Green construction is on the rise nationwide, and California is leading the charge. From a recent mandate for solar panels at Muscle Beach to legislation reserving solar ready rooftop space, the state of California is one of the leaders in promoting environmentally conscious projects. However, recently proposed legislation has made the process of installing solar panels on homes more onerous for contractors – and that cost could be passed on to consumers.
The goal of Assembly Bill 2699 is to create more transparency and better inform consumers on how their solar energy systems are actually performing, an issue we recently discussed. The bill would require parties to produce information on electric rates, payback calculations, and explanations for potential changes in electricity production, along with several other stipulations prior to the purchase, financing, or leasing of solar systems under home improvement contracts. According to the bill’s author, it will protect consumers from bad actors in the solar industry and provide oversight to a rapidly growing industry.
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While the goal to provide better information on solar energy systems is laudable itself, the bill also requires contractors to maintain “a blanket performance and payment bond for the purpose of solar energy systems installation.” As well as providing protection to the contracting homeowner by guaranteeing the completion of the project – and presumably limiting the number of lien claims against such projects – the bill (if passed) may potentially create greater clarity for subcontractors and suppliers. If all home solar projects must be covered by a payment bond, the determination of whether to proceed with a mechanics lien or bond claim in the event of non-payment can be streamlined. However, for reasons not supported in the bill analysis, certain benefits typically associated with providing these bonds on home improvement contracts in California are stripped for solar energy projects.
In California, contractors may only accept down payments pursuant to a home improvement contract equalling the lesser of $1,000 or 10% of the contract. By putting forth performance and payment bonds, contractors can exempt themselves from this rule and can receive full payment before completion of home improvement projects. Contractors working in the solar industry, however, will not be eligible for complete payment until projects are finished.
If this is an acceptable trade off for other contractors, why not those in the solar industry? Requiring performance and payment bonds on every project will create additional costs for contractors. These costs will be passed on to consumers. Further, the bill eliminates the opportunity to remediate a rise in costs by disallowing prepayment of contractors. In an industry that is already incredibly costly, increasing costs will outweigh benefits of going at some point.
Should this new legislation pass, contractors on solar projects would be required to maintain performance and payment bonds on their projects despite receiving none of the benefits that usually go along with them. It would also create transparency in the solar industry by better informing consumers on the performance of their solar panels. The bill would create a safer and more transparent market for green construction projects, but could also raise the cost of going green. An interesting point to keep an eye on as well, is whether mandating home solar projects to be covered by a bond will reduce the number of mechanics liens against such projects in favor of proceedings against the bond itself.