Will Solar Be Mandated for CRE New Builds?

Early last month, the California Energy Commission announced approval of a mandate that will require all “new homes and low-rise multifamily buildings” to include solar panels on the roofs. The law goes into effect within the next two years with full implementation mandated by 2020.

This mandate is the first of its kind in the U.S. Could other states follow California’s suit? Will all commercial real estate builders and developers soon be required to install solar panels in all new builds and what will that do to the industry?

 

New Mandate Could Mean Boost for Construction Industry

In addition to reducing California’s carbon footprint, this change is expected to give a boost to the single family construction industry in CA by adding a near $10K charge to all new construction. But for building owners, while it means an initial increase in construction costs, it will also save them in the long run an estimated $19K – almost twice as much as the initial construction costs to add solar panels.

Builders even concede that this is a “fair balance” between increases in construction costs and limiting greenhouse emissions. Moreover, with more buyers of solar panels, costs for solar panels and installation are both expected to go down.

 

Solar Panel Mandate Could Cause Other Problems

Despite unanimous approval by the CA Energy Commission, there is some pushback to this mandate. One argument is that the mandate is “inflexible” and does not take into account that the technology doesn’t work as well in shady areas, thus making the benefits and costs uneven. Additionally, the costs are made up over the span of three decades – most homeowners will not have lived in their homes long enough to really benefit from those long term savings, although building owners will.

On top of this, there is a political element to this debate and some opponents simply do not like the idea of being forced to comply with a policy to combat a problem that they do not even believe exists, especially if it costs more money. That said, annual savings on energy costs could go a long way to convince tenants that the policy is worthwhile and could lead to other states following suit.

 

Will Other States Follow California’s Lead?

It’s been less than a month since California announced the mandate. It is yet to be seen if other states will follow suit. The more likely scenario is that other states will benefit from California leading the way with this experiment, affording them the opportunity to take a wait-and-see approach.

If California’s model is successful, the proof will be evident in the number of new solar panel innovations and companies born out of the mandate. It will be evident in the cost-benefits to consumers and building owners alike and if the model is successful in cutting greenhouse emissions it could lead other local, state, and federal agencies to consider implementing statewide and nationwide solar panel mandates.

However, location is likely to be the most determinative factor. Consider the amount of sunshine per year in North Dakota compared to that of Southern California and the problems inherent with the idea of a broad mandate for solar panels in commercial real estate could prevent any such nationwide policy prescription.

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