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Reframing Solar Power
by Leesa Lee
For San Francisco multiunit building owners looking to improve their bottom line, a bright ray of sunshine has appeared on the horizon: a newly revised solar rebate package that makes system installations more affordable.
Solar energy has long been a progressive, green-friendly way to lower costs, attract and retain tenants, and increase a property’s net worth. But it’s also
been expensive—until now. With the new rebate incentive package, a building owner’s out-of-pocket expense may be less than 15% of the total cost of
the system.
Incentives are provided by city, state and federal government programs. At the city level, the San Francisco Solar Program offers per-meter rebates based on system cost. At the state level, the California Solar Initiative provides rebates based on a system’s expected performance. At the federal level, tax credits, tax deductions and depreciation allowances have been increased and extended. Each of these incentives can save building owners thousands of dollars on solar installation projects.
The San Francisco Solar Program
“San Francisco offers the most attractive solar rebate incentives in California,” says Mark Morey, a 7-unit residential building owner in the Mission District. The city’s unique per-meter rebate is what makes the program so compelling. Elsewhere in the state, each residential solar energy system installed is eligible for a rebate between $3,000 and $6,000. In San Francisco, however, building owners can now claim this rebate for each meter served by the system. For example, the seven units in Morey’s building are served by individual meters. All seven meters are powered by one solar energy system. So Morey’s rebate was $6,000 per unit, or a total of $42,000.
The per-meter rebate amount is offered on a four-tiered pay scale. The basic rebate is $3,000. Systems installed by San Francisco-based installation companies qualify for a $4,000 rebate. Properties located in the 94107 and 94124 zip codes are eligible for the Environmental Justice District incentive of $5,000. The highest rebate is for systems installed by companies employing graduates from the city’s GoSolarSF workforce development program. These installations are eligible for a $6,000 rebate per meter.
The rebates apply to solar equipment known as photovoltaic solar energy systems, or PVs. A PV consists of solar panels installed on a building’s rooftop, and an inverter or multiple inverters that convert the solar energy into electrical power. To qualify for rebates, the system must be rated at 1 kilowatt (kW) or larger. It must also meet the California Solar Initiative requirements.
The California Solar Initiative
The California Solar Initiative provides two rebate options with different pay-out plans for building owners. The Expected Performance-Based Buy-Down option provides a one-time rebate of up to 30% of the total system cost. (Most building owners choose the EPBB option.) The actual percentage is determined by the system’s expected performance. This value is based on the equipment’s technical ratings and the installation site’s positioning and location factors. These factors include the orientation and tilt of the roof, and the amount of shading it receives. A qualified solar installation professional can provide you with an estimate of your rebate after performing a site evaluation and an energy audit. The payment is made in a lump sum after the fully installed system is connected to the power grid.
The second state-offered option is the Performance-Based Incentive (PBI) rebate. The PBI option pays property owners on a monthly basis for a period of five years. The rebate amount is based on the system’s per kilowatt-hour performance.
Building owners can choose to receive the PBI option instead of the EPBB option. However, solar energy systems over 50kW may only select the PBI option. In 2010, the 50kW limit will be decreased to 30kW.
All PG&E electric customers, including residential and commercial building owners, are eligible to apply for CSI incentives. For residential properties, building owners must have a permit of occupancy from the local building department before submitting the required PG&E Reservation Request Application.
Tax Credits, Deductions and Depreciation
Last October, the U.S. Congress gave a green thumb’s up to solar energy by passing the Emergency Economic Stabilization Act. This legislation includes the Solar Investment Tax Credit. Several provisions of the ITC legislation directly benefit multiunit building owners.
The federal government previously offered a 30% federal investment tax credit on the cost of solar energy systems. This tax credit was due to expire in December 2008. But ITC provisions have extended the credit for eight years, through December 2016.
The 30% tax credit was previously subject to a maximum of $2,000. For residential properties placed in service as of January 2009, the new legislation eliminates this cap. Building owners can now claim the full value of the credit, regardless of the dollar amount.
The tax credit can now be applied against Alternative Minimum Tax liability. For the 2008 tax year, the credit maximum is $2,000. For the 2009 tax year and beyond, building owners can apply the full 30% ITC value against AMT liability.
For a residential PV solar energy system to qualify for the credit under the new ITC provisions, the system must provide electricity for the building. It must also meet all applicable fire and electrical code requirements. Employing a certified solar installation company is the best way to ensure that these requirements are met.
The Energy-Efficient Buildings deduction allows commercial building owners to take a tax deduction for energy-efficient equipment. The deductible amount is up to $1.80 per sq. ft. of building floor area. It applies to equipment installed in commercial buildings for the purpose of reducing power consumption by 50%. Solar equipment is eligible for this deduction. The new legislation extends this deduction for five more years, through December 2013.
In addition to these new credits, building owners can still benefit from the five-year Modified Accelerated Cost Recovery System–General Depreciation System allowance. This depreciation credit for solar equipment is based on the remaining cost of the system after all city and state rebate amounts have been deducted.
Finally, condominium management associations and corporate-owned cooperative apartment buildings are also eligible for solar tax credits. Each member of these organizations can claim a residential solar tax credit, based on his or her share of the cost of a solar energy system installation.
Affordable solar energy is no longer an elusive wish-list item for San Francisco multiunit building owners. Nor is it unattainable for cost-conscious and eco-friendly tenants who, as renters, have had no choice in how their energy is generated. Thanks to aggressive new legislation at the city, state and federal levels, solar energy systems can now be installed at a fraction of the original cost. As building owners take advantage of these generous installation rebate incentives, they can attract tenants by offering a green lifestyle and lower monthly electric bills.
An important partner in the transition to solar energy is a reputable, certified installation firm. These firms bring expertise to every phase of the project, from site evaluation and planning to installation and rebate application assistance. “They’re turn-key service providers,” explains apartment owner Morey. “They do it all.”
A typical system lasts up to 25 years and requires only minimal maintenance, usually included in the price of the installation. Installing solar energy is not only an attractive choice today but a cost-effective and environmentally sound investment in the future. “Installing solar for electricity has always made sense, but it just hasn’t been practical,” Morey says. “Now with the new rebate plan, it makes total sense. For the building owner, the tenants and the environment, it’s win-win-win all around.”
The opinions expressed in this article are those of the author, and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. The information contained in this article is general in nature. Leesa Lee is the director of marketing at Enphase Energy, Inc. For more information on installing
solar systems for multitenant buildings, please visit www.SolarForApartments.com. Copyright © 2009 by Black Point Press. All rights reserved.