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.

Listen to more in-depth conversations on Solar Builder's YouTube channel

Our most popular series include:

Power Forward! | A collaboration with BayWa r.e. to discuss higher level industry topics.
The Buzz | Where we give our 2 cents per kWh on the residential solar market.
The Pitch | Discussions with solar manufacturers about their new technology and ideas.

Tags: ,

Warning: Undefined variable $aria_req in /home/customer/www/ on line 12

Comments are closed here.