The California solar mandate on all new homes starting in 2020 means many homebuilders in the state will need to adjust their business models. We asked Geoff Ferrell, chief technology officer for Arizona homebuilder (and solar installer) Mandalay Homes, how he thinks this will play out in California and beyond.
SPW: As a homebuilder that installs solar in-house, how do you think companies like yours that offer building+solar services in California will make out?
Ferrell: As a high-performance home builder, we focus heavily on the optimization of the home before applying renewable or storage technologies. At Mandalay Homes, we feel that the better the home is as a system, the more attractive it is as a competitive product in the marketplace. For example, our average 2,000-sq. ft home that has been optimized for solar+storage only requires between six and eight solar panels and a very modest battery storage system to drive the home’s HERS score very low and offer near-zero electric bills for homeowners.
In terms of a business model, Mandalay has approached our homes this way specifically in response to utility rates and programs in our service areas so that we can offer this type of home as a standard. This demonstrates how vastly superior it is over just offering solar as an option or burdening buyers with an oversized solar system without working to first optimize the home to use less.
SPW: Do you anticipate or hope other states like Arizona will adopt similar rules?
Ferrell: Every indication is that solar adoption will only continue to grow as prices come down and local incentives promote the use of clean, renewable energy sources. As prices and incentives drive adoption, the social aspects of having a solar array on your home becomes much more attainable too. These are all great things for the environment and the economy too, in our opinion.
However, Mandalay Homes has taken a stance that true renewable viability is not just throwing a bunch of panels on a roof to achieve a HERS 0. Certainly, in new construction there is a real opportunity to look at the home as a base asset first. Reduce the electrical “footprint” of a home and then add renewables appropriate to that optimized home. This approach, we feel, results in the lowest up-front investment on the builder/buyer’s part and lends itself to a more realistic ROI for the consumer.
As utility providers work to stabilize grids as a result of all this solar being exported during the day, an additional opportunity presents itself on the energy storage side. Arizona arguably has one of the worst daily “duck curve” issues in the nation. We experience dramatic overproduction and lack of electric utilization during the day and then a very sharp shift to high electric demand just as the sun is going down and solar production stops. In response to this curve, Arizona utilities have begun introducing both time-of-use and demand-based rate plans to discourage peak energy usage. At Mandalay Homes, we have embraced these new rate plans and designed our homes to work with the problem instead of contributing further to it.
SPW: How might your business model change if solar was mandated on new homes in Arizona?
Ferrell: Mandalay Homes business model has already started to shift in response to these policy changes. We currently have two communities in active production that feature our “Grid Optimized” energy solution and, moving forward, all new communities will feature this innovation as well. The “Grid Optimized” home features our energy-optimized home, with a very small solar array and local battery storage system. The combination of these technologies results in a home that runs on about $0.30 of grid power on a given day. More importantly, these homes only buy power from the grid when the utility needs power purchased. We buy during the day when the overabundance of clean solar is in the grid and again in the middle of the night when power is very inexpensive. Mandalay homes also completely avoid the high demand times each day by running completely on stored solar energy for those periods of time.
SPW: Do you have any advice for California homebuilders that do not yet offer solar in-house? Do you think it would be wise for them to bring the solar services in-house or contract them out?
Ferrell: The best advice I would offer to any new home builder or remodel contractor is to really concentrate on the home as an energy user first. Optimize the aspects of the home that use energy poorly first and get the baseload down. If the home uses less, less is needed to offset the energy it does use. This is economically the best model and ultimately the best model for the environment. Whether the builder chooses to self-perform the solar install or sub out to a trade, having a clear objective in mind and targeting the maximum consumer benefit is key. A quality trade partner that is 100% on board with the builder’s vision and goals can absolutely be the right path for some.
SPW: Any other thoughts on mandating solar on new homes and what that might look like for your business if the rule was imposed in Arizona?
Ferrell: The mandating of solar is a rather short-sighted pursuit. Solar alone is only going to worsen local duck curves in communities as more and more solar is added. Parts of the country are already regulating and limiting the deployment of solar arrays geographically due to export concerns and overall energy excesses during production hours.
The state and local governing organization will need to work very closely with the utility provider to craft policy that supports the grid and creates mutual benefit. In areas where excess production is already an issue, we see relatively low daytime energy rates and the two- or three-tiered time-of-use rate hikes that are in direct response to the duck curve.
Utility customers expect to flip a switch and see the lights turn on. In order to deal with the daily balancing needs of the grid, utilities are forced to turn on “peaker” facilities almost every day to ensure proper service. If better renewable policies can be enacted to encourage better use of energy and a flattening effect on the daily duck curve, rates will follow and the model will become far more profitable for the utility while providing benefit by way of lower rates to the consumer. That is a win-win-win for the utility, consumer and environment.