California’s Solar Decree: Could Other States, Utilities Follow Suit?

Black & Veatch Expert: growth of California solar power shows complexity in electric market
Jun 11, 2018 11:00 AM ET
Press Release

OVERLAND PARK, Kan., June 11, 2018 /3BL Media/ – California energy regulators recently passed a new building code requiring most newly constructed, low-rise homes constructed after 2019 to have built-in solar-powered energy systems, making that state the first to adopt such a mandate. That decree was part of other additions to the building code aimed at bolstering energy efficiency. Ryan Pletka, an innovation and strategy executive at Black & Veatch, a global leader in engineering and power solutions, details key things you should know:

WHAT’S THE ISSUE:  As part of the California Energy Commission’s unanimous decree, which makes use of the state’s most prominent resource by turning sunlight into power, builders must either make new single-family homes or multifamily buildings of up to three stories available with solar photovoltaic systems or build a shared solar-power system serving a collection of homes. Rooftop panels either may be owned outright and rolled into a home price or be made available for month-to-month leasing. Several U.S. cities, including San Francisco and Santa Monica in California along with South Miami in Florida, already have residential rooftop solar power mandates.

WHY NOW: Beyond simply reflecting the trend toward wide-scale adoption of renewable energy and bringing solar energy into the mainstream like never before, California’s edict promotes on-site generation and clean energy while launching the state closer to its goal of cutting its carbon footprint in half by 2030. California’s regulatory commission says the new standards will reduce greenhouse gas emissions by an amount equivalent to taking 115,000 fossil fuel cars off the road. By 2020, the nation’s most-populated state strives for its new houses to be “net-zero energy,” meaning they’d produce as much energy as they use.

HOW HOMEOWNERS WIN: Hardwiring a green energy requirement into the state’s building code is expected to drive down the cost of solar through economies of scale and efficiencies gained through new construction versus retrofits. While equipping new homes with solar energy systems will add thousands of dollars to the state’s already high home prices, regulators say homeowners could recoup that cost over time in energy savings; the California Energy Commission estimates the solar and energy efficiency standards will add about $40 to an average monthly housing payment but save consumers $80 on monthly heating, cooling and lighting bills. With California’s relatively sunny weather and high electricity rates, homes built under the new standards will use about 53 percent less energy than those under the 2016 guidelines. Finally, a decentralized network may be more resilient than centralized electricity systems vulnerable to physical and cyber threats, especially if residential solar is paired with energy storage.

WHAT’S THE POTENTIAL FALLOUT: The new mandate will make homes pricier, perhaps negatively impacting real estate agents, homebuyers and developers. The higher prices also may exacerbate the state’s thorny shortage of affordable housing.  The counter argument is that solar will be a relatively small additional upfront cost and will pay for itself over time.  While more options are becoming available, some homeowners still object to the aesthetics of rooftop solar. Although conventional wisdom might suggest that large residential solar installers could benefit most from the mandate, homebuilders ultimately are likely to gain the skills needed to design and install the solar systems themselves.

WHAT ABOUT RATES: As for whether the migration to solar means higher utility bills for homeowners not required to have solar power, that’s a matter of dispute. What is known is that under the state’s net metering rules, consumers with solar power get credit for the electricity they produce, cutting their utility bills. But they’re still linked to the grid, and there are still costs to maintain reliable service to those customers regardless of where the energy comes from.

WHAT OTHER STATES SHOULD KNOW: While California often leads the way in environmentally-tailored energy policies, the state’s favorable solar economics are unlikely to translate directly to many other states, at least in the near-term. California, followed by Arizona, has nearly half of all U.S. solar electricity generating capacity for a reason: There’s abundant, intense sunshine and fairly high electricity rates that justify the solar decree as part of the state’s energy efficiency matrix,  Most states  do not have the same favorable combination, and many states pondering such a tilt toward solar may stay on the sidelines and closely watch the California-wide decree as a test case. It’s possible that traditionally progressive, environmentally-minded states, notably in the nation’s Northeast or Northwest, may emulate some elements of California’s mandate, perhaps more in the interest of lessening their carbon footprint than for economics. And the cost of solar continues to drop, perhaps offering another incentive for other states to adopt it on a mass scale in the future.

COULD OTHER UTILITIES FOLLOW SUIT: Perhaps, though utilities in other states have a number of challenges or significant things to consider before following in California’s step. Utilities elsewhere have varied relationships with their regulators and consumers. And while solar power has gone mainstream in California, that renewable energy spurs questions in other states about cost recovery or subsidization. If consumers elsewhere are generating their own power, their states may not have regulatory mechanisms that make utilities neutral from a cost and rate standpoint, raising the specter that some utilities or other ratepayer classes come out on the losing end of a policy in the spirit of California’s. On the technical side, it remains murky about whether California utilities will need to invest in infrastructure upgrades to manage such things as bi-directional electricity flow to accept excess power that a solar-powered home may send back to the grid. Combined with increasing adoption of electric vehicles and other distributed energy resources, it may well be that traditional concepts about distribution design may need to be wholly rethought. 

WHAT’S INTERESTING: The proliferation of solar power into the mainstream in California illustrates growing complexity in the electricity market. A century or so ago, a utility’s chief worry was managing its customers’ power load and balancing generation accordingly. Now, a panoply of distributed energy options for consumers has added complexity, turning homeowners beyond being just buyers and consumers but into the realm of generators and sellers.

About Ryan Pletka 
Ryan Pletka, a registered professional engineer, is associate vice president of innovation and strategy at Black & Veatch, a global leader in engineering and power solutions. Pletka was a founding member of that company’s Growth Accelerator team, which, among other things, identifies new trends, evaluates emerging technologies, develops new business models, and establishes partnerships with internal and external entrepreneurs. Focus areas include energy, artificial intelligence, distributed infrastructure, remote sensing, and climate change. Prior to that, Pletka worked in renewable, distributed, and advanced energy technologies for nearly 20 years.

About Black & Veatch 
Black & Veatch is an employee-owned, global leader in building critical human infrastructure in Energy, Water, Telecommunications and Government Services. Since 1915, we have helped our clients improve the lives of people in over 100 countries through consulting, engineering, construction, operations and program management. Our revenues in 2017 were US$3.4 billion. Follow us on www.bv.com and in social media.

Black & Veatch Media Contact Information:

JIM SUHR | +1 913-458-6995 P | +1 314-422-6927 M | SuhrJ@bv.com

24-HOUR MEDIA HOTLINE | +1 866-496-9149