California regulators approve plan to mandate solar panels on new home construction

California regulators on Wednesday unanimously approved a historic plan that will require most new homes in the state have rooftop solar panels that turn sunlight into electricity starting in 2020.

With the move, California now becomes the first state in the nation to mandate solar-energy installations on most single-family homes as well as multi-family residential buildings up to three stories, including condos and apartment complexes. But some experts warn that increasing the cost to build new homes will only worsen the state's affordable housing crisis.

The solar mandate is expected to add on average about $9,500 to the cost of new houses but is projected to be offset by the solar system's long-term energy savings.

The mandate, approved 5-to-0 by the California Energy Commission, is part of the state's 2019 update of energy efficiency standards and ongoing efforts to reduce greenhouse gases. The state's building sector is the second-largest source of greenhouse gas emissions when fossil fuels power plants are factored in.

"This is an undeniably historic decision for the state and the U.S.," said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, a trade association with about 1,000 member companies. "California has long been our nation's biggest solar champion, and its mass adoption of solar has generated huge economic and environmental benefits, including bringing tens of billions of dollars of investment into the state."

News of the nation's most populous state mandating solar on new homes is a win for the solar companies and sent industry stocks higher Wednesday. SunPower added 6 percent, Sunrun jumped 4 percent, First Solar added 3 percent and Tesla picked up nearly 2 percent.

"Overall, we expect with California's mandate some companies within the solar and broader renewable industry stand to benefit positively, including those who make panels and component parts, as well as those who assist with installation and ensure efficient use of energy," said Dave Fanger, CEO of Swell Investing, holder of solar and related stocks in its Green Tech and Renewable Energy portfolios.

The commission's action on new 2019 building energy efficiency standards also applies to everything from current ventilation systems to indoor air quality. California updates the efficiency standards every three years, and the state's ultimate goal is net-zero energy homes that reduces the carbon footprint of buildings and makes them effectively energy self-sufficient.

"We cannot let Californians be in homes that are essentially the residential equivalent of gas guzzlers," David Hochschild, a member of the state energy commission said Wednesday prior to the voting. "This really puts us on a path to a more efficient future."

California — now the world's fifth-largest economy — already has a reputation for pushing the boundaries when it comes to going green. The state's renewable portfolio standard requires power companies to have 50 percent of total energy sources from renewable energy such as solar, wind, geothermal and hydroelectricity by 2030.

The California Building Industry Association, or CBIA, estimates that only 15 to 20 percent of the single-family homes built in California have solar panel installations. At least seven cities in the state already have solar mandates of one form or another on new buildings, including San Francisco.

"Adoption of these standards represents a quantum leap in statewide building standards," Bob Raymer, the technical director for the CBIA said in remarks to the energy commission prior to the vote in Sacramento. "No other state in the nation will have anything close to this — and you can bet every one of the 49 other states will be watching closely to see what happens."

Raymer also applauded state regulators for working with builders "to significantly reduce overall compliance costs and to provide increased design flexibility." He said that cooperation "was the key to gaining industry support from these first-of-a-kind regulations."

The state's solar mandate for new homes includes compliance credits for the installation of battery storage technology. That means homeowners with the rooftop solar systems will be able to capture cheap electricity during the middle of the day and keep that power onsite for evening hours when rates tend to go up.

The solar policy does provide alternatives or certain exemptions for homes or residential buildings when there are shaded areas due to trees, chimneys or other nearby structures. There also are special rules that apply to homes with insufficient roof space for a solar installation.

The commission estimates the solar mandate will add an average of about $9,500 to the upfront cost of single-family houses but result in about $19,000 in energy savings over a 30-year period.

"The lifetime savings are significant because in California we have high energy costs," said Anne Hoskins, chief policy officer for Sunrun, a large residential solar and storage provider based in San Francisco.

For residential homeowners, the commission estimates that the standards will add about $40 to an average monthly payment over a 30-year period but essentially save consumers $80 on monthly heating, cooling and lighting bills.

The state estimates the proposed solar standards applying to most homes and many commercial structures could save California residents and businesses hundreds of millions of dollars in energy costs over the next decade.

The cost of solar rooftop panels have fallen sharply and helped reduce the cost of solar systems. At the same time, the technology is considered more efficient and advancements have led to aesthetically-pleasing solar panels that look like traditional roof shingles.

The approved standards still allow new home construction to continue with some natural gas but the state is pushing to reduce gas need over time and facilitate a shift to high-efficiency electric appliances, such as heat pump water heaters. All-electric homes using solar are seen as having lower greenhouse gas emissions and less energy consumption than those that use natural gas.

Under the change, new homes are expected to slash energy use by more than 50 percent as a result of having solar photovoltaic systems on rooftops. For residential homeowners, the commission estimates that the standards will add about $40 to an average monthly payment over a 30-year period but essentially save consumers $80 on monthly heating, cooling and lighting bills.