California solar activity accounts for over half of all solar activity in the nation. Over 113,000 new residential and commercial solar permits were issued in California during 2015, compared to 218,000 permits issued nationwide, according to BuildFax.
Further, nearly half of the top 20 quickest growing markets for solar are cities in California. In order of the fastest rate of increase in 2015, these cities are:
- Sacramento at 139%;
- Stockton at 118%;
- Chula Vista at 84%;
- Anaheim at 80%;
- San Diego at 73%;
- Fremont at 65%;
- Oakland at 55%; and
- Riverside at 50%.
While solar is taking off today, the future success of solar still depends largely on government incentives and the ongoing cooperation of local utilities. For example, in California, new residential and commercial buildings of ten or fewer stories need to be solar ready, with at least 15% of its roof area cleared for potential installation of solar panels. [24 Calif. Code of Regulations §110.10]
Beginning in 2017 in San Francisco, new residential and commercial buildings ten or fewer stories tall are required to have a solar system installed. (Of course, the effect on the state as a whole will be negligible, considering the minimal amount of new construction occurring within the city limits.)
Thus, California policy is taking active steps to aggressively encourage the adoption of solar technology. But it’s not all sunshine for the rest of the nation.
For an example of what can go wrong when state incentives disrupt solar, look no further than our fellow Sand State neighbor: Nevada.
Nevada used to have the most thriving solar market in the country (little wonder due to its nearly year round exposure to sun, like much of Southern California). But at the end of 2015, the utilities commission started charging higher rates for solar customers, increasing their bills by 50%. In reaction, solar installation has fallen by half in 2016 and thousands of workers in the solar industry have been laid off, according to BuildFax. If there ever was a foolproof way to murder budding technology, that is the way to do it.
So a storm is brewing over states like Nevada. What is the future of California solar?
California solar forecast: cloudy with a chance of state incentives
California’s largest installer of residential solar systems, SolarCity, is in financial straits in 2016. Following year after year of company losses, the solar leasing company is offering itself up for purchase. Innovative Tesla Motors, Inc. is positioned to be the buyer, but Tesla shareholders are not enthused and may put a stop to the sale when they vote in the coming weeks.
The problem is most of SolarCity’s future financial success is dependent on the continuation of government investment tax credits, which are currently set to reduce from 30% in 2019 to 10% in 2022, according to The Motley Fool. Of course, these may be extended as they have been in the past, but it all depends on who is in political office. And without the tax credit, SolarCity will have an even harder (read: impossible) time staying attractive to customers and viable.
If the worst occurs and the Tesla acquisition is not approved and SolarCity goes bankrupt, their many customers across California will be left hanging. If this happens, there’s no assurance about whether the installed solar systems will be reclaimed, be able to be purchased by the homeowner, or if they will be useable in the future. It’s a game of wait-and-see at this point, and a worrisome one for the largest installer of solar. This uncertainty casts a pall over those who are considering going solar in the near future.
On the other hand, there is a bright side to California solar, too.
While federal incentives are less than certain, our state’s incentives are widely available at the state, county and city level.
Find out what tax incentives are available in your neighborhood by entering your address in this solar calculator, or by scrolling to view your city from the list of solar incentives.
Further, California has a big economic stake in the success of the solar industry. 76,000 individuals are employed in the solar industry in California, and $7.3 billion was invested in solar projects here in 2015. It currently has enough solar systems installed to power 3.5 million homes, according to Solar Energy Industries Association. Cutting back incentives has the potential to be disastrous for this fledgling segment of the economy, and forward-looking lawmakers know this.
Finally, as the technology refines itself, the cost of solar panels continues to fall, making it more accessible to all property owners. For those who purchase solar systems outright (rather than leasing them, as with SolarCity), today’s lower costs also improve the return on investment, making solar more attractive.
If you or a client are considering going solar — or if they are considering buying a home with panels pre-installed (particularly a solar-included new build) — think carefully through the pros and cons. Solar can be a valuable investment, but at this point it may be wiser to choose an outright purchase and keep the tax benefits instead of signing onto a dubious solar lease, since the future of solar leasing companies is unclear.
For a form to help your clients think through the benefits and disadvantages, see: Solar panels: pros and cons.
Posted by Carrie B. Reyes on journal.firsttuesday.us.