GOV. ARNOLD SCHWARZENEGGER PULLED OFF an election-year coup late last summer by signing a new law that puts home builders at the forefront of developing solar power usage in the Golden State.

The new law, which had strong bipartisan support, requires that by Jan. 1, 2011, home builders must make solar panels a standard option on projects of 50 units or more. Dubbed the Million Solar Roofs Initiative, the law's intent is for the state to have one million homes with solar panels by 2018.

Solar-energy advocates pushed hard over the past couple of years to make solar panels a standard for new homes, but the builders pushed back, pointing out that the $15,000 to $20,000 price tag to install solar panels still places the technology in the luxury category. The builders also claim that the eight- to 10-year payback period is too long.

“We think that the new law is the right approach to pursuing this promising technology,” says Tim Coyle, senior vice president of governmental affairs for the California Building Industry Association. “What we objected to were mandates that builders would be required to ask buyers to pay up to another $20,000 for the privilege of owning systems that aren't yet 100 percent cost-effective,” he adds.

Another important aspect of the legislation is that it requires the power companies to expand their rebate programs, referred to as net metering. The new law will raise the number of solar power customers who can sell excess electric power back into the grid from .5 percent of a utility's total load to 2.5 percent. Upping the percentage to 2.5 percent of a utility's total load will increase the number of homes in a solar power rebate program to about 500,000. The net metering programs would have to be amended at least once more to reach the million-roof goal. Typical monthly savings range from $50 to $200.

The hope is that as builders continue to install solar panels, the supply of solar panels will increase, prices will come down, and, combined with the rebate programs offered by the power companies, use of solar power will expand. Starting on Jan. 1, 2007, builders may also participate in the California Energy Commission's New Solar Homes Partnership, a voluntary $350 million program that would give rebates back to builders for installing solar panels. The rebates would be based on the renewable power produced.

“It happened with personal computers [where prices on PCs came down dramatically once the market developed], so there's no reason to think it can't happen with solar power,” says Coyle. “The idea is that solar power will become more broadly accepted as a way to save energy and create power.”

Alternative energy solutions have always been popular in California, especially after the state experienced brownouts during the early part of this decade. While home builders welcomed the compromise legislation as a positive development, the reality is that builders have been offering solar panels as an option for several years. Some aren't waiting until 2011, seeing solar as a way to gain a competitive advantage.

Both Shea Homes and Pardee Homes have incorporated solar panels into some of their projects during the past five or six years. Centex's Sacramento division is required to offer solar as an option in at least 5 percent of the homes it builds in Woodland, Calif. And Lennar is offering solar panels in some of its upscale communities.

“People feel good about driving a hybrid car, and it's the same thing with a new home; people feel good about being environmentally responsible,” says Peter Beucke, president of Lennar's Bay Area division.

Learn more about markets featured in this article: Los Angeles, CA.