If you want to build a new home in California, you will have to build one with rooftop solar, according to a new mandate from the California Energy Commission.
The solar rules will apply to new single-family homes and new multi-family housing of three stories or fewer. Under the plan, builders who obtain construction permits issued on Jan. 1, 2020 or later must comply.
This is pretty much a textbook definition of a command-and-control environmental policy, a type of policy that, as I repeat ad nauseam to my undergraduate environmental economics students, is one that is very unlikely to be as cost-effective as an incentive-based environmental policy like a pollution tax or a cap-and-trade market for pollution (which California already has BTW).
Environmental economists tend to dislike command-and-control policies. Severin Borenstein at Berkeley wrote an email to the energy commission chair voicing his opposition, and James Bushnell at Davis has written and op-ed and a blog post arguing against it. Both of them know a lot about energy and environmental economics, and about California's electricity markets in particular.
In addition to not being cost-effective, the policy will likely exacerbate another enormous problem with California's economy: the housing affordability crisis.
The requirements are likely to add nearly $9,500 to the construction cost per home as state officials have declared a housing crisis. Home prices have soared in California, and housing stock has failed to keep up with demand.
There are some defenders of the policy (not just the energy commission members, who passed it unanimously). There are two main arguments. The first is a "second-best" or a political economy argument: a cost-effective incentive-based policy may be best but is unfeasible, so let's be happy with the imperfect policy that we got. Costa Samaras tweets:
Lukewarm take on the Calif solar on homes mandate: should they have done something more optimum instead? Yes- & we should assess objectively. But climate policy/deep decarbonization is about coalition politics, & 2nd (9th?) best policy options often happen instead of the optimum.
A second argument is based on induced innovation: this policy will drastically reduce the costs of solar implementation, so it is effectively subsidizing the under-provided positive externality from knowledge diffusion.
Due to the state’s revolutionary 2019 Building Energy Code requiring solar power to be installed at time of construction for all newly built homes, over time California home buyers could see per unit prices drop to rates approaching that of some of the world’s largest utility scale solar installations ($1/W in the United States).
Some previous research has examined the effects of solar mandates on technological innovation, and my reading of this is that the effect is there not not nearly as big as proponents argue.
Anyways the whole point is that no one ever listens to economists.