Sustainable Energy

California's new solar energy standards: Here's how it could affect homeowners

Key Points
  • California now requires that most new homes built after January 2020 must have solar panels
  • The impact of the requirement is being debated, and may hike costs that could worsen the state's housing crunch
  • In the longer term, some experts say it could lead to lower energy bills for consumers
Experts debate California's new solar panel mandate
Experts debate California's new solar panel mandate

On May 9, California gave the solar industry a huge boost by requiring solar panels on most new homes built after January 2020. The historic measure will make the Golden State the first to require solar installations on most single-family homes, in addition to multi-family residential buildings up to three stories, including condos and apartment complexes.

Yet the move is already becoming the subject of a growing debate over how it could impact a range of costs, and potentially worsen a housing crunch. In light of California's new mandate, CNBC recently spoke to several experts to identify ways in which the solar requirement could ripple across the state's economy.

Construction costs will go up

A worker stands on the roof of a home under construction at a new housing development in San Rafael, California.
Getty Images

For home builders, the mandatory addition of solar panels means added construction costs, perhaps as much as $10,000 per home, in the short term, according to one expert.

"Obviously, there is a cost involved in putting solar on a roof. The good news is when you do it during the building process, it's going to be much more efficient and less costly," Anne Hoskins, the chief policy officer of Sunrun, a solar energy provider. She added that permitting could get easier as well, but costs would rise.

Housing prices will rise

SolarCraft workers Craig Powell (left) and Edwin Neal install solar panels on the roof of a home on Feb. 26, 2015, in San Rafael, California.
Getty Images

California already has one of the frothiest housing prices in the nation, a condition that could get even worse with the new solar mandate.

Jimmy Pethokoukis, an economic policy analyst at the American Enterprise Institute, said the mandate will only hurt California homeowners who can't afford the upgrade in an already saturated housing market.

"This is great for wealthier homeowners, but for everybody else it's one more reason to not go to California or to leave ASAP," Pethokoukis told CNBC recently.

Homes built before 2020 will likely add solar panels as well, as buyers begin expecting this as a feature in homes, Hoskins said, making solar energy a more common luxury.

Companies like Sunrun are offering an alternative to the upfront installation costs they hope will lessen the burden for customers who experience sticker-shock of installation fees.

The option to lease solar panels such as Sunrun's solar as a service lets the company own the system and offer a production guarantee, a lease so homeowners can have access to the energy while the company takes care of the system and maintains it.

Arizona, Hawaii, and others could follow

A Tesla solar farm in Kauai, Hawaii.
Meghan Reeder | CNBC

According to Sunrun, California's move may prompt Hawaii, Arizona, and other western states that have high levels of solar penetration to follow suit.

Roh Habibi, founder of luxury real estate firm The Habibi Group, agreed. He told CNBC that some of the resistance to residential solar panels has been a fear of being the first to act. He sees California as an early adopter.

"When the Toyota Prius first came out we didn't see them often because they were kind of expensive, it was a new proposition, they had to wrap their heads around it but now if you're on the road, you can't count how many you're going to see," said Roh, predicting the same will happen with solar-powered homes.

Homes will focus on "holistic health"

LED smart bulb from Sony.
Source: Sony

Environmentally friendly lighting for commercial buildings is already an industry standard. Yet Habibi said that within in the next five years, there could be a new classification for residential "mood' lighting that's beneficial to homeowner health .

"This could mean there could be different lighting fixtures inside the home that are different colors at different times," he told CNBC. "Say in the morning your mirror and light in your bathroom will come with a cooler fluorescent blue hue to get your day started."

Electricity bills will go down...eventually

Ridofranz | Getty Images

Solar energy accounts for less than 2 percent of electricity generation, according to Energy Information Administration data. While that sum is relatively small, some experts say it leaves room for the sector to grow — especially with the largest state in the U.S. expanding its capacity.

"What happens as you get greater demand, that helps increase economies of scale, draw in more producers and more in the market," said Sunrun's Hoskins.

She envisions a future where customers can offer their services, and share energy, at times where it's most valuable, instead of going through the utility.

California projects the new initiative will save consumers about $80 on monthly heating, cooling and lighting bills (based on a 30 year mortgage). Less than 20 percent of homes built in California currently include panels.

--CNBC's Jeff Daniels and Kellie Ell contributed to this story.