New Solar Energy Requirements for Residential Construction and the Transition to Energy Independence

• Publication year: 2020
• Author: Theodore L. Senet

New Solar Energy Requirements for Residential Construction and the Transition to Energy Independence

Theodore L. Senet

Theodore L. Senet, Esq., LEED AP BD+C, is a partner of Gibbs Giden Locher Turner Senet & Wittbrodt LLP. He practices in the areas of construction, environmental, insurance, and real property law; represents public agencies, private developers, contractors, and building product manufacturers; and teaches construction law as an adjunct professor at Loyola Law School in Los Angeles.*

California is radically changing the home-building industry. Beginning on January 1, 2020, new homes and low-rise (three stories or less) residential buildings in California must install solar power systems on the building site, or provide solar power as part of a community-shared, solar-electric-generation system. The solar energy requirements are intended to reduce the amount of fossil-fuel-produced energy consumed by homes and are an incremental step toward California's long-term goal of zero net energy ("ZNE") buildings. A ZNE building is "an energy efficient building where, on a source energy basis, the actual annual consumed energy is less than or equal to the on-site renewable generated energy."¹ California's new solar energy requirements and zero energy goals should provide homeowners and renters with lower monthly housing costs, compel residential developers to improve the energy efficiency of their buildings, significantly decrease the cost of solar installations, and accelerate the modernization of residential building design and construction.² This modernization could spark a transformation in home-building and energy consumption well beyond California's borders.

I. DEVELOPMENT OF SOLAR ENERGY—THE SPARK FOR ENERGY INDEPENDENCE

Over the past five years, solar panel efficiency has increased, while the cost of the panels has continued to decrease. The City of Los Angeles recently signed a power purchase agreement to purchase utility scale solar power at a fixed cost of two cents per kilowatt-hour, the lowest price offered in United States history.³ More recently, the City signed a combined solar power purchase and energy storage agreement with power priced at 3.3 cents per kilowatt-hour, a record low for this type of contract, and cheaper than electricity generated from natural gas.⁴ At this price, the cost of utility-scale-generated solar power⁵ is now less than that for coal or natural-gas-generated electrical power.⁶ Considering these efficiency and cost trends in solar power, and the impact of fossil fuel pollution, the continuing transition to renewable energy will accelerate due to economic advantages, environmental concerns, and regulatory mandates.

Notwithstanding the increased efficiency of buildings and other conservation measures, our reliance on electricity to power household appliances will likely remain high for the foreseeable future. To achieve their environmental goals, more than 20 California cities have adopted, and more than 50 cities are considering, building ordinances or "reach codes" to encourage elimination or replacement of natural gas-powered equipment and appliances with electric.⁷ Moreover, the market for electric vehicles is expected to grow due to the lower operating costs and superior performance of electric over internal combustion motors.⁸ As nuclear-power-generated and natural-gas-generated electricity are eliminated from buildings in California, the demand for renewable power has increased dramatically.⁹ This shift has spurred, and will continue to spur, investment in solar energy and, ultimately, continue decreasing the cost of renewable energy due to economies of scale.

The installation of solar energy systems will free many new homes from total dependence upon utility companies. This independence from utility-supplied power could unleash market innovations that are as-yet unimagined. Sunlight is an unlimited resource and is the natural source of most energy.¹⁰ Advances in solar technology and competition in the energy marketplace could enable millions of people to live more economically, independently, and without the expense and pollution associated with fossil-fuel-generated energy.¹¹

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II. BACKGROUND OF CALIFORNIA'S ENERGY PLANS—DRIVING THE ENERGY MARKET TRANSFORMATION

More than a decade ago, Governor Arnold Schwarzenegger signed into law the Global Warming Solutions Act of 2006 ("AB 32"). Pursuant to AB 32, a Climate Change Scoping Plan required the State of California to reduce greenhouse gas emissions to 1990 levels by 2020. AB 32 directed the California Air Resources Board to identify actions that would reduce emissions while also preparing a scoping plan to identify the best methods to reach the 2020 limit.

