California is now actively promoting residential solar programs as a way of increasing the reliability of the state’s electric system by reducing peak demand and congestion on transmission systems. But a survey of the home builders installing solar on their new homes in southern and northern California reveals they won’t install solar systems independent of federal, state, or utility incentives until the homeowner demand for solar increases substantially.

The home builders agree that customer education and heavy utility marketing, along with lower solar system pricing, is key to driving the market for residential solar—or zero energy homes, as the field is now called. To jumpstart that drive, the California Energy Commission (CEC) has launched a $6.9 million zero energy home building grant program.

A Local Initiative
At Rancho Mission Viejo, a 23,000-acre cattle ranch established in 1882, the owners created an integrated land use plan nearly 10 years ago to balance inevitable growth with permanent ranch land preservation. Complete development will take another 30 years, but 60% of the ranch is being preserved as open space to protect native habitat and wetlands, as well as water quality.

Ladera Ranch, the current development, opened in 1999 with a goal of 8,000 homes, of which 5,000 have already sold. Terramor is one of the two villages currently being developed and was selected by Rancho Mission Viejo owners to be dedicated to creating environmentally sound “green” homes in what it calls “360? Living.”

All 10 builders have agreed to install solar systems in Terramor homes where elevations or building orientations permit, in addition to energy-efficient appliances, low-formaldehyde insulation, low-VOC/chemical component paints and coatings with water-based finishes, and low-flow water fixtures, among other “green” features. Furthermore, some builders will be offering solar systems as an option at Covenant Hills, Ladera Ranch’s second village.

Ann Marie Moiso, director of marketing for Rancho Mission Viejo, says about 75% of the 1,200 homes now occupied in Terramor’s 12 neighborhoods have solar systems and net metering. All attached and detached homes exceed California’s Title 24 energy building standards by at least 20%. Another 60 homes are being built.

GE Energy has furnished the solar systems installed in 10 of the neighborhoods at Terramor. GE got into the solar business when it acquired AstroPower—and its patented roof-integrated solar module design—in March 2004. The systems range in size from 1.2 kW to 2.4 kW, with 25-year warranties on the modules. The system components, such as the controller, have five-year warranties.

The hardware for the modules comes in two designs. At Terramor, solar cells are integrated into specially designed roofing tile so that they blend seamlessly into the house roof. A second design has the traditional solar module sitting on top of an asphalt roof or traditional barrel tile. The solar technology is identical in both designs.

Taking the Challenge
Pardee Homes was one of the builders that enthusiastically accepted the Rancho Mission Viejo challenge. It has been building EPA-designated ENERGY STAR homes since 1998, according to Joyce Mason, vice president of marketing for Pardee. Its homes are built to exceed federal standards by 30% or California’s Title 25 building codes by 15%.

A developer since 1952, Pardee builds only in California and Nevada, Mason says. Pardee announced in 2002 that all its new homes would qualify for the ENERGY STAR designation. That same year, it unveiled its Living Smart green building program at its Vista Santa Barbara development in San Diego County. Each of the 82 homes includes a solar system with net metering as a standard item, along with a series of energy-efficient elements. Its second development now under construction—also in San Diego County—Soleil at Bordeaux, will have 125 homes, many of them zero energy. Homes in both developments are selling at prices starting at $1.2 million.

Mason says Pardee has three more developments in the planning stages in San Diego County and will install solar systems there if the exterior design of the house is oriented correctly. If the orientation does not accommodate solar, Pardee will offer a trellis mounted with solar panels in the back yard.

Terramor’s Evergreen neighborhood features 77 single-family, detached Living Smart homes with spectrally selective glass windows and doors; sealed duct systems; and high-efficiency heating and cooling, tankless water heaters, and fluorescent lighting. Prices now start in the high $900,000s. Many will have roof-integrated solar systems. The backyard trellis with mounted solar panels will be offered as an option or to extend the standard rooftop system.

Pardee is installing GE Energy’s roof integrated solar systems exclusively. The builder will have 2,300 homes built by the end of this year in the five regions of Nevada and California where it has new communities, Mason says, and about one-third will have solar systems.

Mason confirms that zero energy home prices are targeted to the higher-end home buyer who has more discretionary buying power. She says a number of Pardee homes in Las Vegas begin in the medium $300,000 range with solar offered as an option at its actual cost plus a small mark-up. Asked if Pardee is getting a volume discount from GE Energy, Mason says she doesn’t think so, the price is the price. “I’m hopeful once demand increases, prices will go down.” And price is the biggest barrier, Mason argues. She describes the California regulatory agencies that offer rebates as visionary. They, along with local jurisdictions such as Rancho Mission Viejo, a few utilities, and state and federal agencies are driving the market trying to create demand.

Solar a Secondary Feature
Increasing demand will be a challenge according to the home builders interviewed. Potential home buyers, for the most part, are attracted to the homes at Tarramor for other reasons—like price—and are pleased when they realize that solar is a feature on the house. But it is that—a secondary feature. They have to be educated about the savings on utility bills, says Lee Thomas, president of Shea Homes. Shea is building 79 single family homes in the Sedona neighborhood in Terramor and solar systems are standard. Half the units, priced at $1 million and up, are built, and 80% are sold.

