New Homes in California Required to Have Solar Panels

Last week (May 9, 2018), the California Energy Commission voted unanimously to require solar panels on all new single-family homes and apartment buildings that are less than three stories tall. If confirmed by the California Building Standards Commission, which typically adopts the Energy Commission's recommendations when it updates the state's building codes the regulation will go into effect in 2020. The new regulations would require a solar system of a minimum 2 to 3 kilowatts, depending on the size of the home. A typical household in California consumes approximately 600 kilowatt-hours of electricity per month on average and this size system would produce about 400 kilowatt hours a month. So the homes subject to this mandate will continue to draw power from the electric grid.

The proposed regulations include exceptions to solar panel installation when solar panels are not feasible, such as when a home does not receive sufficient sunlight for electrical generation, and builders can construct a shared solar-power system serving a group of homes in lieu of providing solar panels on each residence.

In the news release the Energy Commission estimated the solar panel mandate will add $9,500 to the construction cost of an average single-family home, but the Energy Commission estimated that the solar panels will save homeowners approximately $19,000 in energy and other expenses over 30 years-less than a 2.5% return and less than the cost of financing the project as part of the mortgage. This will increase the purchase cost of a home in California, and further exacerbate California's significant housing shortage and affordability crisis. Currently, there are more than 5 million homes in California that use solar power for either electrical generation or to heat hot water. California is the nation's leader in the number of solar panel installations, but it is also the most populous southwestern state.

With solar panels included in the price of a new home, this simplifies financing of solar panels and allows homeowners to finance them as part of a mortgage. Homeowners could avoid the challenges that the California's Property Assessed Clean Energy (PACE) loan program has faced. The PACE program, started in 2008, provided loans to California homeowners to fund energy-efficient home improvements that could be repaid through the home's property tax bill. However, applicants for PACE financing often encounter difficulties with obtaining the subordination of their home loans to PACE financing and there were allegations of abuse of the program (kickbacks to contractors, misleading homeowners on the loan requirements etc.).