Spend a little time talking to Jim Dwyer about his experience installing a solar power system for his 217-unit Manhattan cooperative and you might wonder why anyone would ever bother. Dwyer, the president of the board, describes the difficulty of navigating complex rules that span multiple governmental agencies. He talks about delays, about catch-22 regulations, and about how other board members had to lobby Albany to get a tax break that made the project economically viable.
“There is nothing straightforward about this process,” complains Dwyer, who lives at the 15-story Cabrini Terrace at 900 West 190th Street. “There is no off-the-shelf manual on how to do this.”
For the past three years, the board has been trying to install what is known as a photovoltaic (PV) system on the co-op’s garage. The project is part of a larger energy-efficiency plan, which will also include installing a master meter and a cogeneration system.
Solar, Dwyer asserts, makes sense because his building is at one of the highest points in Manhattan. Its height means that residents are more reliant on elevators and water pumps. Another one of the key motivators was the series of city blackouts, including the ones in 1999 and 2002.
“We don’t want to be in the dark or without elevators or water during an emergency,” says Dwyer, who has been on the board for about six years. “If we also reduce the amount of carbon in the atmosphere, that’s great.”
While PV systems have been available since the 1970s, contractors who install them say condos and co-ops have not been taking advantage of financial incentives and tax breaks as often as single-family homeowners and commercial owners. “We’re still in an early adopters phase,” explains Anthony Pereira, president and CEO of altPOWER, a PV installer. Despite tax breaks and cash incentives to offset the cost of putting in a system, Pereira says, “the incentives are not [large] enough to make it happen.”
According to Con Edison, there are 141 PV systems in use in the five boroughs of New York City and its territory in Westchester County. About half are residential projects, but Con Ed does not distinguish between single-family and multi-unit buildings or between retrofits and new construction.
For many boards, installing a solar power system might pay off in the long run, but it’s still a tough sell. “It’s not that they can’t afford it but that they have a fixed budget, and if the stairs need a new railing, you’re competing with other projects,” says David Buckner, president of Solar Energy Systems, which has been installing solar in the area since 1998.
Another issue surrounds what is known as “net-metering.” One way that PV systems make economic sense is that when the solar equipment generates more power than needed, the power flows back into the grid. Essentially, the meter runs backward and the owner gets a cash credit for generating power.
But in Con Ed territory, that net-metering is limited to 10 kilowatts, and only residential and nonprofits can do it. Size limitations make some potential solar installers hesitate because there is not a financial benefit, says Buckner.
“The issue of net-metering is really a killer right now,” he explains. He admits that larger buildings and those that are master-metered would probably not benefit from net-metering because they would use all the power that they generate. Still, he notes that net-metering is permitted at higher levels in New Jersey, Pennsylvania, and Massachusetts.
Con Ed spokesman Chris Olert says the limit on net-metering is required to ensure that service is not disrupted and that workers are safe. An employee operating in one area could be injured if he is not aware that a PV system a few blocks away is feeding power back into the system. Con Ed says that it is searching for ways to make higher levels of net-metering possible but that the limit is needed.
A lesser hurdle: under the city’s electrical code, components of solar power and the installation of such systems must be certified by a nationally recognized testing agency, such as Underwriters Laboratories (U/L). Installation can add between $1,000 and $3,000 to the overall price tag. Buckner says that such costs discourage smaller co-ops and condos.
Even the New York State Energy Research and Development Authority (NYSERDA), which has handed out about $22 million in solar incentives over eight years, isn’t always optimistic about New York City co-ops and condos installing PV systems. Ray Hull, a NYSERDA spokesman, notes that Manhattan buildings are frequently not well-suited for solar panels. Many roofs are small and crowded with water towers and air-conditioning units leaving little room for a PV set-up. (Buckner estimates that a 10-kilowatt system would require about 1,000 square feet of roof space.) Also, many shorter buildings are shaded by taller ones for a significant portion of the day.
Combine that with the low net-metering, the additional U/L costs, and the general complexity, and you have a process that is, in Hull’s words, “thicker than lawyer soup.” He adds: “It’s Manhattan! Have you ever heard of anything being easy in terms of construction?”