“With very high-end prices, you have buyers with more discretionary power,” Thomas says. Shea will also be building 54 units in the gated community of Covenant Hills and solar will be offered as an option on the homes priced at $1.2 million to $1.3 million. With the smaller mid-priced homes, solar systems become a bigger number in the price, since the price per square foot remains constant. “Unless there are more rebates out there, [the cost] makes it difficult for the customer to accept,” he says, adding that none of Shea’s lower-priced homes elsewhere in Orange County or in Ventura County have solar systems, because of the expense.

Centex Homes has built 152 attached townhouses in the Sutter’s Mill neighborhood of Terramor at prices ranging from $436,000 to $530,000, with solar as an option. It will also offer solar systems as an option on the $59 million single-family homes still being built in the Montanez neighborhood in Covenant Hills.

Janet Kemmerer, director of marketing for Centex Homes South Coast Division, says to date no home buyers in Sutter’s Mill have chosen solar. The roofs have a unique design, she explains, in that some are almost flat or otherwise don’t have a proper orientation, so not all are conducive to solar installations. To compensate, Kemmerer says, Centex installed four solar panels on common-area buildings to help light the common areas and reduce homeowner association costs.

Centex will likely not extend solar system options on homes outside Ladera Ranch. It is building entry-level communities in the Inland Empire (east of Los Angeles and Orange Counties) priced in the low $300,000s, and the buyers there either can’t qualify for loans at the higher price solar would add, Kemmerer says, or they don’t perceive solar as a greater value in the same way they understand that dual-glazed windows with low emissivity values will reduce heating and air conditioning costs. This points to the need for more affordable solar products, and greater public awareness and education, Kemmerer argues.

Education a Key
Robert Hammon, principal with ConSol, an energy consulting firm that provides energy-related services to builders, says solar residential applications are still leading-edge and early in the acceptance process. Solar is a financial risk for builders, Hammon says. Costs to install solar are running at $7.00 per watt to $8.00 per watt before rebates. The CEC and utility rebate programs are reducing those costs by $3.00 per watt but are likely to go down to $2.80 per watt. The rationale, according to Hammon, is to lower the price to build the market, and the volume will drive down prices. He disputes that there will be much volume.

“Needed are good voluntary programs with good incentives,” Hammon says. Furthermore, consumers won’t look for solar until they understand its economic benefits, he argues, and adds that education is a natural role for utilities if it is used effectively to market incentives. The incentive for utilities is that they will benefit from the reduced demand produced by solar systems and energy efficiency as standard items in homes.

ConSol is one of the contractors in the DOE’s Zero Energy Home program (recently renamed Building America). Its goal is to assist builders to produce housing with net zero energy within five years. ConSol enlisted Premier Homes and Clarum Homes. Both, instead of building one or a few model homes like other builders in the program, chose to install solar systems in entire developments in northern California.

Hammon will be studying the aggregated homeowner bills in these developments over the next year and he will be looking for take-back. This is the desire by homeowners with solar systems and energy efficient homes to use more electricity, because it’s seemingly free. It’s not free, Hammon emphasized, it’s been paid for up front.

The First Solar Homes
Clarum installed its first solar system in 1999 and opened its first zero energy home in 2000, thanks to the commitment to the environment of the company’s owner, John Suppes. Clarum built 257 zero energy homes in Watsonville and 20 zero energy homes in East Palo Alto, both located south of San Francisco. The 177 single-family homes and 80 townhomes in Watsonville sold out in the first year they were on the market. Prices were initially advertised as ranging from $379,000 to $499,000 but some units sold for as much as $600,000.

Integrated roof-top solar systems on townhouses in the Terramore neighborhood of Clairborne.

The primary reason people, usually first-time home buyers, come to Clarum, says Nicole Gittleson, vice president of sales/marketing for Clarum Homes, is location and not because they want a zero energy home. She says the company will be working on four developments in 2005. Another 177 homes are planned for Watsonville, Menlo Park, Danville, and San Leandro, all in northern California. They will all have the same features as the first project in Watsonville, she says. The company is also looking at developments in southern California and Arizona.

Gittleson says initially rebates were reducing Clarum’s solar system costs by 15%, but rebate amounts are being reduced and if this trend continues and prices go up it will discourage builders from using solar. She says the solar systems and other environmental features are adding $15,000 to $20,000 to each home’s price. She stresses that Clarum is not increasing its prices in the face of reduced rebates, but instead will lower its profit margin.

Premier Homes is competing with Clarum for “first” zero energy home honors—it has built three housing developments in the Sacramento area, all with solar systems. The most recent is Premier Gardens which began selling in March 2004. Premier marketed it as the first standard zero energy community in the Sacramento region.

Premier partnered with the Sacramento Municipal Utility District (SMUD), which provided substantial incentives to the builder to install the roof-integrated solar technology. GE Energy predicts Premier Gardens’ total solar output will be in the range of 300 MWh annually, thereby reducing SMUD’s demand in the area.

