If we could somehow capture all the energy expended on Twitter when California approved new rooftop solar standards, we’d solve our climate problems immediately.
The perpetual emotion machine has cranked up in response to the California Energy Commission passing a new building code that will, among other things, require most low-rise residential buildings constructed after 2019 to have built-in solar-power systems. Cue rows about whether this is cost-effective versus other climate-friendly measures; will swamp wholesale power markets; makes California’s eye-watering property pricier still; and other sore points.
They’re valid debates. Assuming this is a done deal, though, one obvious question is: Who profits?
Large residential solar companies such as Sunrun Inc. look like obvious winners here. Bloomberg New Energy Finance estimates the mandate could boost residential solar deployment in California in 2020 by 200 to 300 megawatts, or 23 to 34 percent – on top of a market already growing at more than 9 percent.
Builders might partner with established residential solar firms, effectively outsourcing the mandate to them. A homebuyer might pay the construction firm for the house and simultaneously contract with the solar partner for services such as long-term power-purchase agreements, maintenance and equipment guarantees. Financing could be done either through existing loan or lease products or, if preferable, rolled into the mortgage.
This seems to hold out the prospect of all-in unit costs for residential solar falling dramatically. As it stands, more than two-thirds of the cost of a typical rooftop system in California relates not to equipment but to such things as marketing, permitting and installation.
The wider implication of the California mandate is that it accelerates an existing trend: commodification.
Solar panels, particularly those fixed to the roof of a house, aren’t exactly the stuff of the Jetsons. While advances in efficiency are still being made, today’s good-enough panels compete mostly on price.
Having panels mandated into the fabric of new homes makes them even more commonplace. That’s good for advocates of distributed renewable power, but perhaps more ambiguous if your company centers largely on designing and financing retro-fitted systems and handling tedious stuff, such as permitting.
This throws a spotlight on an existing aspect of the distributed solar boom; namely, that the value lies less in the hardware and increasingly in the services, both current and potential, that come with it. These include relatively straightforward things such as long-term maintenance and guarantees, with the latter likely to be especially important as batteries are integrated into home systems. But they also could encompass such things as managing residential energy flows to optimize pricing; integrating electric vehicles; and even pooling assets in communitywide networks.
New value propositions are needed, given distributed solar power is depressing wholesale power prices during the day in California already.
New models are also needed because, for most of the new-home buying population, panels just aren’t as sexy as granite countertops. Savings on monthly power bills are fine as far as they go. But construction firms will likely struggle to build a compelling proposition around them for most of their target customers.
Bundling energy services in with more compelling mod-cons such as Wi-Fi, security and other “smart home” stuff offers another potential model.
California’s new mandate tees up a huge experiment in brands and services potentially picking up the slack as residential solar’s commodification accelerates. It’s far from clear who will win.
Liam Denning is a Bloomberg Opinion columnist.
