Is solar a good investment for my apartment building?
As a property owner, have you asked yourself that question? There is a lot of
conversation about going green and reducing carbon emissions.
As a business owner the real consideration is: Will this be a good investment? Will it increase my cash flow and property value?
Will solar work for my apartment building?
If you answer yes to the following questions, then solar is a good
investment for you.
1.Does your building have a centralized water heating system?
2.Does your company or its shareholders pay federal taxes?
3.Does your company or its shareholders have a tax liability that can utilize equipment depreciation?
Since most apartment buildings have centralized water heating systems, the gas bill is paid by the building's owner.
In this article we are going to focus on solar hot water systems. We'll give you a brief history of how solar thermal has greatly
improved in the last 20 years and we'll explain the three types of systems that can be used for apartment buildings.
We'll discuss the current available tax incentive, grant, rebate and
other options that make solar a good investment.
Solar hot water was widely adopted in the 70's and early 80's during the Carter administration.
The early systems used the building's potable water directly in flat-plate collector and are referred to as "open loop" systems. Many open loop systems failed prematurely due to poor design, freezing weather conditions and calcium building up in the collector from the potable water, but great advancements have been made in the last 20 years.
SOLAR THERMAL DESIGNS:
Today's solar hot water systems have addressed issues by changing to a "closed loop" design that re-circulates the same fluid thru the collector loop. There are three main types of closed loop systems: closed loop glycol, passive system and drain back
system.
Closed loop glycol systems are active systems that are widely used. Non-toxic glycol is used as the heat transfer fluid in the collector. It re-circulates in a closed loop to protect against freezing and mineral buildup. Its drawbacks are the extra equipment needed to deal with stagnation (overheating in summer) and glycol has a less efficient heat transfer than water.
Passive systems consist of a combined collector and tank design. This eliminates moving parts, like a pump and controller, making the system less complex. Disadvantages are extra weight on the roof (100gallons of water weighs 834lbs) and no stagnation protection. If there is low or no demand in summer, these systems will overheat. ·
Drain back systems are active systems using pumps and controllers. These systems have freeze and stagnation (overheating) protection. Simply, when the pump stops all the water in the collectors drains back to the system's tank. These systems are one of the easiest to maintain and operate. The drawback is that not all buildings can accommodate this system. In order to drain properly the collector supply and return line must slope to the tank.
The systems described above are pre-heat systems for the building's existing water heating system. The solar collector pre-heats the water before it enters the existing water heater so the water heater doesn't have to run as often. If there are multiple days of cloudy weather with no sun your tenants will still get hot water from the existing water heater.
There is no one system that will fit every application but the three
systems described will cover almost any application and all are dependable. A well designed and properly installed
system will give many years of service.
CASH FLOW
A solar hot water system can increase your cash flow by reducing your operational expenses. Building owners that take advantage of the tax credit or grant, CSI rebate and equipment depreciation and qualify for a loan at 6% or less are cash positive from day
one. The energy a solar hot water system offsets should be more than the loan payment thus increasing cash flow.
PROPERTY VALUE
A solar hot water system will add value to your property but your
property taxes will not increase.
Section 73 of the California Revenue and Taxation Code allows a property tax exclusion for certain types of solar energy systems installed between January 1, 1999, and December 31, 2016.
Qualifying active solar energy systems include solar water heating systems and active solar energy systems.
INCENTIVES
Currently the following state rebate, federal grant, tax credit and
equipment depreciation can be used to maximize return on investment.
30% Federal Tax Credit: The credit is equal to 30% of the total cost of the system with no limit. The credit can be used up to 2016 if credit cannot be recovered in one tax filing. Eligible solar energy properties include equipment that uses solar energy to generate electricity or uses solar energy to provide hot water for use in a structure. This credit will continue to be available for solar systems placed in service on or before December 31, 2016.
1603 Federal Grant: This grant pays cash in lieu of tax credit and is funded by the stimulus plan. Unlike the tax credit, the grant requires an application (with several simple requirement) be completed and filed. The cash amount is 30% of the total cost of the system with no limit. The 1603 Grant is available only to
projects that are at least 10% complete by December 31, 2011 and claimed (application completed and filed) by October 1, 2012. In addition to the application, you must continue to submit a performance report annually for the first five years of the system.
