San Francisco’s groundbreaking solar rooftop mandate sounds great on paper. The city has made distributed renewable energy a basic requirement for almost all new construction -- and other cities are already expressing interest in adapting the policy. 

The mandate doesn't just stimulate additional solar installations. It instigates them when they're easiest and cheapest: while the building is under construction. This saves the future occupant all the hassle of identifying an installer, negotiating prices, drawing up designs, arranging financing and overseeing the install. Those duties fall to the developers, who are professionally suited to handling such things. Then the expense of solar gets bundled in with the overall building purchase, so the owner can pay it off, over time, at the more favorable interest rates of the mortgage.

This imposes a choice on consumers, and it comes with a cost. In some markets with lower new home values, the additional cost of solar could be more significant than in astronomically expensive San Francisco. Even so, the mortgage structure defrays the additional expense over many years, during which time the free energy generated by the solar panels will more than pay it off. With the right nuances and exceptions, this could work in many more places, and create a new standard of sustainable homebuilding.

Not all, but most

In April, the San Francisco Board of Supervisors passed the ordinance to require certain new commercial and residential buildings to include solar PV or solar thermal panels on their rooftops. The policy goes into effect at the start of next year, capitalizing on a state law that mandates 15 percent of new rooftops (or 250 square feet on new single family homes) be able to host solar installations. New constructions in San Francisco will have to fill or exceed the state-mandated solar zone.

“This is a significant way to expand renewable, clean energy in our country,” said Supervisor Scott Wiener, the author of the ordinance, in an interview. “We need to be moving away from fossil fuels towards renewable energy and this is one piece of the puzzle in making that happen.”

The law includes several sensible exceptions. The requirement only applies to buildings up to 10 stories tall; taller than that, the equipment that needs to go on the rooftop doesn’t leave much space for panels. Commercial buildings smaller than 2,000 square feet don't need to comply. And buildings that are covered in shade and wouldn’t be able to produce solar energy are also exempt, Wiener said.

The mandate does not apply across the board, then, but should cover almost all new buildings in San Francisco. It will likely cover about 100 buildings per year, including 60 new single family homes, said Barry Hooper, who manages the Green Built Environment Team at the San Francisco Department of the Environment, in an email. Based on an analysis from 2014, the city expects the policy will produce 20 megawatts in the next decade.

Further flexibility comes in the choice between solar PV and solar thermal. That's a change from the previously enacted rooftop solar mandates in the smaller California cities of Lancaster, Sebastopol and Santa Monica, which focused solely on electricity generation. For some buildings, like bigger multifamily apartment buildings with a central boiler, the use of solar for heating might prove more attractive than the energy savings from PV panels. The city is looking at an addendum to allow "living roofs" as a third compliance option.

Who pays?

The San Francisco supervisors added the policy into the city’s Green Building Code, so the rooftop requirement will become part of the permitting process for new developments. This builds in an elegant enforcement mechanism: if developers don’t comply with the solar requirement, they won’t get a certificate of occupancy. It also provides cost savings.   
“Requiring solar water heating and/or solar photovoltaics at the time of new construction is more cost-effective than installing the equipment after construction, because workers are already on-site, permitting and administrative costs are lower, and it is more cost-effective to include such systems in existing construction financing,” the ordinance says. 
So far, so good. A city built on a coastal peninsula has good reason to aggressively push clean energy, even at the expense of consumer choice. The thorny question is who carries the cost for this.

The new building code establishes rooftop solar as a routine component of any new building. That means developers have to factor the solar arrays into their cost calculations before moving ahead with new projects. Wiener acknowledged that developers will bear the cost, but said it hadn’t been a source of contention.

“I don’t really think it will impact the price that people pay, and if it does, it will be de minimis,” Weiner said. “We really didn’t get any pushback. They understand that it’s not a significant cost increase and that it makes sense and will pay for itself.”

Developers aren’t likely to absorb the additional expense out of goodwill; they’ll pass it on to the homebuyer or renter. No doubt some of these residents will wholeheartedly support the expansion of distributed energy within the city and the opportunity to trim their energy bills with the power of the sun. But what about those who don’t share that priority, or don’t feel they can afford it at the moment?

Making that choice for the homebuyer isn’t unfair, says Adam Browning, executive director of renewable energy advocacy group Vote Solar. Any new building adds to the load that the grid must supply, which ratepayers ultimately have to support; the ordinance simply requires new houses to give something back, too.

“When you build a new building, it can either require new infrastructure -- from generation to transmission to distribution -- that everyone has to pay for, or it can come prewired with its own solutions,” Browning said. Besides, he adds, the marginal increase in the mortgage would be more than offset by the future decrease in utility bills.

In any case, the median sales price for homes in San Francisco in the last few months was $1,200,000, according to real estate website Trulia. An extra $10,000 for a solar array would amount to little more than a rounding error.

New standard

The bill does impose a choice on anyone who wants to live in a home built after January 1, 2017, but it also offers a sizable reward.

It’s hard to imagine a cheaper opportunity to do the installation, and then the customer can wrap the cost in with the home purchase and pay it off with the mortgage, meaning no additional loan agreement is needed. New residents will have their own supply of free power from the day they move in.

State incentives have already spurred a couple of hundred megawatts of solar on new buildings. As people become more familiar with rooftop solar on new houses, Browning argues, customers will come to expect it as a standard amenity.

“First granite countertops, now silicon rooftops,” he said.

This goes beyond consumer satisfaction, though. By injecting solar into the building design process, instead of tacking it on after the fact, the law ensures that potential clean energy isn't squandered by breaking up the rooftop or angling it away from the sun.

"If you don't require those things to happen at the front end, it is less likely that it will happen over the lifetime of the building," said Jeanine Cotter, president and CEO of San Francisco-based solar installation company Luminalt. "There are design features that one might choose to have that would preclude that roof for use with solar in the future."

Can it spread?

The mandate needs to go into effect and prove it works before it can become a model for other cities. It's possible to get a glimpse into that future, though, by looking at the first city to pass a rooftop solar requirement.

Lancaster, California's mandate for PV on new residences kicked in back in January 2014, and since then, "We haven’t heard all that much," said the city's principal planner, Chuen Ng. Lancaster issues permits for around 100 single family homes per year, and almost all of them have solar on their roofs.

"Builders are accustomed to the idea of providing solar, partially because a lot of the customers look for it now," Ng said. "It’s become the norm."

In fact, he added, homebuilders had been adding solar as a standard feature for new homes before the new regulation appeared. The mandate didn't spur a revolution so much as solidify a trend that had already emerged.

That's encouraging news for San Francisco. It doesn't mean it's the perfect policy for every location -- it's ideally suited for sunny geographies, for one thing. And in housing markets where new homes are cheaper and solar installers are harder to find, the additional cost could become more of a factor. Again, the mortgage would spread that out over years and make it much less onerous, but the cost-benefit analysis will vary based on the market.

Ng has some advice that will hold true across all cities. "You have to reach out to your stakeholders and reach out to your homebuilders and get their buy-in," he said.

Other municipalities have already reached out to San Francisco for more information about the policy, including Boston, Washington, D.C., Cambridge and Palo Alto. With each new adopter that spurs solar adoption without harming its real estate market, the body of evidence for such a policy will grow. The endgame will be cities where rooftop solar isn't a personal challenge for a homeowner, it's just one of many components expected of a market-ready property.