The California Solar Mandate: What It Is And What Solar Businesses Should Know

California leads the way in photovoltaic installations with over 32 MW of installed capacity, enough to power 9.6 million homes. The Golden State is serious about transitioning to renewable energy to phase out fossil fuel consumption and reduce carbon emissions. In fact, the Golden State has numerous laws to make this happen, enabling unprecedented growth in the solar energy industry.

Because California has many building codes regarding solar energy, PV contracts need to be aware of these when conducting business in the state. Being knowledgeable about how these laws impact energy codes is critical for advising clients.

What Is The California Solar Mandate?

In 2018, California created a mandate that new single-family homes and multi-family dwellings up to three stories high must install solar panels. The California solar mandate took effect on January 1, 2020, and is part of California’s building codes. The mandate was created by the California Energy Commission (CEC), was unanimously approved 5 to 0 and is the first such mandate in the United States.

Solar systems on new construction projects must have the capacity to provide all of the power needs on an annual basis. Because these properties haven’t been inhabited in the past, builders estimate the electricity needs of the home based on the climate zone and square footage.

However, if the solar system includes battery storage systems, such as the Tesla Powerwall, Enphase Enpower, or LG Chem RESU, builders can reduce the size requirement of the solar system by up to 25%. In addition, when incorporating other energy-efficiency initiatives and demand-response measures, builders can reduce the size of the solar power system by 40% or more.

Last year, the CEC also unanimously approved a change to the building codes to require many new commercial buildings to have solar panels and battery storage. This new commercial mandate will likely take effect on January 1, 2023. The commercial buildings included in this change include high-rise residential projects, hotels, offices, medical offices, health clinics, retailers, grocery stores, restaurants, schools and civic spaces.

The residential and commercial mandates will increase demand for rooftop solar and battery installations throughout the state, creating excellent opportunities for solar contractors.

How Does The California Solar Mandate Impact Homeowners And Businesses?

The solar mandate will affect solar installers and PV contractors. If conducting business in California, it is critical to understand what impact this will have on your customers.

Residential Solar Clients

The California Solar Mandate is already in effect for residential solar clients in single-family homes and multi-family housing three stories or less. Although residential new construction projects must have solar panels, existing homes are not usually required unless they are undergoing extensive updates. In the future, new homes will be required to have wiring that enables an easy transition from gas appliances and heating to all-electric and to be “solar-ready” to easily add solar storage capacity.

The mandate for high-rise residential projects is expected to take effect on January 1, 2023, allowing some time for planning.

In addition, the total capacity of the solar panel system can be reduced when adding solar battery storage or other energy-efficiency measures to the home. If your clients add solar storage capacity, they may qualify for rebates through the Self-Generation Incentive Program (SGIP). The California Public Utilities Commission (CPUC) has already authorized more than $1 billion in funding through 2024 for this popular energy storage incentive program.

Opponents have criticized that the solar mandate will increase new home prices for Californians because of the upfront cost of solar panels, making home ownership unaffordable to some. However, projections from the CEC indicate otherwise, because of the reduction in energy bills with PG&E, SCE, or the local utility provider.

Despite increasing the cost of a new home, the CEC anticipates the California Solar Mandate to save money. According to its estimates, the mandate increases the cost of a new home by roughly $8,400, which adds about $40 a month to a mortgage payment depending on mortgage product, rate and other factors. However, the CEC estimated the solar PV system would reduce energy bills by an estimated $80 a month.

Commercial Businesses

California regulators have updated the Build Energy Efficiency Standard, which will impact commercial properties. Numerous new commercial projects will be required to install solar systems with battery storage, including retailers, offices, schools, apartment complexes, and medical facilities.

The CEC estimates this will add 280 MW of solar energy capacity annually, which creates a lot of work for solar contractors. In addition, the mandate will also add an estimated 480 MWh of battery capacity to commercial properties.

California is promoting the installation of storage batteries in part to reduce the impacts of public safety power shutoffs where utility companies shut off the electricity to help prevent wildfires.

California Solar Mandate Exemptions

Some seasonal properties are exempt from the solar mandate. To qualify for an exemption, the property must lack one basic utility or amenity for year-long occupancy. This includes lack of insulation, permanent heating system, or lack of year-round plumbing. In addition, some homes with small roofs or a lot of shading may also be exempt from installing a rooftop solar array. One path to fulfilling tahe mandate requirements for new homes, residents can subscribe to a community solar farm instead of installing rooftop solar panels.

Also, multi-unit buildings in areas without virtual net energy metering are exempt from the mandate.

Are There Tax Benefits To The Solar Mandate?

There are other solar incentives that can significantly reduce the total cost of a solar PV system, including the federal tax credit for residential and commercial projects. In addition, commercial projects can qualify for accelerated depreciation or bonus deprecation.

Also, per section 73 of California’s revenue and taxation code, there is a property tax exclusion for solar systems. This means that installing solar panels won’t cause an increase in property taxes despite boosting the property value.

Do Other States Have Similar Solar Panel Mandates?

Currently, California is the only state requiring solar systems on new construction projects, and it leads the way in clean energy development to mitigate climate change. However, California’s mandate could encourage other states to follow, especially as concern about climate change and greenhouse gas emissions increases.

Solar advocates are encouraging such mandates for new homes in Nevada, Colorado, New Mexico, Texas, Minnesota, Michigan, North Carolina, Maryland, Pennsylvania and Massachusetts. The new housing market is particularly strong in Texas, North Carolina and Colorado, which could result in a lot of new rooftop solar installations if a mandate is put into effect.

Solar Businesses Should Be Prepared To Discuss The Solar Panel Mandate With California Clients

Because the solar mandate is new and relatively complex, many potential clients have questions about how it applies to their situation. Becoming well-versed on the requirements and exemptions can help set you apart from other solar installers.

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