Earlier this month, representatives from KB Home, BYD-America, and the city of Lancaster announced a historic partnership. With financial help from the city, the two companies teamed up to build a home with solar power, battery technology for energy storage, and an electric car charging station. To detail the innovative home's arrival on the market, TPR was pleased to speak with Micheal Austin, VP, BYD America, and Thomas Di Prima, Executive VP, KB Home-Southern California Division.
The city of Lancaster, KB Home, and BYD America recently joined forces to unveil a solar "home of the future." How futuristic is it? Is it priced to be market competitive?
Thomas Di Prima: A lot of homes in America have solar on them. Solar is not a brand new technology. What's unique with this home is you're building a production home-a first-time-buyer market home-so efficiently that it was-built to Energy Star certification.
There are a lot of people putting solar panels on older homes or homes built ten years ago that are nowhere near the energy efficiency of this home. You've added that solar to this home, and you've added something new to this home: battery backup technology. Are there homes in America that have battery technology? Yes, there are some other companies that do this, but no one yet has done this with the style and type of battery that BYD has provided. You're talking about an iron-phosphate battery that is very small in size, very safe in the nature of the batteries, and very compact-the size of an old stereo cabinet or a copy machine. It's very quiet. In that you have enough battery power to generate ten kilowatt-hours of power.
You have a home that is highly efficient, has solar, and then you add an inverter that lets you do three things: You can take solar generated power out of your solar panels, convert it, and put it into the home for use in the home. Or you can take that power, put it back into the grid, and provide it back to Edison to help with their load demands, where the homeowner would get a credit based on that power going back. Or you can divert solar power into your batteries and charge your batteries.
A lot of commercial businesses today are on tiered structure rates with Edison where they pay more for power at two in the afternoon than they pay at two at night; homeowners are on a flat rate until they reach a certain amount of kilowatt use and then they pay a peak charge. This home will never see a peak charge because it's going to generate so much power that it's never going to hit a peak rate.
We hear that as early as next year, the utility companies are going to change that structure much like commercial where we a homeowner will pay much more for power at four in the afternoon, when power is at a peak, than we would pay at two in the morning. You can actually program your inverter so that while you're sleeping the inverter would go into the grid, take power out of the grid that you might be paying a few cents a watt for and charge your batteries. Then you program your inverter while you're at work or enjoying yourself and your air conditioner is running to power your home at two o'clock in the afternoon when peak rates kick in and you're using two-cent power instead of 30-cent power. It's another way of making this home more affordable. You have a lot of features in this home.
Then add in California-friendly landscaping, drought tolerant plants, point irrigation with water sensing meters, WaterSense rated faucets, and on top of that you add in a very new product-it's the first home in the United States to have MonierLife Auranox Tile. That is a smog neutralizing tile that, when exposed to light, a photo catalyst agent in the tile breaks down nitrogen oxide molecules in the air, minimizing air pollution. Then when it rains a small amount of organic residue is washed off the roof. It is estimated that the tile on one roof can eliminate the amount of smog that is generated by a car driving over 10,000 miles a year.
All of a sudden you have a highly energy-efficient home doing tremendous things to clean up the environment. If every home in America had this you could take out all the peaks and valleys from Edison; their equipment would run much smoother. At peak loads, especially with the temperatures around the L.A. basin, Edison cannot rely on wind energy, solar energy or even some of their other cleaner energies; they have to pull power into the grids from coal firing plants and other things that are very, very dirty. That greatly increases our carbon footprint and puts enough strain on their equipment that the equipment fails much sooner and has to be replaced sooner. The need to replace equipment affects rate structure as well. That's what a simple little home like this could do if we had more like it in America.
Why is this partnership KB of significance for BYD?
Micheal Austin: We have three big green dreams: solar being our first, energy storage being our second, and electric vehicles being the third. The whole purpose of the BYD-KB Home partnership is to launch products that are affordable. We recognize KB Home as a company that is delivering products to the mass markets. At BYD, we vertically integrate our products for one purpose: to drive costs down. When you drive cost down you make products that are mass-market affordable. That's what BYD did with cell phones. They're doing that with solar panels now. We want to do this with home energy storage systems, and we'll do that with electric vehicles.
