Solar Can Work on MF Properties Anywhere If Owner Can Take Advantage of 9% LIHTC
- May 07, 2009
Richard Raeke (pictured)is the director of project finance at Borrego Solar Systems Inc., a designer and installer of commercial and public sector grid-tied photovoltaic solar electric systems. Raeke is responsible for helping customers negotiate their options for financing solar projects, including Power Purchase Agreements and Captive Energy Companies. He talks to MHN Online News Editor Anuradha Kher about the Multifamily Affordable Solar Housing program in California, why solar energy can be harnessed anywhere in the country regardless of the amount of sunlight a region receives, and cost savings multifamily properties can achieve by implementing solar power. (Pictured below: Borrego Solar installed a 687 kW solar electric system at the 398-unit Villa Nueva Apartments in San Ysidro, Calif. The system offsets more than 70 percent of the facility’s electricity needs and should pay for itself within two years.)MHN: When was Borrego founded? Raeke: Dr. James Rickard, an astrophysicist in Borrego Springs, Calif., first founded Borrego Solar Systems in 1980. The company’s first project was the design and construction of Dr. Rickard’s all-solar home, and Borrego Solar’s primary business was installing off-grid solar power systems and solar thermal systems. The company was later transformed in 1999 by the emerging grid-tied solar market in California. Since that time, Borrego Solar has specialized in grid-tied solar energy. MHN: How many projects has the company completed so far? Raeke: To date, Borrego Solar has designed and installed more than 1,000 photovoltaic systems for commercial, residential and government applications. Borrego sold its residential business in February 2009 to focus on the commercial and public sector industries. To date, Borrego Solar has installed about 10 megawatts (MW) of solar energy.MHN: How many of them are multifamily? Raeke: Of the 10 MW of solar energy that Borrego Solar has installed, about 3 MW has been for affordable housing. Every kilowatt (kW) covers roughly a single bedroom apartment, so the 3 MW equates to roughly 3,000 individual units. So far this year, Borrego Solar has an additional 2 MW of solar energy scheduled to be installed at affordable housing facilities.MHN: What kind of savings can solar power bring to a property? Raeke: The savings will depend on the local incentive program. In California, with the Multifamily Affordable Solar Housing (MASH) program, we are seeing rebates that pay for 40 to 60 percent of the system cost. In addition, there is the Federal Investment Tax Credit/Cash Grant, which covers 30 percent of the installed cost of the system. Between these incentives, we are seeing a price-per-kilowatt-hour that is in the low-teens, which is usually cheaper than utility power for multifamily properties in California. In areas without a local incentive program, solar may not be cost-competitive unless the property owner can take advantage of Low Income Tax Credits or a federal grant.MHN: Can solar energy be used for all applications in a home? Raeke: The solar electric system covers all loads in the home. Borrego Solar ties all of its systems into the grid, which can be thought of as a large battery. When the system is producing more electricity than the property uses and that electricity is going into the grid (like charging a battery), the building owner gets a credit from the utility company. At night, when that system is not producing electricity, the building owner will use those credits (like drawing from a battery). This concept is called net-metering. Borrego Solar tries to gauge the size of the system so that its production equals the building’s consumption over the course of the year. MHN: What other source of renewable energy is solar energy competing with? Raeke: I would say that solar doesn’t truly compete with any other renewable source. Some projects may use multiple technologies, such as geothermal, but that does not impact the viability of solar electricity. These systems can work in conjunction. Solar electricity can compete for roof space with solar thermal (i.e., solar hot water systems) but Borrego Solar has done a number of projects that make room for both technologies on the roof. There are also not many wind turbines out there because of the sitting and permitting issues associated with those systems. Wind is more common on utility-scale projects.MHN: Which states can solar energy not be harnessed in? Raeke: Solar can be harnessed in any state. It all comes down to what incentives are available. For example, Germany has the second-largest solar market in the world, surpassed only by Spain. Germany also has the equivalent amount of sunlight to Anchorage, Alaska but Germany’s incentive program is one of the strongest in the world. It is called a feed-in tariff and it pays the owners of solar electric systems for each kilowatt-hour that they produce. This is a direct payment, not a credit, as mentioned before. Solar can work on multifamily properties anywhere in the country, regardless of a local incentive, if the owner can take advantage of the nine-percent Low Income Housing Tax Credit and the solar Investment Tax Credit. The American Recovery and Reinvestment Act has programs for solar on Section 8, 202 and 811 properties. There are also funds for public housing authorities, which can be used for solar projects. With these, Borrego Solar expects solar to work well economically in any region. MHN: How is MASH helping developers overcome the cost of implementation of solar power?Raeke: Because the MASH rebate is so generous, developers have options that are cheaper than utility power. The for-profit developers can receive the federal cash grant for 30 percent of the cost of the system as well as the MASH rebate. Depending on the installed cost, this means that as much as 85 percent of the system will be paid for within 60 days of the system being turned on. The non-profit developers have two options, as they cannot qualify for the federal incentive. The first option is that they can sign a power purchase agreement (PPA) with a for-profit, third-party owner that can take the federal incentive. This price-per-kilowatt-hour should be cheaper than utility rates given the incentives going to the third-party. Non-profits can also create their own for-profit subsidiary. This is called a Captive Energy Company and it can act as the PPA provider. In essence, you have one arm of the company, the Captive Energy Company, selling power to the individual properties. Again, given the MASH rebate level, the price of electricity from the solar electric system should be well under the utility cost of power.