Projects started after 2011 will no longer have this option.
CSI Rebate: The California Solar Initiative is a rebate program to promote solar in California.
This program is funded by SDGE, PGE, SoCal Gas & Edison rate payers. If you check your SDGE bill, the Public Purpose Program charged to you is used to fund all energy rebates.
The Solar Thermal Program has a $350million budget to be used for solar water heating systems, training and marketing. Rebates vary depending on type of system, collector location, shading and other design factors. Incentives will decline over time as the program meets certain benchmarks so early adopters receive larger rebates.
Everyone who pays a gas or electric bill pays into this program but only a few wise investors will get their money back.
Equipment depreciation: As a business, apartment owners enjoy a benefit not available to homeowners,equipment depreciation. The benefit of equipment depreciation can greatly reduce the total out of pocket expense on a solar system. Consult with your tax advisor for your specific situation.
FINANCING :
In this economy, when cash is tight, there are a growing number of financing engines for solar hot water and solar electric.
Energy efficiency loan programs with low interest rates are offered by many banks.
Power purchase agreements (PPA's) offer no upfront cost to the customer. A PPA is a lease-to-own program where the customer agrees to purchase the energy produced at a discounted rate for up to 20years. PPA's are widely used in residential solar electric systems and are becoming available to the solar hot water industry.
So is solar a good investment for your property? Considering the gas bill for your building will never go away and will probably increase over time. With the available incentives, installing a solar hot water system could be one of the best investments you make this year.
Written by: Waymon Arnold, Solar Designer, Licensed Solar Contractor, owner of Arnold Solar and SDCAA member.
arnoldsolar@yahoo.com 619-507-6255
For more information:
CCSE (San Diego's CSI
division) at
http://www.gosolarcalifornia.ca.gov/solarwater/
30% Federal Tax Credit
http://www.irs.gov/pub/irs-pdf/f3468.pdf
1603Grant http://www.treasury.gov/initiatives/recovery/Pages/1603.aspx
As a property owner, have you asked yourself that question? There is a lot of
conversation about going green and reducing carbon emissions.
As a business owner the real consideration is: Will this be a good investment? Will it increase my cash flow and property value?
Will solar work for my apartment building?
If you answer yes to the following questions, then solar is a good
investment for you.
1.Does your building have a centralized water heating system?
2.Does your company or its shareholders pay federal taxes?
3.Does your company or its shareholders have a tax liability that can utilize equipment depreciation?
Since most apartment buildings have centralized water heating systems, the gas bill is paid by the building's owner.
In this article we are going to focus on solar hot water systems. We'll give you a brief history of how solar thermal has greatly
improved in the last 20 years and we'll explain the three types of systems that can be used for apartment buildings.
We'll discuss the current available tax incentive, grant, rebate and
other options that make solar a good investment.
Solar hot water was widely adopted in the 70's and early 80's during the Carter administration.
The early systems used the building's potable water directly in flat-plate collector and are referred to as "open loop" systems. Many open loop systems failed prematurely due to poor design, freezing weather conditions and calcium building up in the collector from the potable water, but great advancements have been made in the last 20 years.
SOLAR THERMAL DESIGNS:
Today's solar hot water systems have addressed issues by changing to a "closed loop" design that re-circulates the same fluid thru the collector loop. There are three main types of closed loop systems: closed loop glycol, passive system and drain back
system.
Closed loop glycol systems are active systems that are widely used. Non-toxic glycol is used as the heat transfer fluid in the collector. It re-circulates in a closed loop to protect against freezing and mineral buildup. Its drawbacks are the extra equipment needed to deal with stagnation (overheating in summer) and glycol has a less efficient heat transfer than water.
Passive systems consist of a combined collector and tank design. This eliminates moving parts, like a pump and controller, making the system less complex. Disadvantages are extra weight on the roof (100gallons of water weighs 834lbs) and no stagnation protection. If there is low or no demand in summer, these systems will overheat. ·
Drain back systems are active systems using pumps and controllers. These systems have freeze and stagnation (overheating) protection. Simply, when the pump stops all the water in the collectors drains back to the system's tank. These systems are one of the easiest to maintain and operate. The drawback is that not all buildings can accommodate this system. In order to drain properly the collector supply and return line must slope to the tank.
