Electricity is a big line item on every co-op and condo board’s budget – and no wonder, since New York City has the highest energy prices in the continental U.S. But you can trim your electricity bills by mounting solar panels on your rooftop. It may seem surprising, but New York City receives more than enough sunlight to make solar a good investment; as of December 2016, the city’s solar installations were able to generate more than 78 megawatts of electricity, enough to power some 10,000 homes. And with current incentives and tax credits, going solar is surprisingly affordable.
“However, those incentives are going to decline in coming years, so it pays to do it sooner rather than later,” says Noah Ginsburg, the director of Here Comes Solar at Solar One, a nonprofit initiative that assists building owners, including co-op and condo boards, to implement cost-effective solar projects.
Considering making the switch? Here’s everything you need to know.
Incentives and Tax Credits
Installing solar panels on your building’s roof is just like any other investment. There is an upfront cost, but over time you get your money back, eventually earning a return – in this case through reduced electricity bills and tax incentives. The cost is typically measured in dollars per watt of power installed.
While prices can vary widely by borough and individual projects, in New York City the average cost of systems larger than 25 kilowatts – enough to power the common area of a 25- to 40-unit building – was roughly $4 per watt in 2016, meaning a 25-kilowatt project would cost $100,000. That number, however, can be reduced by as much as 80 percent (see box), thanks to government incentives and tax credits. Among them:
Federal investment tax credit. Building owners are eligible for a credit worth 30 percent of the installation costs. Co-op shareholders and condo unit-owners are eligible for pro-rated shares of this credit; if the amount exceeds an individual’s federal income tax liability the year the system was installed, it can be carried forward to the next year, much like rolling over minutes or data on a phone plan. The 30 percent rate is available for projects that commence construction before the end of 2019. The credit then steps down to 26 percent in 2020 and 22 percent in 2021.
It can be challenging for boards to distribute the tax credit equitably among residents, especially in multi-family dwellings with retirees or veterans who don’t pay sufficient taxes to take full advantage of the credit. “One possible way around that is for the co-op or condo to take the credit if they have the tax liability to do so,” says Ginsburg. “In that scenario, boards won’t have the headache of pro-rating, and residents don’t have to bother with paperwork and filing forms on time.”
New York State tax credit. Residential building owners who install a system are eligible for a tax credit of up to 25 percent of the installed cost of systems no larger than 50 kilowatts, or about $40,000 for a 50-kilowatt system. As with the federal investment tax credit, co-op and condo residents can receive their proportionate share of the state credit, but the federal government may consider the state tax credit taxable income.
New York “sun” incentive. New York State’s Sun Initiative, part of Governor Andrew Cuomo’s strategy to advance solar adoption across the state, provides incentives of roughly 15 percent of installation costs, reducing the upfront cost of the solar energy system to the building. These are distributed through three regions serviced by Con Edison, PSEG Long Island, and The Balance of the State (for upstate New York). The money goes directly to the solar installation company, which is required to pass along all of it to customers.
Sales tax exemptions. New York State grants an exemption from sales taxes for the purchase of residential solar systems; New York City grants a similar exemption. New York City property tax abatement. Building owners who go solar before January 1, 2019 are eligible for a four-year property tax abatement of five percent per year of the installed cost of the system (after the New York Sun Initiative). The abatement, however, may not exceed a building’s property tax liability for any given year.
Financing and Ownership
While the initial cost of purchasing a solar energy system may seem daunting, there are financing options that allow co-ops and condos to pay incrementally over time, whether they decide to purchase their system, or lease it from a solar installation company. “For co-ops or condos with smaller reserves, leasing can be a win/win,” says Ginsburg. “There’s little or no upfront cost, and your electricity costs can be 10 to 15 percent lower than buying from a utility.” Among the options: Direct ownership. Although this requires the heftiest out-of-pocket cost and has the lengthiest payback, it generally provides the biggest savings and return on investment over the lifetime of the solar energy system (25 years or more) since there’s no interest to be paid. If a cash payment isn’t doable, co-ops and condos can secure solar loans through their banks or financial institutions such as the New York City Energy Efficiency Corporation. Housing Development Fund Corporation (HDFC) cooperatives “can also get similar loans or grants from the city’s Department of Housing Preservation and Development,” says Ginsburg.
Third-party ownership. In a leasing arrangement, the solar company installs and maintains the solar equipment for a fixed period, typically 20 years. After that, there’s the option of purchasing the system at a significant discount, just like a car lease. Co-ops and condos can pay an agreed monthly fee that’s based on the estimated amount of power their system will produce in a year. Or they can pay for the actual power used at a set per-kilowatt-hour rate, which means that their electric bills will vary from month to month. In December 2016, Solar One announced Affordable Solar New York, a pilot program that is making zero-down financing available for HDFC co-ops interested in adopting solar power.
Adapted from the New York City Multifamily Solar Guide.
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