One of the fastest-growing solar installers in the U.S. is now taking on Los Angeles and California’s affordable housing shortage with the launch of a solar energy program for accessory dwelling units (ADUs), which are also known as granny flats, in-law units, backyard cottages or garage apartments.
An average of some 80,000 new homes were built in California from 2007–2017, but that still leaves the state 100,000 units below the actual and forecast pace of population growth through 2025. The average cost to rent housing in Los Angeles has soared in parallel—to $2,685 per month at present, up 5% from 2018, according to San Dimas, California-based Clean Energy Solutions (CES).
“Together, Clean Energy Solutions (CES) and the City of Los Angeles will combat the growing housing issue in L.A. that is driving rent costs and spiking property costs statewide,” company management says.
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California turns to ADUs to address growing affordable housing crisis
A 2016 law opened up opportunities for California homeowners to rent attached and detached garage apartments, detached cottages or so-called granny flats or “in-law” apartments attached to or detached from their single-family houses. More recently, state government leaders passed a bill that removes bottlenecks, making it easier for them to do so.
We are in a severe housing crisis and homeowners who build ADUs are making an important contribution to help us resolve it by providing additional housing.
This bill will help more of them achieve their goal of building a small unit on their own property. We should be encouraging this behavior rather than blocking it with excessive fees, owner occupancy requirements and other restrictions.
Applying the same strategic approach that has led to its success in California’s residential solar and home energy efficiency markets, CES has reduced the time it takes to obtain building permits for ADUs in Los Angeles from three to five months to down to two to three weeks, CEO David Gomez told Solar Magazine.
Streamlining the ADU permitting process
ADUs typically range anywhere from 400–850 square feet in size. The solar PV systems that CES installs as part of building units for homeowners come with separate electricity meters and separate sub-panels. Most are in the 3–4 kilowatt (kW) range. CES doesn’t offer residential solar-plus-storage systems at present. That’s shaping up as “the next frontier” for CES, however, Gomez said.
CES has completed just five ADU construction projects since it completed streamlining the new business line’s operations, around 23 all told. That’s just for starters, however. It expects to build as many as 1,000 new, energy-efficient units per year in L.A., offering homeowners the option of having a solar energy system installed, either via outright purchase or a power purchase agreement (PPA) with longtime partner Sunrun, the largest residential solar energy systems installer in the U.S.
“Our partnership with the City of Los Angeles allows us to help alleviate California’s housing crisis,” Gomez stated. “In fact, Los Angeles will lead the state in the construction of ADUs. With this new integration, we’re excited to help residents citywide find affordable ways to live, including cutting down utility energy to a fraction of the average cost for energy generated from the burning of fossil fuels.”
A win-win-win situation
Energy-efficient ADUs are a win-win situation, benefiting California homeowners and renters, Gomez told Solar Magazine. Homeowners can earn substantial passive income monthly by renting ADUs, typically between $1,200–$1,800, while also raising the value of their homes. Renters will have access to housing substantially below current market rates, he explained. And that’s not to mention helping Californians achieve the state’s ambitious zero-carbon-energy-by-2045 goal.
CES sees a lot of potential in Los Angeles and California’s fledgling solar ADU market. “Any single-family home built in L.A. in the past 20 years has a garage, and that [converted to an ADU] ends up being a guest house,” Gomez pointed out.
Furthermore, Californians pay some of the highest electricity rates in the nation, Gomez pointed out.
According to the U.S. Bureau of Labor Statistics (BLS), Los Angeles area households paid an average of 18.6 cents per kilowatt-hour (kWh) of electricity in May 2019, up just over half a cent from the 18.0 cents price per kWh paid in May 2018.
May’s average electrical energy price was 36.8 percent more than the nationwide average of 13.6 cents per kWh. “In the past five years, prices paid by Los Angeles area consumers for electricity exceeded the U.S. average by 32.4 percent or more in the month of May,” EIA reports.
Solar makes sense in L.A. Electricity is extremely expensive— as high as 22–36 cents [per kilowatt-hour (kWh)]. If you go down to Orange and San Diego county, the highest [price] tiers are USD0.42/kWh.
When it comes to spurring growth in solar ADUs, “a lot of it is just getting the word out there,” Gomez continued. “Nearly all the homeowners we speak to express strong interest.”
