California Passes Solar Panel Mandate

86 Replies

California recently signed a mandate requiring most new homes in the state to include solar panels after 2020. California is the first state to do so, but it likely won't be the last, with New Jersey and Minnesota pursuing increased reliance on solar.

Despite criticisms of the mandate, the trend towards increased solar use will continue as economies of scale push prices down, utilities pivot their business models and the economic and health benefits of decreased reliance on the grid and fossil fuels are revealed over time.

The measure, approved by California regulators in a unanimous decision on Wednesday May 9, 2018, will require all new residential buildings, including apartments and condos that are three stories or fewer, to have rooftop solar panels starting in 2020.

The California Energy Commission, the body responsible for approving the decision, estimated the panels will tack on approximately $9,500 in additional construction fees but save homeowners $19,000 in energy bills over the course of 30 years.

Reactions are split on this.  I wanted to see how the Bigger Pockets community would weight in.. Any thoughts???

Solar panels should be a choice. It is not something that should be forced on the consumer.  In Maryland, our local Realtor boards are fighting against a similar proposed law.

I’m by no means an expert in this field, but I’ve seen costs for solar panels in Oregon and $9,500 in additional costs seems extremely low. $19,000 in energy savings over the course of however many years also seems high. If those were the numbers I think people would be doing this without the need for regulation. $9,500 for additional construction costs after contractor markups and vendor markups means that these panels would be rather inexpensive. I’d be curious to know where these numbers came from because it seems as though they were fantasized to make the law more appealing. . .

@BJ Dante  Totally, does seem optimistic.  Not sure on what models are used to get there but I guess the idea is that the mandate will force competition and cause lower cost of production therefore driving down the price? Not sure, but thanks for weighing in 

@Alex Bekeza it’s not going to drive down the costs. China has been subsidizing and dumping panels on the US market for years, that’s just one reason why Solyndra and these other companies we foolishly subsidized when rent bankrupt.

@BJ Dante is right. If solar panels saved money consumers would be installing them without the need of the state coercing them with regulations or tax breaks

@Alex Bekeza the problem is that forcing competition IMHO doesn’t really exist. This could quickly turn into a political discussion which isn’t allowed here so I’ll just say this. The ACA was supposed to lower rates this everyone would be forced to purchase health insurance. We saw rates nearly double in some places in just the course of a year. I think solar panels isn’t as extreme of a case as healthcare because you can actually get a cost of good for the item rather than the cost of the service. But the example is still valid. Forcing competition just tells providers of the good or service that people will be forced to buy their good/service. Its actually the opposite of competition and it’s the reason even the most expensive smart phone is $1k instead of $5k. As soon as you force people to buy something that cost will go up.

Here are some hard truths you never hear from media or politicians:

1. Solar typically takes 20 years or more just to break even.

2. Solar is not "green" energy. A tree is green energy, meaning it takes as much as it gives. Solar requires mining for resources, transportation, manufacture, more transportation, installation, and maintenance. The amount of energy burned during this process likely offsets any "savings" experienced.

3. The costs quoted include tax subsidies, which means taxpayers are helping foot your bill. Some of you are liberal and don't see a problem with this. Conservatives and libertarians don't believe in forcing others to pay for our indulgences.

4. The costs are never accurate. Most people don't think about circuits burning out or batteries going bad. The lifespan of a solar system is allegedly 30 years but batteries only last 5 - 15 years. That means new batteries at least once, probably twice.

5. Hazardous, limited resources are used to create solar panels and batteries. These include cadmium, lead, gallium arsenide, copper-indium-gallium-diselenide, hydrochloric acid, sulfuric acid, nitric acid, hydrogen fluoride, 1,1,1-trichloroethane, and acetone. Some of these can't be recycled. 

6. Solar never performs as promised. It's limited by weather and performance is dramatically exaggerated by everyone in the chain. Even the super-farms touted by politicians tend to produce 1/3 or 1/4 of what was promised. Oh, and then they burn up thousands of birds and go bankrupt while company owners walk away with millions, but that's another story.

If you want solar, knock yourself out. I can see many great reasons for using it and have no qualms against anyone installing it on their home. I have a huge problem with government forcing it on people or subsidizing it. If solar is so great, it will thrive on the open market.

One other thing. I’ve heard that these panels don’t even last this long because even here in the NW with less sun they still get sun damaged and worn out. I can only imagine in California this process would be expedited and here I’ve heard that the homeowner is responsible for repair.

I agree with Nathan and think what he said was very true...For those locating in the mountains of California, when is snows, the panels do absolutely no good unless there is a system to melt the snow from the top of the panels.  Government needs to stay out of legislating the way owners heat and cool their properties.

Not a fan.

It would take 15 years to recoup the $9500 investment with a savings of $633 a year.

