As part of our Problem Solved series, Habitat spoke with Alan Burchell, a principal at the consultancy Urbanstrong.
Boards that are considering installing solar panels often find that the return on investment isn't quite what they were hoping for. But there is a program that can make going solar worth it. Can you tell us about it?
We were approached by a 63-unit condo in Queens that wanted to turn its 8,000-square-foot roof into a food garden. Unfortunately, our engineers found they didn't have the structural capacity, and structurally reinforcing the roof was beyond the condo’s budget. When we suggested they consider solar, they said that they had looked into the state's net metering program but didn't quite find the payback all that appealing. And that's when we explained that a lot has changed in New York City and that it was definitely worth taking another look at solar.
What exactly has changed?
With the old net metering program, the solar power that buildings produce just rolls back their own meter at whatever discounted rate they buy electricity. So for example, for every 20 kilowatt hours you produce on your roof, they'll take 20 kilowatt hours off your bill. But you'll never get paid in actual cash, and they don't compensate you for any electricity you produce beyond what your building consumes. And net metering offsets only the supply charges on your bill, not the delivery fees. So while it can help somewhat reduce your bill, the net metering program is rather limited in terms of the profit it can generate for buildings, particularly for those with large roofs. But now there’s a program called Community Solar that can earn buildings vastly more money.
How does it do that?
The Community Solar program gives the option to all New Yorkers who live in apartments to say that they only want to buy electricity that’s been produced by solar panels on New York City rooftops. It’s clean, renewable and hyper-local, which is really great. Back in 2017, the New York State Public Service Commission put a higher value on electricity produced and distributed this way. As a result, the electricity produced for the Community Solar program is almost twice the value of what's offered through the net metering program.
Are there significant upfront costs?
Well, we have two options for our clients: the no-investment option and the full-investment option. With our no-investment option, building owners can go solar and enjoy many of the benefits without any investment or any risk. Under this scenario, we work with our partners to install our own solar system on our clients’ roofs. Then, rather than using the electricity produced on the roof to roll back our client's meter, we immediately export 100% of it into the Community Solar program.
The utility compensates us for this electricity in the form of bill credits, which are then used to lower the building's utility bills. But these bill credits are issued at the premium Community Solar rate. So there are lots of bill credits left over, and we sell these to our Community Solar program investor subscribers. They are able to take the federal tax credits and bundle these together with the subscriber revenue from selling the bill credits. They then share the profits with our building owner clients in the form of a fixed annual roof lease for 25 years.
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And do building owners also reap tax credits?
Since they are the ones hosting the solar array, they collect a four-year property tax abatement. They also improve their energy efficiency to comply with local Law 97. So under the no-investment option, just to summarize, they invest nothing and assume no risk, but they get to go solar and just sit back and collect a fixed income.
How does the full-investment option work?
Under the full-investment option, the co-op or condo is the investor in its own rooftop Community Solar project. If they have the reserves and are able to do this, they will make significantly more profit in the long run than the no-investment model. The building ultimately owns all the equipment – they just sign contracts with us for operations, maintenance and subscriber management. Other than our annual fees, they keep all the profit. And even if the building doesn't pay federal taxes, our tax experts can help individual unit-owners split up the building’s tax credit and depreciation.
Which option did the Queens condo choose?
Our Queens condo client went all in on the full-investment option once they saw the numbers. For their 8,000-square foot roof, their 25-year net profit will be $225,000, with an initial rate of return of 28%. But they didn't stop there. Next, they decided to solarize their parking lot, which is even bigger. Down there, we're building them a solar carport that they can park their cars under. The payback period for the entire project is only 3.8 years, and in total it's going to net them just under $980,000. All for a roof they thought was useless to them – and all thanks to the very generous Community Solar program.
Where does Community Solar stand today?
New York City's Community Solar program has been overhauled in terms of how funds are allocated. Now, instead of flowing to Con Edison first, funds will go to building owners via the state's New York Sun program to subsidize up-front investments. In a nutshell, Community Solar is back and better than ever. We're continuing to sign-up buildings and looking forward to a very busy 2022 ahead.
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