By Boyd R. Zoccola
Published in the September 2011 issue of Today’s Facility Manager
Of all the alternative energy sources available, solar has recently emerged as the one generating the most attention within the commercial real estate industry, even if it is not yet the one generating the most energy. Currently, solar provides less than 1% of U.S. energy needs, but that’s changing. A report prepared by research firm Clean Edge and the non-profit Co-op America shows that solar has grown at an average pace of 40% per year over the last eight years and could contribute up to 10% of U.S. needs by 2025.
Solar In Public And Private Sector
Meanwhile, major companies in the U.S. are embracing solar like never before. IKEA recently installed a 302-kW solar energy system at its Palo Alto, CA store. Comprised of approximately 1,344 panels that will produce approximately 427,900 kWh annually, the system could reduce the equivalent of 326 tons of carbon dioxide (CO2).
Organizations in New Jersey (see the accompanying sidebar, “Sun Shines On The Garden State”), thanks to aggressive financing assistance, tax incentives, real estate and development assistance, and access to small business services that support solar renewable projects, now hold the top spot in the nation for having installed more solar panels per capita than any other state. And major solar energy plants are planned or under construction in several other states as well.
Sun Shines On The Garden State
New Jersey has made solar power a priority, but the state’s Economic Development Authority (EDA) isn’t stopping there. In July 2011, the state launched a new loan/grant program to support green technologies, the Edison Innovation Green Growth Fund (EIGGF), funded by the New Jersey Board of Public Utilities (BPU).
The EIGGF program offers assistance in the form of loans with a performance grant component of up to $1 million to New Jersey class I renewable or energy efficiency clean technology companies that have begun generating commercial revenues and are seeking matching funding to support the growth of their clean technology businesses.
With the positive performance of the company, up to 50% of the funding may be converted to a performance grant. Interest rates will be fixed for a five year term, based on risk and location.
New Jersey’s Clean Energy Solutions Energy Efficiency Revolving Loan Fund (EE RLF) will provide supplemental financing to entities that have already received an approved Energy Reduction Plan under the New Jersey Clean Energy Program’s Pay for Performance initiative from the New Jersey Board of Public Utilities (BPU).
For additional information on the EIGGF program, visit www.njeda.com/EIGGF. To learn more about opportunities for business growth throughout New Jersey, visit the state’s business portal at www.NewJerseyBusiness.gov.
Incentives Elevate Solar Power
David Gralnik, vice president, renewable energy, for Jones Lang LaSalle, says that awareness of—and interest in—solar technologies has become much more acute in the last year. Understanding its application from the physical and financial perspective is what’s required for the next round of application.
“Solar is driven by incentives—not by sunlight,” Gralnik says, “and the U.S. government alone is not adequate enough—you need state incentives to push you over the top.”
Peter Belisle, Jones Lang LaSalle president of energy and sustainability services in the Americas region, noted too that “Federal incentives for 2011, including 100% first year depreciation and a 30% grant make solar energy a viable strategy for large, flat roof buildings and vacant land parcels. Incentives in several states sweeten the deal considerably.” Furthermore, he pointed out, improvements in technology and market maturation have caused the price of generating a kilowatt-hour of solar power to fall by more than 40% in recent years.
States With SREC
Identifying the states with the strongest incentive plans comes down to identifying those with “SREC” programs, or Solar Renewable Energy Certificates. This market driven system allows solar system owners to recoup their investment by selling SRECs which are produced each time one megawatt-hour (MWh) is produced by the system.
At first blush, it might seem reasonable to assume that the sunniest states are the most likely to have the best incentives, but that’s not necessarily true. While solar may work well in states like California, Arizona, and Nevada, it’s states in more temperate climates that currently offer the most incentives: New Jersey was the first state to develop an SREC program in 2004, and the concept has since expanded to other states including Delaware, Maryland, Massachusetts, North Carolina, Ohio, and Pennsylvania.
Next, it’s a matter of determining whether solar energy is viable for a property, and if so, what deal structure (ownership, third party lease, etc.) works best. The physical structure and design of a building are critical, particularly when considering the age and size of the roof.
“A roof that’s seven years old or younger is a good rule of thumb,” says Gralnik, “but even then, it becomes a question of whether the roof can maintain the weight. The more efficient crystalline system (15% to 18% efficient) can weigh as much as five pounds per square foot, while a thin film system can weigh as little as one pound per square foot (but is 6% to 9% efficient).
“Next, you need to consider the size of the roof. Generally, 200,000 square feet of roof surface can produce one megawatt of solar energy,” Gralnik explains. “In situations where the roof doesn’t make up the majority of surface space available, fms can also consider carports or adjacent land. A multi-story shopping center, for example, can have a parking lot with a far bigger footprint; elevated solar panels (which can also double as sunshields) could make solar a viable option for a building that otherwise might not be a good candidate.”
A variety of options also needs to be considered when it comes to deciding how to obtain the solar energy—as owner or lessor. The most typical application is a power purchase agreement, whereby a third party developer puts a system on a roof and sells the energy to the host at or below market. Alternatively, the roof can be rented from the owner of the building, and the power that’s generated is placed back on the grid through a direct agreement with the utility company.
In either instance, the return on investment is typically in the seven to 10 year range. But, in some markets, especially those with SREC programs, the payback can be at or below five years, making it far more viable and attractive.
The Power Of Positive Publicity
“If you look solely at the economics of solar,” said Gralnik, “it doesn’t always work. There are physical limitations, and it’s difficult to squeeze value out of the systems in a short time period. But if you look at the long-term hedge of power prices going forward—which are likely to continue to be incredibly volatile—then the fixed rate you can gain from solar is an enormously powerful budgeting tool to have in hand.”
Brad A. Molotsky, EVP and general counsel, LEED-Green Associate, for Brandywine Realty Trust, and director of Brandywine Environments recognizes it is possible to do things in a better, more efficient way.
“Solar, wind, geothermal, and other renewables are not the only means of providing energy, but due to their abundance, we need to be paying attention to them. Everyone will benefit when these nascent technologies can support themselves without incentives in the long term,” he says.
“While we’re not about to run out of coal or fossil fuels today,” Molotsky adds, “every decision we make can’t be for the moment right in front of us; we also need to make decisions for the long-term, appropriate, cost-benefit supported decisions for our kids and grandkids. Solar (and wind and geothermal) and other renewables are very real options; we need to be objective but should not let the noise surrounding how to go about making these technologies economically viable drown out the value of using the technology.”
Zoccola is chair and chief-elected officer of the Building Owners and Managers Association (BOMA) International and executive vice president of Hokanson Companies, Inc.