Zero Net Energy

An article in today's San Francisco Chronicle provides another example of California taking the lead on connecting energy and environmental policies. The state's Public Utilities Commission wants to require developers to build homes so energy efficient that they will require no net energy from the grid by 2020. This is consistent with the state's goal of drastically reducing greenhouse gas emissions, and it would also shrink the infrastructure burden associated with adding six million additional residents between now and then. Timing is sometimes as important as substance, however. It would be hard to imagine a worse time to impose such a potentially expensive new requirement on the housing sector.

As my regular readers know, I'm hardly unbiased about California, having spent three-fifths of my life there, including my entire education. Californians have long believed that they are about 10 years ahead of the rest of the country, and that what you see there today, you will see everywhere else eventually. It's probably more accurate to say that California represents a useful testing ground for new ideas, giving the rest of us a preview of some of their consequences, intended and unintended. Not all of these experiments have turned out well, as evidenced by the state's botched electricity deregulation a few years ago, and the impact of unregulated immigration on a massive scale.

The concept of zero-net-energy housing has much to recommend it. The technology to do this is certainly available, at least for homes in an area with as benevolent a climate as California's. It also makes a lot of sense to incorporate features such as solar roofs, extra insulation, and efficient appliances into original construction, and thus into the mortgageable purchase price of a home. A decade ago, my Texaco colleagues and I suggested that this was the most logical way to implement distributed generation technologies such as home fuel cells, including long-term supply contracts for the natural gas these devices would use. But whether it's fuel cells or solar panels, they are easier to incorporate into a house when it is built than as a retro-fit, and the economics work better, too.

Unfortunately, timing matters. You would have to be living under a rock to have missed the implications of the sub-prime mortgage crisis for home construction in California, one of the worst-affected states. Putting a major new requirement such as energy self-sufficiency onto developers at this juncture looks like a recipe for failure. The engine of easy credit and bootstrapped home equity from strong, steady appreciation has stalled and gone into reverse in California, where home sales are down and property values are declining. No one knows how long this situation will last, but it could take the California housing bubble years to deflate and return to normal growth.

I don't fault the PUC for wishing to align California's large housing sector with the state's overall emissions and efficiency targets. Floating this proposal now seems a bit tone-deaf, though. Hopefully, the California Energy Commission and the legislature will take a bigger-picture view and shelve this idea until conditions become more propitious. That shouldn't affect existing incentive programs for solarization and efficiency, nor would it preclude developers from packaging these systems as selling features. After all, there's nothing wrong with this idea, other than making it mandatory. In the meantime, California should seek big emissions reductions in less distressed sectors, since all such cuts are equivalent in their impact on climate change.