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July 15, 2019 •Franklin Energy
Solar projects are often met with excitement, but often accompanied by hefty project requirements. Sometimes they are plagued by a lack of funding or staff to complete predevelopment work. So, how do you make sure you set your project up for success? Paying attention to the following considerations can significantly streamline a project’s implementation.
Project timing
When can you know for sure that building owners are ready to take the solar energy plunge? It makes sense that a major capital event, such as refinancing or renovating an affordable multifamily building, gives owners access to needed funding for the upfront cost of efficiency upgrades. While targeting these periods is strategic, the ACEEE report “Our Powers Combined: Energy Efficiency and Solar in Affordable Multifamily Buildings” found that “owners will consider solar investments at all stages of a building’s life cycle if provided with a clear rationale and sufficient staff and funding.” Unless the building’s roof needs repair, rooftop solar installations do not have to coincide with a renovation.
Project financing
As mentioned before, owners are willing to make energy efficiency and solar investments if they can secure sufficient funding. The challenge is that financing options for rooftop solar are, unfortunately, limited. State and local multifamily solar incentives are rare, and green banks are still not widespread. To navigate a funding shortage, the ACEEE report says, “many affordable multifamily housing owners use cash reserves or power purchase agreements (PPAs) to install rooftop solar systems. In entering a PPA, solar companies agree to coordinate and fund all predevelopment, installation and monitoring of a solar project in exchange for revenue from the solar system.” The beauty of these agreements is that they require no upfront investment, and owners may even be granted the option to purchase the system after a few years.
Utility-offered community solar
Community or shared solar is an interesting alternative approach for providing solar energy generation to multifamily residents. Such models allocate the electricity of a jointly owned system to offset individual consumer electricity bills. These systems tend to be located off-site, and residents receive bill credits directly from renewable energy generation. What’s more, utilities, solar companies, building owners, resident cooperatives or other third parties may own and manage a community solar project. In the utility-sponsored model, customers participate by contributing an up-front or ongoing payment in order to be a part of the project and procure the benefits. Community solar, or solar gardens, provides a unique opportunity for multifamily owners and residents to collaborate and reduce their energy costs.
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Nonprofit community solar projects
Not all community solar programs are created equal. Voluntary neighborhood solar programs operate differently by allowing property owners to enjoy the perks of solar power without having to fork out a substantial outlay. The array is set up at a central location and equipment and produced power are cooperative-owned. In that way, all electricity benefits are shared equally among the group.
This model appeals most to multifamily unit dwellers, small business owners and rural residents. Since all costs are shared, solar communities make it easier for low- to moderate-income residents to enter the renewable energy market. Projects like this also are a good fit for properties not conducive to panel installation. As renewable energy becomes accessible to a wider range of people than ever before, community-owned solar projects will continue to evolve and serve more possibilities than we can even imagine at this point.
The stacking of utility incentives, potential grants, low income housing tax credits, and solar tax credits can buy down the initial cost of the solar project to something palatable at the time of recapitalization if a PPA is not appealing.
Building performance
The most successful multifamily solar projects are those that use highly reliable energy efficiency upgrades bundled along with the solar upgrades to combat risks associated with investing in many newer technologies. Sometimes failure to meet solar performance expectations alone can harm a project’s reputation and longevity. A lack of experience with the new technologies could account for less than stellar performance and energy savings may not fully materialize. Many building operators know about energy efficiency and water conservation measure savings, but the same isn’t true for solar. Benchmarking a building and modeling the solar panel’s output potential is absolutely essential to ensure that a project achieves its projected energy and water savings. The successful projects featured in the ACEEE report all used an energy and water benchmarking service to monitor performance before and after project completion.
Whole-building strategies
Multifamily buildings practically demand a whole-building approach of addressing the in- unit and common area energy usage . The problem with larger and older affordable multifamily buildings is that few of these types of properties have been designed to accommodate individual utility meters for each apartment unit. In these situations, owners are more likely to pay for an entire building’s utility costs and have an income allowance for each unit. You’ll find that owners of these properties are motivated to invest in energy efficiency and solar measures because they are responsible for all utility costs. Plus, an unfortunate reality of renters is that they tend to consume more energy when they are not responsible for their own utility bills. But with strategies we have developed over the years to overcome barriers such as split incentives, it is possible to incorporate solar resources to achieve energy savings for both owners and residents by combining the renewable and energy efficiency measures in to one comprehensive project. Some of those solutions do include solar and storage but that is a whole different blog posting.