In 2007, the California Building Standards Commission began developing green building standards to meet the goals of AB 32. The 2008 California Green Building Standards Code ("GBSC") was the first green building code in the nation. The initial GBSC provided a framework for, and first step towards, establishing green building standards for low-rise residential structures. The GBSC was used as a base document that led to the 2010 CALGreen Code ("CALGreen").¹² CALGreen was the first-in-the-nation green building standards code that established new energy efficiency minimums for buildings.¹³ However, regulation of energy efficiency is left to the California Energy Commission ("CEC") and the California Energy Code, known as the Building Energy Efficiency Standards.¹⁴

In July 2008, the California Public Utilities Commission ("CPUC") established new energy saving targets for the years 2012 through 2020 for its regulated utilities. These goals are intended to spur "long-lasting sustainable changes" in the energy market. In September 2008, the CPUC adopted the Long Term Energy Efficiency Strategic Plan ("Strategic Plan") to achieve maximum energy efficiency across California.

The Strategic Plan has been supplemented by the CEC's more specific regulations in its Building Energy Efficiency Standards. The Building Energy Efficiency Standards were critical to implementing both the Strategic Plan and the CPUC's Residential Zero Net Energy Action Plan ("Action Plan") that followed. The Action Plan was designed to operationalize the Strategic Plan's goal of ZNE buildings in all new residential construction.¹⁵

In 2016, California enacted Senate Bill 32, which requires a reduction in greenhouse gas emissions to levels 40% below the 1990 levels by 2030. In 2018, the state enacted Senate Bill 1477, which provides incentives for near-zero emission homes, and Assembly Bill 3232, which requires the state to assess the options to reduce emissions from buildings by 40% from 1990 levels by 2030.¹⁶ In 2018, Senate Bill 100 established a landmark policy requiring renewable energy and zero-carbon resources to supply 100% of electric retail sales to end-use customers by 2045, and requiring state agencies to ensure that actions are taken to achieve this policy.¹⁷

The Building Energy Efficiency Standards are a key component to achieving California's evolving environmental policies, and are updated every three years.¹⁸ The 2019 Building Energy Efficiency Standards update ("2019 Standards") added several significant requirements to the 2016 standards, although the 2019 Standards did not adopt a ZNE mandate. The 2019 standards require that all low-rise, single-family, and multifamily buildings either have a photovoltaic ("PV") system installed on the building site or be part of a "community shared solar electric generation system" approved by the CEC.¹⁹ The mandate for new solar-energized homes, starting in 2020, contains a temporary exemption for replacing a residential building damaged or destroyed by a disaster in an area where the government has proclaimed a state of emergency and the reconstruction project meets certain additional conditions.²⁰

III. SOLAR ENERGY REQUIREMENTS—A MANDATE FOR SELF-RELIANCE

Pursuant to the 2019 Standards, a photovoltaic system must be installed on all new single family residences and low-rise apartments, unless a building is subject to an exception.²¹ This requirement applies as a condition to issuance of building permits for low-rise residential buildings after January 1, 2020.²² Under the 2019 Standards, builders must install solar power systems on individual homes or apartment projects, or, under an exemption, build a shared solar power system, join an approved, community-shared, solar-electric generation system or other renewable electric generation system, and/or join a community-shared battery storage system. This exemption is available as an alternative to homes and apartments built in a common-use development with a CEC-approved community power source. In February 2020, the CEC approved the Sacramento Municipal Utility District's proposal to permit certain housing developments to use off-site solar power plants to meet the solar mandate under the community-shared solar electric generation system exemption.²³

The 2019 Standards also include new energy efficiency requirements, which will be essential in meeting homeowner expectations and performance standards for solar-energized buildings. Two approaches in the 2019 Standards may be employed to meet the low-rise residential energy budgets: the prescriptive approach and the performance approach.²⁴ Although less flexible than the performance approach, the prescriptive approach is simpler than the performance approach and requires that each energy component in the home meet a prescribed minimum efficiency level.²⁵ The more complicated performance approach offers more design flexibility, utilizing approved software to calculate the energy consumption of a proposed building design and comparing the energy consumption to a calculated energy budget mandated by the Public Resources Code.²⁶ The performance approach also gives compliance credits for builders who incorporate extra compliance options into their...