California's New Solar Rules: Getting Beyond 'First Cost'

It's the world's 5th largest economy, and unlike nearby city Las Vegas, what happens in California goes almost everywhere else as well.

Yesterday, regulators on the five-member California Energy Commission voted unanimously to require all newly built single-family homes--and all multifamily units three stories or less--to come equipped to draw on solar power starting in 2020.

For home builders with operations and a lot of their business within California, the new rule is both expected and momentous. For those whose operational footprint is outside California, get ready sooner than later for a similar flip of the power switch.

A bright-line "opportunity area" for the state's building sector--once the California Building Standards Commission gives the measure its expected blessing--to do something about the fact that it's the state's second largest source of greenhouse gas (GHG) emissions, the rules will be polarizing nonetheless in a residential development and construction business community already struggling with the impact of regulatory expense in money and time.

In this case, word is from the California Building Industry Association, regulators did a laudable job of telegraphing their plans and working with builders to soften the immediate negative financial impacts of the initiative.

"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 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 the cooperation "was the key to gaining industry support from these first-of-a-kind regulations."

Still, new direct expense that will, in a flash, add just shy of $10,000 to the price tag--and about $40 a month in mortgage costs--of a new home is a fraught issue right now for builders, despite the mathematical promise that operational cost of ownership would go down by almost double that amount, with immediate savings of about $80 a month on heating, lighting, and cooling bills.

California builders already have been working the challenge of changing their processes, procurement, design, engineering, and systems to meet evolving Energy goals in California by 2020, and are managing risk to their construction cost models to get both building enclosures and systems to measure up. The new rules would require a measure of increase in efficiency from current levels, and then builders would have to add enough solar to offset the home’s estimated annual electricity consumption, not all energy.

Added price headwinds--human construction labor cost increases and capacity constraint, materials price inflation, and rising mortgage interest rates--also need to be priced into what home buyers agree to pay, which is already a tough pill to swallow in expensive markets like California.

A silver lining that might be seen in a measure that forces builders to step up as part of a broader societal campaign to deal with reducing carbon emissions and using less energy is this: the conversation shifts focus from "first-cost" to "total cost of ownership" as a measure of value that impacts people's choice.

This initiative works on both the granular domestic unit level, the neighborhood level, and towns and regional jurisdictions writ large.

Once people start to look beyond initial costs, it opens up the possibility of whole new ways to unlock long impassable pathways in the architecture, engineering, and construction cycle that currently build in as much as 30% expense that provides no value to a home buyer and homeowner, and community member.

Initiatives like the new California solar mandate mean that builders must find new connections--in sourcing, in construction processes, in community design and planning, and in marketing value--to develop and construct homes and neighborhoods both affordably and responsibly, for people and the planet.

This measure stands as a bold expression of what policymakers and the building industry community can stand for and do if they work together.

Now, they need to take the same unflinching conviction and creative, collaborative approaches, and apply it to making more housing more attainable to more people.