug—and any additional costs could force low-income or first-time buyers out of the market. Architectural enthusiasts might complain about the lack of curb appeal and could seek homes in another state, or buy an older house without solar panels. 

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The savings that homeowners will receive as a result of the solar panels might also be misleading. According to the Wall Street Journal, for the solar panels to operate efficiently, the homeowner will need to pay 300-$500 a year for cleaning and inspection—meaning it will take longer to reap enough in energy savings to cover the outset cost.  While the mandate may lower the individual energy rates for homeowners with solar panels, the net metering system that California uses for electric bills may increase the energy bill burden for other homeowners.

Critics also argue that newly built houses are already much more energy-efficient than older ones based on improvements in developing products that insulate and wrap a home, rendering the mandate less useful. Also, California currently produces so much solar energy that they pay Arizona to take it to avoid overloading power lines. 

The mandate is still a contentious issue, but the challenges it creates may also lead to new opportunities. The decree may lead to substantial well-financed U.S. based exterior building products manufacturers entering the marketplace, drive technological improvements, and create a price-competitive environment due to completion. Other states will be carefully watching what happens in California to determine if this new model is worth adopting.