I don’t think solar tech is there yet and I don’t like being told what I have to do with my houses.

In my experience solar panels don’t pay off as fast as the sales figures say they do. I had a buddy put them in and they aren’t making near as much energy as they predicted.

Mine are making more energy than predicted, 5 years in a row.

So many of the naysayers don't have panels themselves. Misinformation is rampant. Let's hear from more folks who actually have installed them.

I agree with Tanya, I’d like to hear more too.

@Nathan G. I just had to weigh in on your comment and so called "hard truths" which turn out to be entirely false. I've responded to each of your points respectfully because I've had a different experience with solar than what you describe.  

1. The payback period for solar hasn't been 20 years in 20 years. In many areas such as California the current average payback period is 5-8 years on a cash purchase. A 20 year payback period like you describe is not impossible but it would be rare with today's prices. You'd have to drastically overpay or detail your panels with gold trim to have such a long payback period. The panels on my roof were paid off in less than a year. I bought them at wholesale price and installed them myself, so it depends on how good a deal you get, how good your roof orientation and pitch is, how many sunny days you get in your region, how good your local incentives are, how much local competition there is among solar installers, etc.  However calculating payback periods is uncommon these days anyway as the cash purchaser is rare. Just like real estate most people finance their systems, so what matters is cash flow. Typically loan payments are less than a normal utility bill, so people with solar pay less per month for electricity than those without, that's why people do it, because they like saving money. 

2. Solar is indeed "green energy". What you are referring to is called embodied energy or energy return on energy invested (EROI). It is easily calculated including resource extraction, manufacture, shipping, and installation. Solar panels take 1 to 4 years to offset their embodied energy with electricity production, depending on the brand. The standard warranty is 20-25 years, so they pay back the energy it takes to produce themselves several times over during just the warranty period, and average life expectancy is 30-50 years as evidenced by the panels produced in the 70's that are still making electricity today.   

3. Yes there are tax subsidies for solar. Please find me a form of energy that is not subsidized. Nuclear for example is the most subsidized form of energy, it would not exist without government subsidy because nobody would insure a nuclear power plant. Tax dollars insure nuclear plants, clean up disasters and also store the waste indefinitely. 43% of coal is mined on public lands, then it is shipped on railways built with tax dollars and burned in power plants built with tax dollars. Oil would be insanely expensive today if not for the Intangible Drilling Cost tax deduction of 1916, the Oil Depletion Allowance Act of 1926, the Domestic Manufacturing Deduction of 2004, etc. Energy is about the farthest thing from a free market you'll ever find, so why single solar out for getting government support when all forms of energy do? Many conservatives and libertarians actually love solar, it's not just liberals who love saving money! In fact the Solar Investment Tax Credit, the 30% tax credit which is driving the growth of the solar market, is from the Energy Policy Act of 2005, which if you recall was during the presidency of George W. Bush. That tax credit was recently extended by another Republican president. 

4. Batteries are either a luxury add on for those who prefer a battery bank over a generator for backup power, or a necessary component for a backwoods cabin that is off the grid. 99% of modern solar electric systems don't even use batteries. They use what's called net metering which doesn't require batteries. As far as circuits burning out I'm not sure what you're referring to there, that's completely made up.

5. What panels use those hazardous materials? None that I've ever seen. Cadmium was used very briefly and on a small scale years ago but that type of panel is obsolete. Modern solar panels are made from silicon wafers. Silicon is the eight most common element in the universe. It is not hazardous and is easily recycled. 

6. Every solar system I've worked on has produced more energy than forecasted. Somebody may have messed up an energy forecast at some point, but it is not standard industry practice or lawyers would really love solar. As far as birds burning up, that has happened in a few isolated incidents with concentrated solar farms in the Mojave desert, which is a completely different technology than rooftop solar. It's not a factor with the types of panels you find on residential rooftops like California now requires. Also birds get killed by semi-trucks every day but that doesn't mean we're going to halt the trucking industry does it?

There is a lot of bad/outdated information about solar out there, I didn't want it to be propagated here. I'm not sure I agree with California's mandate, and I'm not sure how it will be implemented when many homes aren't suitable for solar, however I hate to see solar categorized as liberal/bad technology when it's actually great technology that benefits everyone regardless of political affiliation. 

@BJ Dante @Tanya F. I've sold, designed and installed thousands of systems. My customers are both liberal and conservative. It's sound technology that has been proven for decades. The solar industry is growing extremely fast and increased competition plus economies of scale is driving costs down quickly, making it more and more competitive in price compared to other forms of energy, and rapidly making arguments against it outdated, as evidenced in this thread. All forms of energy are subsidized. Solar is unique in that it will not need subsidies in the future, while legacy forms of energy based on non-renewable resources will in fact need increased subsidies to remain competitive as supplies are exhausted making them more precious and expensive to extract. As long as the sun shines the fuel for solar panels will be free. 

