Three possible shifts in California’s solar market after historic rule

solar california rule

When the world’s fifth largest economy mandates the use of your product, as is case for solar in California starting in 2020, outlooks can shift dramatically. Shocking, I know. Here’s a quick rundown of some of the implications.

1. GTM boosts residential forecast by 14 percent

Solar’s growth stall has largely been because of California’s growth stall. That lagging should now be a thing of the past. On net, the implementation of this rule increases our base-case residential forecasts by 14% from 2020-2023E – an upside of nearly 650 MW over the same timeframe. The California Energy Commission (CEC), estimates nearly 75,000 new homes are expected to be built statewide in 2020. Based on that analysis, new-build solar will account for 23 percent of new installations in 2020 — or 222 megawatts. New build residential homes will account from 18-23% of total solar build-out from 2020-2023E. Though multi-family units are also included in this ruling, GTM excluded these customers from this analysis given their typical inclusion in its “non-residential” sub-segment.

2. Good bye soft costs?

Soft costs such as permitting, marketing and customer acquisition make up about two-thirds of a solar installation costs. Many of those will be removed or reduced dramatically in this equation, which make a huge impact on the economics of residential solar.

So that’s the good news, but who shares in all of this upward momentum is an open question. How much will homebuilders take on themselves? Will most solar companies focus on the new build market, and what will those margins be? What becomes of the retrofit business model? These questions aren’t meant to imply bad news for anyone (maybe every single stakeholder wins!), but a rule change this dramatic can be expected to make a dramatic change somewhere in the status quo.

RELATED: Solar Installer Survey: Two-thirds will absorb solar tariff costs instead of passing to customers as confidence climbs

3. The rise of solar shingles and BIPV?

What if homebuilders gravitate right to BIPV products? According to Freedonia Group analyst Matt Zielenski, demand for solar roofing products – such as those made by Tesla, GAF Materials, and CertainTeed – will see strong growth going forward as builders and contractors in California install these products on newly built homes.

“Solar roofing products have several advantages over traditional roof-mount solar panels,” says Zielenski. “One of these advantages is that they are more attractive than solar panels. Most solar roofing products look like traditional roofing, such as asphalt shingles or roofing tiles. Their ability to ‘blend in’ with the rest of the structure can add to the curb appeal and value of a home.”

As a result, US demand for solar roofing is projected to reach $2.2 billion in 2022, and continue to grow strongly through 2037. For more information on the U.S. solar roofing market, see Freedonia’s new study Solar Roofing in the US by Application and Region.

RELATED: Module Evolution: What big-time PV improvements will boost panel efficiency?

4. The end of the traditional grid?

I know we said three in the headline, but this one is more us thinking out loud, so consider it a bonus. We are excited to see the very long-term results of this initiative. Sunrun CEO Lynn Jurich once asked “what’s the fastest way to install 1 MW?” and then expounded on the possible benefits of shifting the concept of large-scale PV from the plodding and planning needed for a gigantic utility-scale system to a plan that nimbly deploys a ton of small systems at once that equals the same MW-scale right at the point of demand. This is a giant lab experiment / case study that moves this thought experiment into reality, and could show what a true widespread, distributed generation grid could look like. This is the most exciting part to us.

— Solar Builder magazine

Report: Solar retrofit market in California hitting saturation point

Despite gaining ground in 25 states in the country, the overall residential solar market declined in 2017 due in large part to a decline in the saturated California market. We noted this at the time and then somewhat glossed over it to highlight the countrywide expansion, but a new report from Lumidyne Consulting raises concern over just how saturated the California market is and what the implications could be.

The analysis forecasts that if current adoption patterns hold, “installations of residential [solar] would be expected to drop from a peak of about 149,000 systems/year in 2016 to ~92,000 in 2018 and 46,000 in 2020 (a 69% drop relative to the peak in 2016).”

Lumidyne Consulting LLC

The paper notes that after a decade of explosive growth, in 2017 the residential solar market in California saw its first decline in annual installations, a 22% drop relative to 2016. The white paper suggests this decline is likely due to the beginning of market saturation in the residential solar retrofit market, which peaked in December 2015 for all investor-owned utilities in California and has since trended downward.