At the same time, there are several recent developments that might make it easier for condos and co-ops to go solar. Under old laws, if you installed a residential PV system, you qualified for a state tax credit but only if your PV system were 10 kilowatt, which is considered to be on the small side for a multi-unit building.
That is changing. On July 10, Governor Elliot Spitzer signed a bill that increased the size requirement so that installations of up to 50 kilowatts could apply for the tax credit, which is 25 percent with a $5,000 cap per resident.
Under the state law, the co-op or condo gets a 25 percent tax credit based on the cost of the project, and that trickles down to the individual co-op or condo owner’s income taxes. In a co-op, shareholders get a percentage of that based on their share. In a condo, the owners divide the amount. In both cases, each individual cannot get more than $5,000 even if the total amount of the credit is more than $5,000.
Dwyer says other board members successfully lobbied state senators, including sponsor Dean Skelos, to make the change. A bill introduced in May by Assemblyman Steve Englebright would boost the amount of net-metering permitted in the city from 10 to 2,000 kilowatts. The bill passed the assembly in June and is awaiting a companion bill in the state senate.
Con Ed argues that allowing such a large amount of electricity to be net-metered would require expensive renovations, the cost of which would have to be passed down to all ratepayers. On the congressional side, Senator Robert Menendez introduced a bill in March that would require utilities to permit net-metering up to 2,000 kilowatts. In December 2006, Congress voted to expand the existing 30 percent solar installation tax credit to the end of 2008. The Democratic majority is working to extend it to 2016.
The way the credit works for condos and co-ops is that each shareholder or owner can deduct his or her percentage, up to $2,000 each, from his or her federal income taxes.
But, at the same time, the federal tax credit is problematic for many New Yorkers. Rules stipulate that the solar credit cannot be used toward paying the Alternative Minimum Tax, says Noah Kaye, spokesman for the Solar Energy Industries Association. (That is a tax paid by higher-income earners on top of their regular income taxes.) Bills are pending to remove that rule.
Additionally, Mayor Michael Bloomberg has proposed a property tax abatement equal to 35 percent of the installation costs of PV systems that are initiated between 2007 and 2009. (The abatement would drop to 20 percent between 2010 and 2011.) This measure still needs to be approved by the New York State Legislature.
At Cabrini Terrace, the plan is to install a 50-kilowatt system. Dwyer says the board expects solar to power about five to ten percent of the building’s needs. He notes that the city’s tax abatement, if approved, would be used to reduce operating expenses and the next year’s tax bill. The price tag for the project starts at $370,000. NYSERDA has approved $200,000 in incentives, which will be paid directly to the contractor, altPOWER.
Dwyer expects the state tax credit to knock off another $42,500 in income taxes. Some shareholders will be able to take advantage of the federal tax credit, while others will not because of the alternative minimum tax issue, he says.
“For many people in New York City, the federal tax credit is of questionable value,” he says. “We’re applying for it, but we’re not counting on it.”
With the federal tax credit and the city tax abatement still in the air, he estimates the out-of-pocket cost to be somewhere well under $100,000, an amount that will be paid back by energy savings in about 10 years.
As if the process needed any more complications, Dwyer says there are still a few additional quirks. Regulations prohibit the board from taking the federal solar tax credit on money that comes from financing via low-interest loans offered by NYSERDA. (According to Dwyer, the federal tax credit can be used with a regular bank loan, just not an incentive loan. The board has not yet decided whether it will need to take out a loan or not.)
Another quirk: when the building decided to go to a master meter system, Con Ed required that all the Con Ed-installed meters in each unit be ripped out so the contractor could install new meters that will be connected to the new master system. The master meter project is required for both the solar panel and the cogeneration projects because it segregates Con Ed’s power that comes into the building from the power generated by those systems. “Why can’t I just buy a master meter from Con Ed and buy their meters that are already in place?” Dwyer asks.
Despite the delays and complexity, Dwyer is optimistic and thrilled that work is scheduled to start on the project in the fall. “I want to see this through now,” he says. Noting the 10-year payoff time and the fact that the PV system should last for about 25 years, he adds: “Who wouldn’t do this deal?”