How is solar impacting manufacturing in California?

Solar power is a promising source of renewable energy. Despite its potential, it remains in transition in many industries, shifting between practical and profitable.

California is a leader in many things. Perhaps most notable among our efforts are the state’s environmental reform initiatives. According to the Solar Energy Industries Association (“SEIA”), California leads the nation in solar energy practices; the resource accounts for 20% of the state’s total power usage. In 2019, California passed a solar mandate which requires all residential buildings constructed after January 1, 2020 to have solar panels installed. While a laudable effort, its far easier said than done for those in commercial spaces.

In addition to our solar initiatives, California also leads the country in manufacturing output, jobs and productivity. Nationally, the state accounts for 10% of all manufacturing and 10% of all manufacturing jobs. The trillion-dollar industry requires a considerable quantity of power; industrial energy usage is said to account for about 25% of the state’s total electricity consumption. Since the cost of energy is higher in California—$0.13 per kilowatt hour, higher still among SDG&E/PG&E customers and double the national average—there is always a demand for lower energy bills.

Solar energy is surprisingly the cheapest form of energy in the country. Its low cost is attractive to manufacturers, like Apple or Tesla, who need a cost-efficient solution for their larger operating spaces. (Apple, in fact, converted 100% of its California-based operations to renewable energy sources.) As most of the energy consumption for these manufacturing facilities takes place during the day, it goes without saying that solar power's advantages far outweigh its drawbacks.

Of course, factories often need to run at night; this introduces the need for energy storage batteries. Major advances in power storing technology have led to far more efficient storage solutions, both in cost and performance. Capacity has risen substantially thanks to lithium-ion technology; between 2010 to 2020, the amount of installed battery capacity in the United States increased over 1,000%.

Other key advantages of solar are California's laws permitting power purchase agreements between businesses and developers to install solar panels grids on a manufacturer's property. Developers sells the electricity to the business at a lower cost than the grid, a benefit to both parties. A power purchase agreement can lower the cost of energy by 10%-30%. Since developers are responsible for maintaining the panels and keeping the electricity flowing, manufacturers do not have to be concerned with blackouts, brownouts or other power failures.

The design and selection of manufacturing space plays a key role in the industrial adoption of solar panels. Factory roofs tend to be very large, flat and very empty—three qualities that are perfect for solar power generation. While California remains an expensive state to do business, it is important for occupiers to evaluate the energy consumption variable of any industrial real estate decision.