Building Management Hawaii June/July 2013 - (Page 10)

Solar & More Solar Options for Condos From leasing to power-purchase agreements, all types of condos can benefit. By John Cheever A common misconception about renewable energy is that only people with sole control over their rooftops can benefit from photovoltaic systems. However, for those living in condos (presently more than 25 percent of Hawaii’s housing units, the highest rate in the nation) this technology is very much available. With clear legislative support, not only can PV help to offset common area utility bills, it can also reduce a significant portion of an association’s overall electricity demand. • Act 53 gives condo boards of directors the authority to install solar or wind energy devices on common elements without having to get a direct vote from all of the condo residents. This allows condos to act much quicker and take advantage of tax incentives from a particular year. • Act 201 frees condo owners with stand-alone units of any condo board restrictions that might increase the cost of installing or maintaining a solar energy device, or reduce its production in any way. • Most recently the legislature passed SB 19, which enables property owners to sell power from a renewable energy system to all of their tenants. The bill also protects tenants from ever being charged more than the current electricity rates. Option 1: Leasing A condo association can lease a PV system for a rate that is less than the energy savings attained from the PV power produced. The lease can be negotiated over a period of time (usually five, seven or ten years). At the end of the lease term, the condo association can purchase the system at fair market value. At that point, the association will see its energy savings jump dramatically since it will no longer be making lease payments and it will be receiving the PV power for free for the rest of the life of the system (up to 35 years). 10 June - July 2013 BMH Kapiolani Banyan, for example, opted for an operating lease that allows it to save some money now and gives it the option to purchase the system after seven years, after which its energy savings will increase almost five-fold. The building has enough roof space to accommodate a 67 kW photovoltaic system, which covers a portion of the expenses generated from common areas that are on a single meter. RevoluSun designed and installed this 119 kW solar system at Makiki Park Place. Last year it produced 194,825 kWh of energy, saving about $55,000 in electricity costs. Photo courtesy Steve Mazur, RevoluSun. Option 2: Power-purchase Agreement (PPA) Nonprofits such as HOAs and AOAOs cannot directly take advantage of renewable energy system tax credits and depreciation, yet third party investors can. In this option, a third party uses federal and state incentives to drive down the purchase price of a system. They then pass those savings along to the condo association by selling the PV power for less than the utility rate. This lower rate can be fixed for the entirety of the contract (usually 20 years), or it can have a predetermined escalator each year (approximately 3 percent). One of the advantages of a PPA is that the system owner (the third party) is responsible for all of the system’s maintenance and insurance for the duration of the contract term, whereas under a lease the condo association takes care of maintenance and insurance costs. Timing Is Everything The federal tax credit is presumably safe at 30 percent through 2016, and the federal accelerated depreciation schedule (60 percent of the cost basis in year one) has been extended through 2013. However, Hawaii Senate Bill 623 recently failed to pass in the legislature. Left in place are the state’s temporary administrative rules on the solar energy tax credit. The rules limit the number of tax credits that homeowners may claim on multiple systems. It also places a non-refundable credit cap of $500,000 per property ($350,000 refundable) on commercial projects. None of this should deter people from going solar, however. Since most condo PV projects fall well under this cap limit, the legislative inaction actually works in favor of projects installed before the end of 2013. In fact, the best bet for any condo association is to move forward as soon as possible with a credible PV installer so that you’re in good position regardless of future legislative decisions. If trends are any indication, the cost of power in Hawaii will continue to go up. Locking in at least a portion of those electricity rates can help condo associations budget for the long-term and allow them to remain financially viable for many years down the road. John Cheever is a renewable energy developer with RevoluSun, where he has overseen the development and installation of nearly two megawatts of renewable energy in Hawaii. Cheever is a member of the Urban Land Institute and the Pacific Century Fellows. www.buildingmanagementhawaii.com http://www.buildingmanagementhawaii.com

Table of Contents for the Digital Edition of Building Management Hawaii June/July 2013

Special Section: BIA Renaissance Awards
Solar & More - Made In The Shade
Solar Options For Condos
Beyond PV…The Power Of The Negawatts
Solar On The Highrise
On The Farm With PV
The Reality Of Exploring Solar
Steep-Slope Solar
Concrete & Asphalt - Fresh Surfaces for Work & Play
Pavement Maintenance 101
Asphalt Alternatives
Rocky Road
Pavement Preservation
Painting Top 5 Painting Tips
Painting & Exterior Finishes
Lead & Rules
On Site: Renting Delinquent Units

Building Management Hawaii June/July 2013