Premier Gardens was designed for entry-level buyers, with homes initially priced from the mid $200,000 range. However, by December, base prices in the eight remaining homes still on the market ranged from $366,000 to $421,000 due to market demand. The 95 homes are built to exceed the current California Title 24 building requirements by 50%, each has a GE Energy 2-kW roof-integrated solar system with net metering, a tankless water heater, spectrally selective glass windows, tightly sealed air ducts, and a heating and air conditioning system.

John Ralston, vice president of sales and marketing for Premier Homes, says Premier Gardens was the company’s first community with solar as standard on every home. It had experimented with solar on seven of the 35 homes it built in Lincoln in 2002. Its next development, Premier Oaks, in Roseville, will include solar on all 49 homes built there. These homes will be more expensive, starting at the mid-$400,000 level.

Ralston says home buyers are slowly getting educated as they hear about or see lower utility bills. Homeowners’ experiences in Premier Gardens, where the average September electric bill was $20, will be used as a test case for marketing and explaining how solar works. Another developer built energy-efficient homes without solar immediately adjacent to Premier Gardens and the average September bill there was $66. “We will use these to continue educating buyers,” Ralston says. “Our homeowners are just now realizing what they have.”

Price Competition Needed
Rahlston says Premier’s costs went up between projects. Solar and all the energy efficiency elements including tankless hot water heaters, insulation, and low-emissivity windows, add at least $15,000 to the price of a home. Premier’s construction cost, on average, for all elements is $10 per square foot, including the incentives provided to the builder by SMUD. The incentive was enough to reduce the risk, but the marketing value of the zero energy home is worth taking that risk, Ralston insists.

Ralston argued that rebates in the short term are necessary because competitors offering roof-integrated solar are limited. GE Energy’s patented roof-integrated solar product has no real competition in the US, he points out, adding that if there was more competition, prices should come down. “If you get a 2-kW system in the $5,000 to $8,000 range, then you’ll see the market take off.”

Another critical aspect making Premier’s zero energy homes a success was the utility partnership, Rahlston says. SMUD’s role in the process made the work easier and gave homeowners a sense of comfort. Roseville Electric, the municipal utility in Roseville where the newest development is going in, has also been an excellent partner. “We will be moving on to other developments and do more zero energy homes.”

The Utility Partner
Mike Keesee, PV project manager at SMUD, says the utility is planning to provide rebates to builders to install solar on another 100 homes and is already negotiating with three builders. He said competition for integrated rooftop solar systems should open up in a year or two. Kyocera Solar and PowerLight are developing products and, in April, Sharp Electronics is planning to introduce a product already in use in Japan. Japanese manufacturers are eager to sell in the US market, says Keesee.

While the standard solar systems enjoy a competitive market, SMUD has found that the builders it has been working with for the past three or four years don’t like them because they don’t like drilling the holes in the roofs the systems require, Keesee says.

Another problem in the US market that has kept prices high is a short-term one. There has been a shortage of silicon used in the solar cell and manufacturers haven’t been able to keep pace with the European and Japanese markets. “Once silicon manufacturing is ramped up, within the next two years, we can expect dramatic price drops,” he predicts.

The Market Outside California
Elsewhere in the West, Consol is working with Pardee and Pinnacle Homes in Nevada, which has a rebate program. Pardee is installing solar as standard on 10% of its Vista Verde homes in northwest Las Vegas and offering it as an option on the remaining homes. Pinnacle is currently building a single-family, net-zero home for the experience. It will then select the items it wants to include as standard or options, based on cost, for its development.

Hammon says getting home builders to install solar systems in their developments in other parts of the country will be very difficult because there are a limited number of buy-down programs or rebates being offered in such states as New York, Pennsylvania, and New Jersey. On the positive side, Hammon says 31 states do have net metering regulations in place.

Lou Pratch, zero energy home project manager at the DOE, says the building of zero energy homes outside California, Nevada, and possibly Arizona is very spotty. Primarily, builders are sticking to model homes, he says. But they are building energy-efficient housing. He noted that Energy Star homes now have a 10% market share.

Pratch says what is needed is a wider recognition of the benefits to utilities of residential solar to reduce summer peak load. The creation of a special electric rate for solar may help in this regard, he suggests. He also points to the current CEC Zero Energy New Homes solicitation to encourage developers to build more zero energy homes. If it works for California utilities, Pratch says, the knowledge could be transferred to other states.

The Future
In mid-December, the CEC awarded $2.9 million to Architectural Energy Corp. to develop 75 single-family zero energy homes in southern California with direct involvement from Southern California Edison to promote the homes through utility programs and incentives. It also awarded $2.73 million to PowerLight Corp. to develop single- and multi-family units applying a new built-in photovoltaic system the company is developing. A third award went to Global Green USA for $732,000 to develop two multi-family zero energy home demonstration projects—one 55-unit building in Los Angeles and another 56-unit building in Poway, CA.

The aim of this work, said the CEC, is to make zero energy homes “a mainstream part of California new home construction” by promoting innovative business models for driving down costs and sustaining development of zero energy homes in the marketplace.

California-based LYN CORUM is a technical writer specializing in energy topics.

DE - May/June 2005