That said, I'm not sure I agree with California's mandate, simply due to practical concerns such as not every roof being that great for solar (what about the shaded roofs?), I also don't like anything that is required fundamentally, even though I like the technology itself. I'll have to look into how the mandate addresses issues such as shaded roofs before forming my opinion, however solar technology itself is sound, lots of people around the world save money installing panels and have for many years, and prices are dropping drastically making it more and more cost effective every day let's get up to speed it's 2018 people.  

@Timmi Ryerson The way solar works is the utility totals up energy consumed vs. energy produced on an annual basis, so any snowy days when the panels produce less than the home consumes would be offset by sunny summertime days when the panels produce more energy than the home consumes. There are valid reasons not to like the California mandate, but the technology itself is sound and proven. 

I wish prices were more reasonable. I’ve looked into doing this at my primary residence and the return on investment is so low it doesn’t make sense. But I am hopeful for the near future if the costs come down and technology improves.

Not sure it will ever be cost effective for my small multi’s as the tenants pay electric and if I advertised a rent cost for utilities included it would only allow for a very modest rent price increase....

@Jordan Moorhead Minnesota and California are quite different markets when it comes to solar. CA has a higher price per kilowatt hour for electricity (MN 11cents/kWh avg., CA closer to 16), so your payback period will be reduced by 30% in CA. And of course generally CA gets a lot more sunshine than MN. Also when calculating a payback period you should use a projected rate increase because energy prices aren't static they increase over time. So that savings of $633 in the first year will increase by a certain percentage each year due to the increase in price of electricity offset, decreasing the payback period. 

Payback is a moot point anyway seeing as most people finance or lease their systems. The key is having your monthly loan/lease payment be less than you would be paying without solar. In some areas on some roofs that's possible and other times not. It depends on how much electricity you use, how much you pay for that electricity, and if your roof is big enough to support a system to offset your usage 100%. In California it is pretty typical to have positive cash flow immediately with a leased or financed system because of high electricity prices, cheap solar from lots of competition, and plenty of sun. MN is borderline now but as panel prices drop and electricity prices go up you'll see more solar there too.  

 Regarding your buddy's system that is not meeting production estimates, that's unfortunate. Reputable companies design systems properly and have power production guarantees to back up their work. Most solar contractors under promise, over deliver, but not all. Like any industry there are unscrupulous and inept players. Trust but verify: there are websites like PVwatts.nrel.gov where you can enter in your address and roof information and calculate system production yourself so you don't have to take a salesperson's word for it. I recommend getting multiple bids from several different installers and doing your own due diligence just like any transaction.

I agree with you regarding being told what to do with your houses. Taken at face value the California mandate does seem like a bit too much government overreach. I have to do some more research before finalizing my opinion on it but I don't see how it would make sense for every new residential building to have solar. Some will have too much shade, face the wrong direction, have an unsuitable roof surface or not enough room on the roof, etc. It seems a bit idealistic to expect every new residential building to have solar but that's California for ya. Solar is often an emotional buy, and people get equally emotional about not wanting to buy it, so a mandate may have some serious negative backlash.  

Originally posted by @Nathan G. :

3. The costs quoted include tax subsidies, which means taxpayers are helping foot your bill. Some of you are liberal and don't see a problem with this. Conservatives and libertarians don't believe in forcing others to pay for our indulgences.

fossil fuel subsides are 10X  vs renewables.  This point of yours is flawed, along with most systems don't have batteries.  

I think we can both agree that this requirement does not help affordable housing.

@Kurt Kwart I don't know if your numbers are correct, but I wouldn't doubt it. I didn't bring them up because those subsidies are to the benefit of the energy industry (or investors), not individual citizens. I am a HUGE proponent of wiping out all subsidies. Our government shouldn't be in the business of supporting businesses of any type.

I admittedly only know a few people with solar and they have batteries so I assumed it was the more common option.

I am with @Jordan Moorhead , I looked at this quite extensively a few years ago even considering opening a business installing these as I already have contacts in place.  In MN the payback seemed to be around 15 years and there weren't enough transactions to support an increase in home value.  

@Steve King I would not be forecasting higher energy savings in the future as it is likely offset by any repairs to the system over 15 years.

@Alex Bekeza

I grew up in COMMIfornia and as much as I love my birth place and the beautiful weather, especially in San Diego, where I went to highschool, I thought this was still America. Forced expenses like this is not representative of a Republic, as in the Republic of California. My disclaimer is: I am a huge supporter of solar energy. I looked into it when I owned a home in Arizona. The panels for a 4 bedroom house with an in ground pool and spa were going to cost me $20,000 to install and have to be replaced in 10 years. When I ran the numbers for my electrical bill, it was not an advantage to me at all to install the solar panels. I am sure the technology has improved since then, but we are a Republic and all of these regulations and taxes have driven people out of the states that make these mandates. Texas loves California, because the net out-flow of residents moving from California to Texas, with their businesses, has caused a budget surplus for the state. But hey, if California wants to keep driving people out of the state, have at it. 

