California recently became the first state to require that homebuilders install solar panels on almost all new houses. In California, most homes built after Jan. 1, 2020, will be obligated to have solar energy panels and systems. The mandate is bad policy for multiple reasons. It will drive up the state’s already astronomical housing prices by an estimated $10,500 per home, according to the California Energy Commission’s own estimates. It is also likely to add layers of government bureaucracy in an area where the state’s typically overzealous regulatory streak has been surprisingly restrained — solar energy.
The cost of installing residential solar electricity generation in the United States has declined significantly over the past few years, due mostly to innovations that have reduced the cost of photovoltaic panels. But, nationwide, American consumers are still being charged far more for solar panels than the average consumer in other countries.
Antiquated regulations, primarily at the state and local levels, are costing American consumers about $70 billion per year. Permitting and other regulations vary significantly from state to state, but onerous permitting processes, strict building codes, and various tariffs cause U.S. consumers to pay, on average, nearly double what consumers abroad pay for installing similar solar systems. That amounts to nearly $10,000 more in costs for a 5-kilowatt residential solar system. The contrast with Australia, where there is no permitting process at all for solar, is stark. Solar installation costs in the U.S. are $3.25 per watt, compared to just $1.34 per watt in Australia.
California, not typically known for being a leader in government reform and efficiency, has actually been leading the way in streamlining its solar permitting process. The state has taken a number of steps to standardize its permitting process and has modernized outdated laws and regulations that were impeding Californians’ ability to adopt solar.
Assembly Bill 2188, passed in 2014, requires all local and city governments in California to follow the permitting processes included in the “Solar Permitting Guidebook,” which lays out standards and best practices for governments to reduce barriers to entry and cut costs. And the state has seen remarkable progress, with many local governments updating their books, reducing installation and permitting fees, and/or waiving them entirely. Each step taken locally to modernize outdated and onerous regulations is one step closer to ensuring the solar market is competitive and attractive to the ordinary consumer.California’s improvements have played a role in the price of solar in the state plummeting 55 percent over the last five years. And California is expected to lead the nation in solar production in the next five years, with a projection of 13,402 megawatts of solar according to the Solar Energy Industry Association.
These successes should be spurring California to continue streamlining its solar process so homebuilders, businesses, and consumers voluntarily select it. Instead, the state is implementing a mandate that may not scale well or generate positive returns since California is already experiencing periods where it has more solar power than the grid needs. Meanwhile, there is one very obvious negative. Piling on another $10,500, or more, in the costs of a home only makes the region’s housing more unaffordable for first-time homebuyers and middle-class families.
In March, the median home price across Southern California’s six counties was $519,000, according to CoreLogic. In Orange County, the median price hit a record $725,000 and in Los Angeles County the median price was up to $585,000.
Instead of the solar mandate, California would be much better served to continue focusing on reducing the cost of permitting and other regulations that have helped drive down the price of solar. Doing that can help solar installations become cheaper and more attractive to a wider swathe of consumers without pushing sky-high housing prices further out of reach for most Southern Californians.
This column originally ran in The Orange County Register.