In 2018 the California legislature voted to mandate that all new single-family homes built in the state must include solar panels starting January 1st, 2020. This new law is also applicable to multi-family properties up to three stories. The law is only applicable to new homes and does not require existing homes to install solar panels (although if the home consumes a lot of energy it is wise to do so). If the home’s plans were approved prior to January 1st, 2020 they are exempt from the mandate. California’s new home solar mandate is the first in the country, but you can expect other states to follow its lead.
Solar panels are a great investment for California homeowners for several reasons. The first and foremost is that a solar system will reduce or eliminate all the energy a home consumes (whether the electric consumption is fully offset depends upon if the roof of the home has enough space to accommodate the number of solar panels needed for a full offset). The second benefit is that by producing your own clean and renewable energy from the sun you no longer must deal with rising utility rates. The third benefit, and while it is not mandated, is that a California homeowner can choose to install an energy storage system (solar batteries) with their solar system to ensure they still have power in the home when the utility shuts off their power or there is a natural disaster that causes a grid outage. These “forced shutdowns” are becoming more and more common, particularly in PG&E territory during California’s wildfire season.
Another benefit a California homeowner will receive from installing solar on their new or existing home is that the solar system will add value to their property and make it easier to sell. Many studies have been done to determine how much value solar systems add to homes and while that figure can vary from city to city a general rule of thumb is that for every $1 invested in a solar system it will add $2 of value to the property! With an increase in property values comes an increase in property taxes, right? Wrong! In California solar systems are exempt from property tax increases!
With some of the highest electricity rates in the country, it is not only a benefit to the environment but financially for California homeowners to go solar. All three private electric utilities in the state (PG&E, SCE, and SDG&E) are raising electric rates, and with the cost of solar panels having come down by 70% over the past ten years the payback period, or Return On Investment (ROI), is typically between 6-8 years for a California homeowner. The hardware components of a solar system (solar panels and inverters) are warrantied for 25 years, so a California home with a $300 electric utility bill will save around $118,000 over the course of the solar systems lifetime if they stay in their home.
Of course, California homeowners also have the option of financing their solar system and can take advantage of record low interest rates to do so. There are a number of very attractive solar loans offered by credit unions with low interest rates and low origination fees (and secured by the solar equipment), or a homeowner can choose to use their construction loan, primary mortgage, or home equity line of credit to finance the purchase.
So how much does it cost to go solar? While the price per watt of a home solar installation can vary throughout the state the average price per watt for a residential solar project in California is $3.25 (for Tier one solar panels and central inverters). If we look at an example of an average California home with a $300 per month electric utility bill this homeowner will need to install roughly a 9.92 KW solar system to fully offset their electric utility bill (if the arrays are facing South) and save $3,600 per year on their electricity costs. We calculate the cost of this project by multiplying the number of watts (9,920) X $3.25 = $32,240. This is the gross cost that you would pay to the contractor to install your solar system on your home and does not include the current 26% Federal Investment Tax Credit (for systems installed by 12/31/20). If we deduct the 26% Federal Investment Tax Credit of $8,382 the net solar system cost would be $23,858. Unfortunately, there is no California state tax credit or rebate for solar projects and the Federal Investment Tax Credit is decreasing to 22% in 2021. There is however a one-time California state cash rebate for batteries that is currently available as of the date of this blog. The cash rebate is determined at the time of the battery system installation and is based upon the battery system size and the “step” the state’s incentive program is in on that date the rebate is reserved.
So now that you know how much it will cost to install solar on your new home where do you begin? The first step in understanding the process is understanding that solar systems are sold as a package. EPC contractors (i.e.: solar installers) will purchase the equipment (solar panels, inverters, racking, mounting equipment, conduit, and batteries) and install it on your home (solar) and in your home (battery) for one turnkey price. This includes all plans, permits, labor, and interconnection to the electric utility grid. This packaging is what I was referring to earlier when I mentioned price per watt. Is it always best to go with the contractor with the lowest price per watt? No. Like with anything in life you get what you pay for. There are a variety of factors that contribute to an EPC contractor’s price per watt and with so many California homeowners going solar many of these contractors are overwhelmed with business which can lead to poor customer service and delays in the workflow of your project. If you base your decision strictly on the lowest price per watt you are highly likely to end up with one of these providers. It is also important to make sure your EPC contractor has a clean license, a good track record in the industry, and is going to be in business for the long haul to service your system if any issues arise in the future. Want to see which EPC contractor I would recommend for your solar project? Get started by e-mailing us an electric utility bill, a picture of your electrical panel (we need to see the circuit breakers), and a picture of your roof today: email@example.com.