Reducing Utility Costs w/ Solar Panels on Apartments?

Question

I am in the infancy phase of even exploring this idea, but was curious to see if any other apartment operators have looked into installing solar panels on their buildings to reduce utility expenses?

My gut says there is no way it makes sense from a straight cash flow basis. My thought was more so when factoring in tax benefits as well increased NOI and therefore value that can be captured through an already planned refinance I may be able to make sense of it financially.

The complex in consideration is made up of several 12 unit buildings. All of them get full day direct sunlight. They are asphalt shingled gable roofs. Currently, the only utilities we are responsible for are the common areas including the laundry rooms. I have already gone in and done LED upgrading. So in all our electric consumption is  relatively low. I have heard if you can produce more energy from the solar than you use it will spin the meters backward and you can receive a payment from the energy company.

Before I spend hours researching I thought I'd see if anyone else has executed, or explored the same.

This is strictly for apartment complexes where value is based on income not considering this for smaller property.

Jay Hinrichs · Answer

@Brian Burke  one of my long time business partners in Honolulu does this.. they create investments for clients and put solar on condo projects in the Islands.. it works there because cost of elec is highest in the country.. and for those living in Hawaii the tax break is pretty fabulous..

I would research the tax aspect.. I am going to do one as an investor for tax purpose before end of year pending my CPA's final approval that it will work with me being in Oregon and the project in Hawaii..

If you like I could rustle up one of their PPM's so you could take a look at how they structure these deals.. could work in what your doing...

Brian Burke · Answer

@Jered Sturm I haven't done this myself (yet) but the trend I've seen is to use solar for covered parking. You can charge for the covered parking spaces plus save on electric. You only want to install enough panels to offset your common area electric expense (or at least most of it). Do it in combination with LED lighting and I'd think you'd have a winner.

The other plus is you don't have to fool with rooftop panels when it's time to re-roof.

The cash flow isn't the point, it's the capitalized value of the additional NOI that you are really after.  The cash flow is just a bonus. Do it a year before you refinance or sell.

Account Closed · Answer

Incorrect. They can easily last 3 decades. Where did you get this info from?

"A solar panel typically lasts approximately 30 years."

http://www.solarcity.com/residential/solar-energy-...

Dante Pirouz · Answer

@Chris Fennimore Could you elaborate on why you would recommend steering clear of SolarCity?

Jered Sturm · Answer

Thank you Everyone! @Brian Burke you seem to understand exactly where my head is in this idea. Cash flow is only a very small factor in this decision.  We have a planned refinance coming in 18 months as long as the market cooperates and I'm looking at creative ideas to boost that refi.

To@Chris Fennimore  point I think my challenge will be that I have too many meters serving not enough electric demand.  If I had one meter that served all common areas for the entire complex I would only need one system. Since my complex is broken up I have separate house meters for each building's common areas only serving a fraction of the complex and would require several separate systems. I will have to see.

Attached is a very rough financial estimate on the system the solar company suggested. Since I received this I have sent them actually utility bills for them to produce a financial analysis based on actuals. I will post that once I have it for others to take a look. For now here is the rough estimate.

Jeremy Nolen · Answer

Marc,

You are reducing costs, but they way we look at it is your are owning the electricity and bringing in another revenue stream.

In addition you are taking advantage of tax credit, any utility rebates, and you should try closing on a green loan if it isn't too late in your loan process. Fannie Mae, Freddie mac, and FHA all give you a reduced interest rate, at least 10 basis points. It makes a lot of sense in the long run.

Christopher B. · Answer

Our common electric is $120 at one site ($60 each building).  The consumption is very low, 110 KWH in a month per building, but the utility charges high base charges.  It's only lighting, no heat.  With no usage, the cost would still be near $120.  I would like to cut this expensive completely.  It could help cash flow, but also add about $17K in value, assuming cap rates stay the same.  What is the approximate cost of solar, for low consumption like above?

Stanley Choung · Answer

Might want to look into your state PACE (Property-Assessed Clean Energy) program, PACE GA. You can get the state to pay for the upfront cost of the installation. The loan is paid back over time with higher property assessments. One advantage over other vendor programs is that you can sell the property and the buyer will pick up the payments vs the having the balance due.

Chris Fennimore · Answer

@Dante Pirouz This is just my opinion, but SolarCity sells people a 20 year Power Purchase agreement, saving the client some money on their bill, but over the life of the system paying an enormous amount of money for the solar system.  If you look at the numbers it is great for SC, not great for the customer.  The rely on marketing and high pressure sales to try and push people past that fact.  They've also grown so quickly there are sales people who are not always knowledgeable and under a lot of pressure to close.  In their history, they've never turned a profit and if Tesla hadn't just bailed them out, they could have been in serious trouble leaving customers in the lurch for the operations and maintenance of the system (see SunEdison for what this looks like). I would look at reputable local companies first and using leasing as a way to finance if you don't have the tax appetite.

@Jered Sturm What you are describing can make the project more expensive- multiple points of connection, additional interconnection paperwork with the utilities for each meter you are connecting to, and multiple roof installs.  I'm happy to look at a final proposal if you want to send it to me.

Eric Bilderback · Answer

My hunch would be that depending on your state those solar panels may have there costs going up with a new President/gov’t.  That being said bring your solar panels to Oregon we love them we just don’t get much sun unfortunately.

Reducing Utility Costs w/ Solar Panels on Apartments?

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