Important update for businesses in California considering solar – Prevailing Wage will increase costs for all solar projects by up to 8% starting Jan 1, 2024!
Specifically, Assembly Bill 2143, which was passed in 2022, will categorize all commercial solar projects larger than 15 kilowatts as public works projects, meaning that workers must be paid the prevailing wage, according to the type of work and location of the project. The prevailing wage rates are usually based on rates specified in collective bargaining agreements and vary from county to county. More information can be found at CA.gov.
While the Federal Inflation Reduction Act already requires projects larger than 1 megawatt (AC) to pay prevailing wages if they want to receive the maximum Investment Tax Credit, this new California requirement goes beyond and particularly impacts projects less than 1 megawatt (AC). While well-paying jobs will likely help support longer-term solar industry growth by attracting and retaining new talent, the short term impact is that project costs will increase, especially in key counties with higher than average prevailing wages.
OnSwitch used our SkyQuote engine to quickly perform some analysis on sample projects. Check out the table below illustrating cost increases for the same project before and after Prevailing Wage is applied.
| Project City | Project Size (kW) | 2024 Payback (yrs) | % Price Increase ($/Watt) |
|---|---|---|---|
| San Jose, CA | 785 | 3.3* | 8% |
| Fremont, CA | 393 | 2.8 | 4% |
| Vernon, CA | 491 | 5.1 | 4% |
| Millbrae, CA | 187 | 3.3 | 6% |
How can you avoid these cost increases? While regulations still need to be formally approved by the CA Department of Industrial Relations and the CA Public Utilities Commission, current guidance allows building owners to “start” projects before the end of 2023 by submitting a utility interconnection application. Some preliminary design work, utility consumption analysis, and application costs are required submit an interconnection application, so we urge customers to proceed as soon as possible this autumn to avoid the deadline rush.
The first step in starting a solar project is to request a SkyQuote – you only need to provide the building address. Or you can reach out to info@onswitchenergy.com.
Here is a side-by-side comparison for the San Jose Project:
