The California Solar Mandate went into effect on January 1, 2020, requiring home builders to install solar photovoltaic (PV) systems on all new residential low-rise buildings. However, a program from the Sacramento Municipal Utility District (SMUD) is carving a huge exception to this requirement, and it may have cost implications for owners of new homes.
Under the Neighborhood SolarShares Program, homebuilders in Sacramento have a choice between adding a rooftop solar PV system to each home or entering into a 20-year agreement with the utility. This would supply renewable energy for NEW homes from NEW utility-installed and operated ‘solar farms’ in Sacramento County. The Utility is also allowed to supply energy from up to 20 megawatts (MW) of existing utility-scale solar installations located within their service territory.
Proponents of the bill argue that SolarShares can help keep home prices low, making the possibility of owning a home a reality for more people. Opponents argue that, while this alternative saves money upfront, it ultimately makes home-buying less affordable by locking the homeowner into a 20-year contract with the utility.
Two compelling arguments: let’s do a cost comparison
When the California Energy Commission (CEC) first announced the California Solar Mandate, they conducted and published a cost-effectiveness study for the overall benefits of adding solar PV to new homes. This study concluded that adding a rooftop system would save consumers a net average of $35 per month. This is after taking into account an estimated $8,400 average upfront cost to add a rooftop PV system and deducting an estimated $80 per month in savings in their electricity bill. SMUD estimates an average of $30 in savings per year under their SolarShares program. According to SMUD, new homeowners can expect savings of $10 per kilowatt (kW) per year in their electric bill.
To put this into perspective, the average 2100sq-ft single-family home in Sacramento would need roughly a 2.7kW PV system to comply with the solar mandate. With SMUD’s rates, consumers would get a yearly savings of just $27 per year, compared to the CEC’s estimate average net savings of $420 per year.
The Sacramento SolarShares program may well live up to its promise to keep home prices lower upfront, a 20-year-contract with the utility is the invisible cost that most home buyers won’t see. Programs like SolarShares may proliferate as developers look for ways to keep development costs down, so it is important that homebuyers understand the cost implications, today and in the future.