Let the Market decide if installing solar panels is the right thing to do. I hope solar energy technology continues to improve, however, we all know that when people are getting their energy for no extra cost over the cost of the panels, the government will step in and find a way to tax it. The utility companies will use their lobby money to make it more cost effective to stay on the grid than it would be to install the panels. Just the way of the world. Why would they give up the huge cash flow they get from electrical plants. 

@John Woodrich  panel prices have come down by about half in the last few years, so if you looked into it a few years ago your info is outdated. You should absolutely factor in rate increases to any payback analysis, in Minnesota Xcel raised rates 7% in 2017, so it’s not insignificant. Energy prices are not static they’re increasing. Also there is no maintenance expense to factor in that would offset rate increases, as systems come with 20-25 year bumper to bumper warranties and there are no moving parts to break anyway. Maintenance consists of hosing them off occasionally if you choose to but it’s not necessary, rain will clean them off sufficiently if you don’t want to clean them (I don’t clean mine except very occasionally during droughts if I notice them getting really dusty). Once again payback periods aren’t as important anyway now that low interest financing is available, most folks are more interested in positive cash flow than payback period which is a somewhat new development over the last few years. Also we should keep in mind the thread topic is California where the economics are much different than MN due to higher electricity costs, cheaper solar, and more sunny days. The economics will vary drastically depending on a lot of factors including roof pitch, location and orientation, local incentives, price per kWh from the the grid, and local installation pricing. MN has a growing solar market but it doesn’t compare at all to CA where the market has been huge for a long time and is now mature, competition combined with increased operational efficiencies and economies of scale has driven installation pricing way down in CA compared to other markets. The payback period will be much shorter in CA in 2020 (panel prices are expected to drop to less than 40 cents per watt by 2020) when this mandate is enacted and a majority of systems will be financed or leased so payback period isn’t a huge factor anyway. 

Originally posted by @Nathan G. :

@Kurt Kwart I don't know if your numbers are correct, but I wouldn't doubt it. I didn't bring them up because those subsidies are to the benefit of the energy industry (or investors), not individual citizens. 

By this logic, if Big Oil and Coal and Nuclear corporations didn't have government subsidies, then, out of the goodness of their hearts, they would sell their products for the same price as they do now, with subsidies.  

Americans enjoy some of the cheapest energy rates in the world (tried to buy a liter of petrol in London, lately?)  This includes the cost of all goods made and sold, since it requires energy to do so.  

To state that consumers don't benefit from government subsidies in industry is, with any due respect, patently false.  Without subsidies to the oil industry, it would not only cost you 4x the cost to commute to work, but you'd also pay higher prices for just about everything, including the food on your table, which is grown and packaged with petroleum products.  

I've worked in solar and have 2 solar systems installed on a duplex rental property in Portland, Oregon.  The systems are leased, meaning I paid nothing to install them, but I still pay a flat rate each month for the privilege of having the systems on my roof for 20 years.  This flat rate is based on the minimum amount of energy that the panels are guaranteed to produce annually, over time, including any reduction in panel efficiency, and is related to local per kWh grid energy costs as well as what a comparable system would cost to finance at the interest rates in place at the time the system was sold (2015).  

If I had to do it again, I would have purchased--not leased--the system, but I do believe that these systems will save occupants money long term.  Given local laws that govern how you can bill back utilities to tenants, I'm not sure that, knowing what I know now, I would install solar again on a rental property, unless I used a different tactic, or maybe I'd do solar thermal (hot water) here in Oregon, instead of PVs.  

The point is, it would depend on each particular property's total solar resource fraction (TSRF), roof age, system cost (initial and lifetime/financing), building function, building lease structure, and system ROI over a specific period of time. Which, even though I'm pro-solar, means that imposing a broad rule on all new construction in an entire state is not necessarily the best solution to address climate change, and especially, to address housing affordability.

I am troubled by the lack of details. We specialize in rehabbing properties and turning them into green properties. I can tell you that not every property is a candidate for solar. If the mandate requires panels regardless of location or building design it's going to be a problem

California and every other state has all kinds of mandates built into their building codes.  Most at least claim to be justified by safety concerns, although (at least in California) there are a significant number of other interests at play in most of the building mandates.  The biggest difference with this one is that there is not a pretense that it is a safety concern.

In general, I don't care for government overreach.  However, I think that in California things were trending towards solar panels on more and more homes anyways so I think this just accelerates the process.  Additionally, as electric cars become more popular (particularly in states like California) more homes would end up installing solar panels anyways.

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