Stellar growth and new opportunities
Founded in 2013, CES’ roots lie in residential solar energy systems installations. The San Dimas, California-based company subsequently broadened its activities to include home energy efficiency improvements, Gomez recounted.
With a three-year revenue growth rate of 4,331%, CES ranked #70 on Inc. 500’s 2018 list of fastest-growing companies, #3 among Top Energy Companies and #6 among Top Los Angeles companies.
It was CES’ ability to streamline the residential solar permitting process that served as the key catalyst to the company’s extraordinary growth and statewide expansion. Gomez recognized a similar opportunity in the wake of L.A. enacting its version of the statewide ADU law, one that presented an opportunity to not only install emissions-free solar energy systems, but help alleviate California’s affordable housing shortage, he explained.
As it did when entering the residential solar market, CES dug deeply into the ADU permitting process with an eye towards streamlining it. “Permitting can really slow things down. It can take 3–5 months to get a permit [to build an ADU]. We’ve gotten that down to 2–3 weeks,” Gomez said.
“We did it for solar, so we got our designers, architects and engineers together and really got into the process with city authorities. We’d go down to their offices and work with them, going over plans repetitively until we learned how to get them right.”
Once permitted, it typically takes CES from 4–6 weeks to complete construction of an ADU, depending on its size and design specifics, Gomez added.
CES’ partnership with Sunrun
Once CES builds a solar ADU, Sunrun steps in as the counterparty to the PPA with the homeowner.
“We’re an integrated Sunrun partner. We do our installations with Sunrun as a partner, and we install for Sunrun,” Gomez explained.
Providing assurance to solar homeowners, Sunrun offers a 95% production guarantee and provides a “bumper to bumper” warranty for equipment. CES remains in the picture, providing ongoing servicing over the PPA’s term.
Earlier this year, Sunrun presented a bold plan to replace one of three Los Angeles natural gas power plants scheduled for retirement by aggregating the power generated by solar-plus-storage systems installed in city homes. That might include the solar ADUs CES is installing.
According to Sunrun’s 2019–2030 Repowering Clean: Gigawatt-Scale Potential for Residential Solar & Battery Storage in Los Angeles, “LADWP (the L.A. Department of Water & Power) can raise its targets for local clean energy with residential solar to create a city-wide clean energy ‘virtual power plant’: rooftop solar and battery storage on as few as 75,000 Los Angeles homes can replace peak capacity of one of LADWP’s retiring gas plants.” Moreover, L.A. could save nearly $60 million by doing so, according to the white paper.
In an earlier, related and landmark development, Sunrun in February achieved a U.S. power industry landmark by winning a bid to provide regional transmission organization (RTO) ISO New England (ISO-NE) with energy capacity at wholesale rates by aggregating electrical power produced by home solar-plus-storage systems distributed across the region.
Helping alleviate California’s affordable housing crisis
Sunrun’s also keen to help alleviate California’s affordable housing crisis while growing its business and helping the state achieve its renewable energy and climate change goals. Last September, Sunrun joined California’s USD1 billion Solar on Multifamily Housing program, the cost of which is to be covered by the state’s emissions cap-and-trade program. The plan is for Sunrun to install 100 megawatts (MW) or more of solar power capacity at affordable, multifamily housing developments where 80% of residents earn less than 60% of median income in their areas.
“We have a very broad vision for how residential rooftop solar can change our energy system, but we have to make sure that can happen across all income levels,” Sunrun Chief of Policy Anne Hoskins said at the time.
Due to go into effect January 1, California’s residential solar housing mandate is expected to provide a big boost to the state’s solar industry and market and its intention to be carbon-free in energy come 2045.
There are around 140,000 single-family home solar systems installed in California at present, retrofits or new home installations. With the solar new home mandate going into effect, the number of single-family residential solar installs in California is expected to surge higher, from 140,000–150,000 up to 240,000–250,000 starting in 2020.
Active statewide, from “San Diego to Sacramento and on up to the Oregon border,” CES is readying itself for the anticipated surge in solar demand. “We’ve been speaking with a lot of developers. All the new construction you see going up these days comes with solar,” Gomez said. comment