The systems described above are pre-heat systems for the building's existing water heating system. The solar collector pre-heats the water before it enters the existing water heater so the water heater doesn't have to run as often. If there are multiple days of cloudy weather with no sun your tenants will still get hot water from the existing water heater.
There is no one system that will fit every application but the three
systems described will cover almost any application and all are dependable. A well designed and properly installed
system will give many years of service.
CASH FLOW
A solar hot water system can increase your cash flow by reducing your operational expenses. Building owners that take advantage of the tax credit or grant, CSI rebate and equipment depreciation and qualify for a loan at 6% or less are cash positive from day
one. The energy a solar hot water system offsets should be more than the loan payment thus increasing cash flow.
PROPERTY VALUE
A solar hot water system will add value to your property but your
property taxes will not increase.
Section 73 of the California Revenue and Taxation Code allows a property tax exclusion for certain types of solar energy systems installed between January 1, 1999, and December 31, 2016.
Qualifying active solar energy systems include solar water heating systems and active solar energy systems.
INCENTIVES
Currently the following state rebate, federal grant, tax credit and
equipment depreciation can be used to maximize return on investment.
30% Federal Tax Credit: The credit is equal to 30% of the total cost of the system with no limit. The credit can be used up to 2016 if credit cannot be recovered in one tax filing. Eligible solar energy properties include equipment that uses solar energy to generate electricity or uses solar energy to provide hot water for use in a structure. This credit will continue to be available for solar systems placed in service on or before December 31, 2016.
1603 Federal Grant: This grant pays cash in lieu of tax credit and is funded by the stimulus plan. Unlike the tax credit, the grant requires an application (with several simple requirement) be completed and filed. The cash amount is 30% of the total cost of the system with no limit. The 1603 Grant is available only to
projects that are at least 10% complete by December 31, 2011 and claimed (application completed and filed) by October 1, 2012. In addition to the application, you must continue to submit a performance report annually for the first five years of the system.
Projects started after 2011 will no longer have this option.
CSI Rebate: The California Solar Initiative is a rebate program to promote solar in California.
This program is funded by SDGE, PGE, SoCal Gas & Edison rate payers. If you check your SDGE bill, the Public Purpose Program charged to you is used to fund all energy rebates.
The Solar Thermal Program has a $350million budget to be used for solar water heating systems, training and marketing. Rebates vary depending on type of system, collector location, shading and other design factors. Incentives will decline over time as the program meets certain benchmarks so early adopters receive larger rebates.
Everyone who pays a gas or electric bill pays into this program but only a few wise investors will get their money back.
Equipment depreciation: As a business, apartment owners enjoy a benefit not available to homeowners,equipment depreciation. The benefit of equipment depreciation can greatly reduce the total out of pocket expense on a solar system. Consult with your tax advisor for your specific situation.
FINANCING :
In this economy, when cash is tight, there are a growing number of financing engines for solar hot water and solar electric.
Energy efficiency loan programs with low interest rates are offered by many banks.
Power purchase agreements (PPA's) offer no upfront cost to the customer. A PPA is a lease-to-own program where the customer agrees to purchase the energy produced at a discounted rate for up to 20years. PPA's are widely used in residential solar electric systems and are becoming available to the solar hot water industry.
So is solar a good investment for your property? Considering the gas bill for your building will never go away and will probably increase over time. With the available incentives, installing a solar hot water system could be one of the best investments you make this year.
Written by: Waymon Arnold, Solar Designer, Licensed Solar Contractor, owner of Arnold Solar and SDCAA member.
arnoldsolar@yahoo.com 619-507-6255
For more information:
CCSE (San Diego's CSI
division) at
http://www.gosolarcalifornia.ca.gov/solarwater/
30% Federal Tax Credit
http://www.irs.gov/pub/irs-pdf/f3468.pdf
1603Grant http://www.treasury.gov/initiatives/recovery/Pages/1603.aspx