KB Home is a perfect partner to launch these home energy systems in affordable housing across the United States. It's a fabulous partnership.
Will the manufacturing, distribution, and installation process for building these homes be located in Lancaster, using local labor?
Di Prima: We use local labor. Most of our subs come directly within the market or very nearby. If you look at some of the statistics that have been developed over the years through BIA, every home that's produced ultimately produces between five and seven jobs within the economy of that market itself. The homes themselves are generating jobs. We have a lot of local manpower. All of our staff generally lives in the areas that we're building. KB Home's Superintendents live in the area. I live in the Antelope Valley myself. So this project and our other housing communities are generating local jobs.
As far as development and installation, we're utilizing the technology from BYD, learning from them, installing, and supervising the installation of the work. It's been a great, great relationship. It truly has formed this partnership.
I'm going into a meeting tomorrow and hoping to come back and talk with Micheal early next week about how we can mass produce homes. We want to mass-produce 70 or 80 homes, where the solar is not an option, it's a standard, and the level of solar could be an option. We're ready to do that based on how well this relationship has worked.
Austin: We've learned a lot about this system through this first KB Home. This solar system is just four kilowatts, which is only about 15 percent of the roof's space. It's only 18 panels, and at about 220 watts per panel, we've already learned that that is probably overkill for this size home.
Di Prima: Here we have a house that is built so efficiently that it's probably only using three or three and a half kilowatts on a very hot day and way less than that on a cooler day. We're generating close to four kilowatts. One of the things we've found with BYD's product is that no product gives you 100 percent because there are conversion ratios. But what we're getting is so close to 100 percent-we're getting around 3.9 kilowatts out of this system-that we're producing more. We've learned that we can drag cost down because we don't need four or five kilowatts. Now we comfortably put three kilowatts on this home which is cheaper and has the same effect. As battery storage technology is more available and we better learn how to use it, we might even go down to two kilowatts. Right there you could cut some additional cost.
Usually in these kinds of futuristic energy efficient homes there's an added price cost. What is the price point for this 90-home community development project, and how does this measure out as a plus, not a minus, for a buyer?
Di Prima: We were putting the numbers together the other day on where the cost of this system is coming in and what is available out there. There are a lot of tax incentive credits that are coming down the road. But at the end of the day, if a typical buyer is going to spend $60-100 a month in utility costs, and we can cut that down where this home might be $5 or $8, than there's a substantial amount of funds to pay for that, especially where these incentive programs have very low interest rates. Our goal is, between KB and BYD, to create enough competition out there that we can get the cost down to where this is paid for in three to four years and not five or six years. We're still working with consumers-everybody wants this but no one wants to go out too far to pay for it. The great thing on this project is that BYD has put into this project, KB has put into this project, and the city has put into this project, so we're going to get some homeowners that are going to experience this at little to no cost to them. In exchange, they're going to share data with us: How does the system work, what are some of the things that are working well for you, what can we do better?
As we build the next group of homes, we're going to continue to learn areas where we can be more efficient and more affordable. We already improved the placement of the inverter. We're so precise now on our layout that we've just launched a program to offer a pre-wire for solar for our customers. We want to go immediately to a solar option in all our homes. That's how impressed we were with the program. You're still looking at a few thousand dollars for a kilowatt. Micheal and I have a goal to drive that down to several hundred dollars a kilowatt. When we get there is when you're going to see this, and there is no better partner than BYD. Look what they've done with battery technology and cell phones. Cell phones are a giveaway now, and we want to get where solar is not a giveaway but it's so affordable it's in every home.
Austin: An EnergyStar rating for a normal home is a score of 90, this home scored 69. It essentially uses 39 percent of the energy that a normal home would use. It's phenomenal, we've learned a lot through this. The pre-wire option is very interesting because if you understand property-assessed clean energy policy, once an owner buys a home, a KB home for example, that's been pre-wired for solar, they can make an immediate application, in Los Angeles County, for example, and when that goes live in October, they can make an immediate application to have zero up-front cost for the solar panels. The solar system cost would then be amortized over 20 years. It's essentially an immediate ROI. They are cash flow positive from the first month those solar panels are on the roof, especially the home that KB Home has designed. Cell phones aren't free, but the carrier subsidizes with a two-year contract.