The paper illustrates how housing growth in California, combined with strong incentives or initiatives to install solar on new construction homes, could help mitigate the decline and avoid job losses in the state. The analysis underscores the importance of initiatives to encourage construction of Zero Net Energy (ZNE) homes in California, which has a goal of 100% of new homes being constructed to a ZNE standard by 2020. However, it suggests that “the growth rate of the percentage of new homes installing solar PV would have to accelerate to materially mitigate the current pattern of decline in the retrofit market,” since currently about 20% of new homes install solar.

The paper also applies to other states, and notes that “unless steps are taken to mitigate the effect, one can expect a ripple of ‘boom and bust’ waves to propagate across the country as each [solar] retrofit market ultimately becomes saturated.”

Here’s the white paper if interested in the findings.

— Solar Builder magazine

California to standardize disclosures for solar contracts, protect solar customers

California solar power

Gov. Brown signed AB 1070 (Gonzalez Fletcher) into law last week. The bill previously unanimously passed the California Assembly and Senate. AB 1070 creates new and important consumer protections measures, including standardized and simplified disclosures, for all residential solar customers.

“CALSEIA greatly appreciates the efforts of Assemblywoman Gonzalez Fletcher to protect consumers and applaud Governor Brown for signing AB 1070,” said Bernadette Del Chiaro, Executive Director of the California Solar Energy Industries Association (CALSEIA). “We support this new law because it simultaneously helps eliminate confusion in the marketplace while also reigning the handful of errant contractors. It does this without inadvertently harming the ethical California business men and women who are critical architects of California’s clean energy future.”

AB 1070 requires Contractors State License Board (CSLB) on or before July 1, 2018, to develop a disclosure document that must be provided to consumers prior to sale, finance or lease of solar installation. In addition, the law requires the California Public Utilities Commission to develop standard inputs for calculation and presentation of energy savings to potential buyers.

“We should make it as easy as possible for Californians to use solar power and other clean-energy sources,” added Assemblywoman Gonzalez Fletcher, author of the bill. “But it’s very expensive and very intimidating for homeowners to invest in solar power. It’s a challenge figuring out the honest companies from the ones trying to rip you off. The more protection we can provide consumers, the more comfortable they’ll be purchasing solar power at a time when each of us must do our part to combat climate change.”

California solar thermal incentives officially extended until 2020

Last week, the Governor previously signed two other important consumer protection bills, SB 242 (Skinner) and AB 1284 (Dababneh), which provide additional consumer protections for Property Assessed Clean Energy (PACE) financing of clean energy projects. SB 242 mandates PACE providers call homeowners to ensure they understand the terms, and AB 1284 requires the Department of Business Oversight to regulate PACE providers and that PACE lenders to ensure borrowers have the ability to repay their loans obligations.

Since solar investments are independent, voluntary choices made by consumers, consumer protection is considered the cornerstone of the solar industry. With the signing of these three strong bills – AB 1070, SB 242 and AB 1284 – California took major steps to increase protections for consumers in the 2017 legislative session.

— Solar Builder magazine

California’s Clean Energy Storage bill passes Senate

California solar power

While the executive branch attempts to go backward with its energy goals, progressive states continue to march forward as the California Senate passed a bill that would give consumers more access to clean energy and provide the next critical piece for California to achieve its aggressive greenhouse gas and renewable energy goals. SB 700, authored by Sen. Scott Wiener (D-San Francisco) would increase availability of local, customer-sited energy storage for schools, farms, businesses and homes.

“In California, we are pushing aggressive renewable energy goals because we know that fighting climate change means taking action now,” said Senator Wiener. “This bill will push us down the path to 100% renewable energy. To meet our goals, we need solar, storage and other renewable energy resources in every city and neighborhood in California, not just those that can afford it. This bill will transform energy storage so that all can reap the benefits of clean, renewable energy.”

Details of the bill

SB 700 would create a 10-year rebate program designed to grow the California local storage market and make storage more affordable for consumers. The rebates would step down as more storage systems are installed and economies of scale are achieved, thereby driving down the installed cost of the systems. Local energy storage enables the integration of large amounts of renewable energy, creates value for consumers by helping them save money on energy bills, and increases grid reliability.

“Thanks to the leadership of Sen. Scott Wiener, Californians are one step closer to taking control of their clean energy future,” said Laura Gray, energy storage policy advisor with the California Solar Energy Industries Association. “This bill would allow homes, businesses, schools and public buildings to use solar and renewable energy at all hours of the day and night. Using a combination of solar and storage, consumers will make the sun shine at night.”

CPUC relaunches Self-Generation Incentive Program with big focus on energy storage

The bill also takes many steps to ensure Californians across the state are participating in the clean energy economy and have access to this program. Specifically, the bill would dedicate a portion of rebate funding for underserved areas and low-income households.

“The California Housing Partnership strongly supports SB 700. By setting aside 30 percent of incentives for low-income homes across the state, along with small businesses and public institutions in disadvantaged and low-income communities, this bill will empower Californians to equitably share in the benefits of energy storage,” said Stephanie Wang, policy director for the California Housing Partnership. “By prioritizing projects that will receive AB 693 Multifamily Affordable Housing Solar Roofs incentives, this bill will also support the long-term success of a key solar program for low-income California renters.”

The bill passed by a vote of 23 to 13 in the Senate. The bill now moves to the State Assembly.

— Solar Builder magazine

CPUC relaunches Self-Generation Incentive Program with big focus on energy storage


The California Public Utilities Commission (CPUC) announced that the state’s Self-Generation Incentive Program (SGIP) successfully relaunched on May 1, 2017, amid heavy customer demand for program incentives, particularly for energy storage projects. A total of $50 million was awarded in the first incentive step to projects that include storage paired with solar energy, projects to help offset the impact of reduced gas storage at the Aliso Canyon Natural Gas Storage Facility, and projects in disadvantaged communities.

SGIP is one of the nation’s longest running programs incentivizing customer investment in clean, distributed energy resources. It provides rebates to support energy resources installed on the customer’s side of the utility meter, including wind turbines, waste heat to power technologies, pressure reduction turbines, internal combustion engines, microturbines, gas turbines, fuel cells, and energy storage systems. In June 2016, the CPUC set the SGIP budget at more than $270 million through 2019. Also, to maximize the value of ratepayer incentives and to create more equitable distribution of funds, the CPUC instituted a lottery mechanism to select projects and replaced a first come, first-served system when demand for incentives is high. In April of this year, in response to the Legislature’s passage of Assembly Bill 1637 in 2016, the CPUC increased the total SGIP budget to more than $500 million through 2019. Nearly 80 percent of that budget is reserved for energy storage projects, with more than $100 million of funds for energy storage projects planned to be made available in June 2017.

Over the past 16 years, more than 3,700 clean energy projects have been funded by SGIP. On May 1, 2017, more than 130 companies submitted applications for more than $90 million in available incentives, more than 50 percent of which were reserved for energy storage projects. In total, hundreds of projects received incentive reservations. Initial data from the May 1, 2017, reopening indicate that the average cost per watt for storage systems seeking SGIP incentives fell from $3.33 in 2016 to $2.55 in 2017.

California Senate Panel approves energy storage bill

“We have successfully revamped our Self-Generation Incentive Program and have reserved rebates for projects across various technologies that will promote reliability and provide clean energy,” said Commissioner Clifford Rechtschaffen. “I am pleased to see that there are so many customers seeking clean energy solutions on their side of the meter, and that the market for these technologies is robust and growing. I am also very pleased that a significant portion of the projects are located in disadvantaged communities.”

Of note in the SGIP results:

● Of the approximately $50 million made available for energy storage projects on May 1, 2017, the majority of that funding was reserved on the day the program reopened.

● Approximately 28 percent of the incentives reserved by large-scale energy storage projects in the territories of Pacific Gas and Electric Company (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) are for projects sited in community census tracts identified by CalEnviroScreen 3.0 as being in the top 25 percent (i.e., most heavily impacted) of disadvantaged census tracts statewide.

● As intended by CPUC policy priorities, energy storage projects paired with solar and/or located in the Aliso Canyon-affected areas performed well in the lotteries. For example, 58 of the 66 funded applications in SCE’s large-scale (i.e., projects over 10kW in size) energy storage lottery, totaling 15.4 megawatts, are sited in SCE’s West Los Angeles Local Reliability Area, an area impacted by the leak that occurred at Southern California Gas Company’s (SoCalGas) Aliso Canyon.

SGIP is funded by the ratepayers of PG&E, SCE, SDG&E, and SoCalGas. It is administered by those utilities in their territories, with the exception of SDG&E, the administration of which is managed by the Center for Sustainable Energy

— Solar Builder magazine