In 2020 California became the first state to require solar panels on the roofs of most new homes, a milestone for a residential solar industry that already enjoyed a healthy foothold in the state. But with implementation now underway, the state’s building industry has hit a snag.
The coronavirus pandemic has resulted in construction slowdowns and fewer permits for new housing in California, potentially delaying the impact of the nation’s first statewide residential solar mandate.
Even under normal circumstances, it takes months for all new buildings to fully comply with requirements under California’s building energy codes, which are updated every three years. Many builders request permits just ahead of the code switch in order to delay costly changes. The pandemic may extend that timeline even more.
“We’re in a bit of a desperate time here,” said Bob Raymer, technical director at the California Building Industry Association (CBIA), a trade group that represents homebuilders.
Prior to the pandemic, analysts at Wood Mackenzie forecast that the mandate would add 123 to 334 megawatts of PV to the state’s market each year through 2024. That’s akin to adding another very strong residential quarter in California on top of the largest residential solar market’s baseline additions. Now, those benefits may not be realized until well into 2021. California will go through another code change, which may bring more stringent requirements, in 2022.
“The fourth quarter of 2020 and the first quarter of 2021 is when you’re really going to see an uptick,” Raymer says. “It’s just a matter of time. But if COVID screws with us again, that could push us back.”
Pandemic hits an already-dampened housing market
Prior to the Great Recession of 2008, California homebuilders completed the construction of nearly 200,000 single-family and multifamily units in a good year. Recovery has come slowly: The state has since clawed its way back to about 65 percent of that volume, says Raymer.
This year will bring another dip, with the state likely to build fewer than 90,000 new units in 2020, said Mike Hodgson, president at Consol, a California company that consults on efficiency and building standards.
The coronavirus pandemic is exacerbating existing and more serious difficulties for California’s housing market, including affordability and land availability, Hodgson says. And fewer new homes being built means the solar mandate is having a smaller impact than it ordinarily would, even though California is still likely to top the charts for residential installations overall.
“I would not blame [the coronavirus] for the dip in the housing market,” said Hodgson. “It’s going to be part of it. Is it going to be significant? Yes. But is it the big issue? No.”
April was the “worst April in the history of us keeping statistics,” says CBIA’s Raymer. The state issued just 5,383 permits for new units in April, compared to 10,572 in April 2018, according to data from the Construction Industry Research Board, the research arm of the California Homebuilding Foundation, which has tracked state permits since 1954.
In Fairfield, an inland Northern California city, the local building division received just 51 permit applications in the first six months of 2020, according to the city’s Chief Building Official Jeff Thomas. That’s down from 213 applications received in the same period last year and 159 applications in the first half of 2018.
There are exceptions to California’s housing market slowdown where the solar market will benefit. In neighboring Vacaville, permit applications submitted in the first six months of the year grew steadily from 2018 to 2019 and into 2020. That may be due to more active subdivision developments in that city, said Vacaville’s Chief Building Official Jay Salazar.
Unusually low interest rates have helped buoy demand for new houses, said Brandon De Young of De Young Properties, which builds in the Central Valley and has been adding solar to all of its homes for more than three years. De Young, which constructs about 100 homes per year, expects to grow its builds by 10 to 20 percent in 2020.
Residential solar and storage company SunPower, which has prioritized its new-homes segment and is based in California, told Greentech Media that construction and sales were slowed for a few weeks due to the coronavirus lockdown. But the solar provider said the pandemic hasn’t delayed the state’s transition to the new solar standard.
The pandemic has hit the broader market hard, though. Through April, total housing unit permits declined 11 percent in 2020 from the year prior. And in addition to slowing down permitting, the coronavirus slowed construction in parts of the state, notably the Bay Area, where stringent local shutdown orders prevented all construction — an activity that was deemed essential statewide — from moving forward.
“Construction schedules are daily; they have a rhythm and a routine to them,” said Consol’s Hodgson. “With [the] coronavirus…a reasonably well-oiled machine became not well-oiled at all. There were days when nothing happened on the job site.”
Regulators rely on local building officials to “monitor their own local situation” when it comes to compliance with the standards, said Amber Beck, a spokesperson at the California Energy Commission, which worked on the residential solar codes. And the time it takes to meet the standard may vary widely based on location. Twenty-five California cities also have local ordinances that are more stringent than the current state code.
The other challenges
Even without the coronavirus pandemic, California faced challenges in enacting its first-in-the-nation statewide solar standard.
Some housing in high-density areas such as Los Angeles and the Bay Area may not have the roof space necessary for adequate solar installations. Because executing projects in California’s market often takes years, Hodgson said some projects may have been designed and planned before the code change was even a discussion point, with permits submitted later.
Such issues could be alleviated with one fix built into the energy code: community solar. But just one California community solar program, from the Sacramento Municipal Utility District, has thus far been approved as an alternative method of compliance with the energy code. That approval also came after much controversy about the format of SMUD’s program, and it’s unclear if other programs will follow.
“There’s definitely a good market [potential] for community solar,” said Hodgson. “[But] if you look at how much SMUD got beat up trying to get community solar through, I would not want to be in that line.”
Regardless, California’s residential solar mandate will serve as a tailwind for the market, and the idea may spread to other parts of the country. This summer, advocacy group Environment America announced a campaign to promote similar policies in 10 additional states in the coming years. And challenges aside, California’s builders have a lot of experience implementing new codes. Hodgson said he doesn’t expect that complying with the latest iteration will present a major problem.
But with the coronavirus pandemic still raging and the economy on shaky footing, the full impact of the solar mandate may come later than many hoped.