We're doing the same thing with solar panels and PACE legislation; we're amortizing the cost of those panels over the effective life of those panels and the electronics. It is the perfect melding of a home that is pre-wired for those kind of efficiencies and having the new mortgage owner be able to make an application, get the money, and install that energy efficiency for no upfront cost and no fees. It is exactly the cell phone model, and they are cash flow positive from the first day.
The home features an electrical vehicle outlet to demonstrate the home's compatibility to charging one of the electric cars that's produced by BYD.
Austin: The electric vehicles piece is really interesting. We wanted to work with KB to standardize the charging of vehicles in their homes. Every BYD vehicle that ships in China-dual mode or electric comes standard with a 3.5-kilowatt charger onboard. You plug that it an AC plug that KB installed for us-220 volts on a dedicated 20-amp circuit, at a level two charge for the F3DM or the E6-and it uses that 3.5 standard kilowatt charger in the vehicle. All the vehicles that will be shipped in the U.S.-the E6 and the F3DM -will now come with a ten-kilowatt standard imbedded charger. These cars will be capable of a direct AC ten-kilowatt charge. They'll come with a standard J1722 plug that can plug into any electric vehicle charging station. (We didn't have that ready for this first KB Home.) But at KB Home it is easy for us to run a 220, 20 amp dedicated drop in every garage for the electric vehicle, making the home, "electric vehicle ready".
The governor and the legislature and others have been pressing the case that California's laws put it on the cutting edge of changing to a more climate friendly economy and environment. How do KB and BYD respond to these state initiatives? Are these market driving public policies bringing you into this marketplace?
Di Prima: Policy that gets drafted always tends to be policy for new homeowners and not policy for existing homeowners. It ultimately seems like the burdens are on the back of new homeowners. However, we as a company are very, very focused on improving our carbon footprint. We are one of the first builders, if not the first public builder, to file a sustainability report, which is viewable at kbhome.com for anybody to read. We are very focused on how we can be a much greener builder because we are not here for a year; we are here for the next hundred years.
We have to work with the companies that build this technology, like BYD, in order to get that cost down so everybody can afford this. This is one of those things that once people have it in their home, the home is more affordable. Our goal is getting people into a quality, well engineered, affordable home. In order to do that we have to look at affordability in more than just the cost of the dry wall. We have to look at what ultimately the consumer has to pay: How can we save them on water? How can we save them on electrical? That is what we are trying to do: How do we do this faster, better, and more affordable?
We are very aggressive and we want to encourage more legislation that actually helps to see this get in, but it can't just help the new homeowner; it has to help everybody.
California legislation is saying that in 20 years we have to have homes that are zero net energy. In four months, we were able to meet that mandate. The technology isn't 20 years from now. It is now. A key for all of us is how we partner and create enough competition in the market that we can keep costs down and find ways to do this now. If we want to protect our children and our children's children, we have to attack these problems now. It takes leadership like the city of Lancaster, which spearheaded this project and said, "We can do it." In taking one of the top energy producers of material and one of the premier home builders in the United States, putting them together, and saying, "Let's go do it, and let's see how fast we can do it." We have shown that it can be done. The next question is how do we make that so it is affordable in every home in America.
It was great to see the representation from the governor at the press conference. It was great to see the interest. It is great to see some of the programs that governor has put out there. We have real issues, and it is going to take really dedicated people to solve them. My only request is for it not to stop here. We need help from the government to help us with more programs to help subsidize this technology. I have seen more happen with green technology in the last two years than I have seen in the last 20 years because there is a focus now to do it. I have seen more changes to homes. It can't stop with this governor, but we also need help from this governor and his team. We need more legislation; we need legislation like AB 811, which helps an existing homeowner. We need that kind of legislation for new homeowners. Why can't they get those kind of programs up front so we can put it in every new home, not waiting for homeowners to close one day and come back the next day and do it?