What You Need to Know About California's New Solar Panel Law

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California took the bold step recently to become the first state to require all new homes—including multi-family residential buildings, up to three stories—built after January 1, 2020 to have solar arrays installed. This is huge news, as California often leads the waywhen it comes to green developments. While there have been a few cities in the United States that have such mandates, California’s is the first statewide decision. It’s not a stretch to say that other states will watch this closely as they consider following suit.

The news created a shockwave throughout the industry, as stocks of domestic solar manufacturers rose on the news, while homebuilders’ shares fell. So how will the law affect general contractors, energy auditors, and manufacturers of energy-efficient products going forward?

What Is the Law?

Calling it a law is a bit of a misnomer—it’s actually a set of standardsfor building codes, set forth by the California Energy Commission. In addition to photovoltaic panels requirement, all energy-efficiency recommendations have been updated. All new buildings will have adjusted ventilation regulations, and commercial buildings will need energy-efficient lighting, with a goal of reducing energy use by 30 percent.

Are There Cost Concerns?

Critics of the legislation are concerned about the increase in housing costs due to the up-front costsof solar. California already has an affordable-housing shortage, and there are many that worry that the increase will further isolate low- and middle-income families. It’s estimated that the law will increase the initial purchase price of a home by about $9,500 per house, or about $40 per month for a 30-year mortgage.

That’s a real concern; estimatesfrom the National Association of Home Builders show that in the United States, with just a $1,000 increase in the price of a median-priced home, more than 150,000 families are priced out of the market. However, according to the California Energy Commission, having a photovoltaic system saves an average of $80 per month on heating, cooling, and general utility bills.

Also, those cost increases may be overestimated. Often, when people talk about solar panels, they talk about the retrofit market, not new construction. When installing solar arrays in new construction, electricians won’t have to make special trips to make new connections, and contractors might even get discounts when buying panels in bulk. So while builders may have to work a little more to get proper permits and licensing for green building, all the small savings in the process will add up to lower overall expenses.

Will There Be Exemptions?

Solar panels are only a small part of the broader set of standards, all aimed at reducing greenhouse gas emissions, and there are workarounds for builders. Exceptions are in place for homes that are fully or even partially shaded all day. Plus, leasing solar systems would count toward compliance, significantly reducing the upfront costs and making solar power more affordable for lower-income families. Builders are also able to combine storage systems to build power-sharing mini-grids for blocks of houses.

What Does This Mean for the Energy Grid?

The ruling’s flexibility is a good thing, because it’s perhaps energy storage, not just energy productionfrom the panels themselves, that may be the more important detail here. And one where energy consultants can differentiate themselves in a crowded marketplace.

California’s major utilities are shifting to a time-of-use rate structurefor residential accounts, meaning homeowners will pay more for electricity when demand is higher and power is more expensive. Since the new mandate focuses on demand-responsive technologies, like battery systems similar to Tesla’s Powerwalls and heat pump–based water heaters, homeowners with such systems can score big. They could harvest cheaper electricity in the middle of the day and use their own power in the evening. That would also stabilize the grid greatly, as all solar panels produce power at the same time.

How Will Foreign Tariffs Affect These Standards?

In January 2018, President Trump imposed a 30 percent taxon solar components imported from other countries. The advocacy group Solar Energy Industries Association (SEIA) estimates the tariffs could kill as many as 23,000 jobsin the USA in the first year. Critics of the tax worried then that there could be a shortage of both domestic-made solar equipment and the technicians to do the installations. Now, California’s new legislation might exacerbate that shortage with a new surge in demand.

The new mandates don’t take effect until 2020, and the tariffs will decrease by five percent every year until they expire entirely after four years. So it’s too early to say what effect the tariffs will have on the industry, but it’s certainly something to keep an eye on.

What’s Coming in the Future?

This fall, the California Building Standards Commission will vote to approve or deny the new mandates. The Trump administration also seems to change its mind frequently, and the midterm elections are coming up. If there are substantial changes, solar advocates in the House or Senate could put pressure on the White House to drop the tariffs.

One thing is certain in all of this: solar power has really gone mainstream. California once again showed itself as a forward-thinking state, and there’s little doubt that others are sure to follow.