A Solar Installation Spree as the Deadline for Federal Grants Approaches

Screen shot 2014 07 29 at 4.21.06 PM A Solar Installation Spree as the Deadline for Federal Grants Approaches nytimes pic A Solar Installation Spree as the Deadline for Federal Grants Approaches

Owners of commercial buildings are rushing in such numbers to meet an end-of-the-year deadline for a federal Treasury grant program for solar energy installations that inventories of some equipment have dried up, solar energy experts said.

Madeleine Robinson, chief of LPS Industries, on the factory roof with Jamie Hahn of Solis Partners, the solar installer.

Incentives for owners to install solar panels on their warehouses, or even on excess land, have been growing in recent years, with one of the most important being a federal tax credit for 30 percent of the solar project’s cost. That credit was converted to a Treasury grant program in February 2009 as part of the American Recovery and Reinvestment Act. Instead of having to wait to take the credit against taxes owed, owners receive a check within 60 days of the project’s completion.

As an example, an owner installing a typical 500-kilowatt photovoltaic system on a 100,000-square-foot rooftop at a cost of about $2.2 million would receive $660,000. Depending on how the building is used, that 500-kilowatt system could generate all the building’s power or, for high-demand uses like data centers or refrigeration, as little as 2 percent.

According to a September study by the U.S. Partnership for Renewable Energy Finance, a group of renewable energy financiers, investment in solar systems nationwide doubled from 2008 to 2010 under the Treasury grant program, going from $3.4 billion to an estimated $6.7 billion by the end of 2010. By Oct. 26, 1,118 solar energy systems had been installed under the grant program, according to the Solar Energy Industries Association, a trade group.

But the federal grant program will expire on Dec. 31. If Congress does not renew it, it will revert to an investment tax credit valid through the end of 2016. Without an extension of the Treasury grant program, industry groups say they expect investment in solar systems to shrink drastically.

Few commercial owners could come up with the capital expenditure necessary without the help of the 30 percent Treasury grant, said Jamie Hahn, a managing director at Solis Partners, a solar developer based in Manasquan, N.J. He said that after Congress established the grant program, the market for solar installations on commercial buildings changed from one in which the installations were mostly owned by investors, who then sold power back to building owners, to one where the business owners themselves did the installations.

“Prior to the cash grant coming out, about 70 percent of large-scale commercial solar projects were owned by third-party investors,” he said. “The cash grant made it feasible for actual building owners and companies themselves to own the solar assets.”

Whoever owns the system gets the most benefit, Mr. Hahn said. With federal, state and local subsidies, he said, the investment in a solar system can be extremely attractive. It can even generate income for the business, while locking in or providing free electricity for the 25 years the systems are typically under warranty.

Owners of commercial buildings are lining up to install their solar systems before the grant program expires. Donnelly Mechanical Corporation, a mechanical contractor based in Queens, plans to install a 50-kilowatt system on a 25,000-square-foot building with warehouse and office space, said Robert Ragozine, the company’s president. That will reduce the company’s electricity bill by about 15 percent.

Mr. Ragozine said he expected to meet the Dec. 31 deadline. To qualify for the grant, either a large enough part of the construction of the solar installation must be completed or 5 percent of the cost must be incurred. But if Donnelly does not make the deadline, Mr. Ragozine said, it will continue with the project and receive the tax credit.

Donnelly’s project is intended to maximize incentives. The solar installation is small for the size of the rooftop, but anything larger would not qualify for a solar rebate program, worth $1.75 a watt, offered by the New York State Energy Research and Development Authority.

“We could fit more on the roof, but we’ll max it out at 50 kilowatts,” said Mr. Ragozine, whose solar installation will cost about $275,000. “That’s a maximum rebate of $87,500.”

Other perks include a federal tax benefit for depreciating the system over five years instead of 39, he said. Also, New York City allows building owners to deduct 8.75 percent of the solar installation costs over a four-year period from their property taxes, with a maximum of $62,500 in taxes offset, Mr. Ragozine said.

“With the solar installation that we’re looking at, we would probably be able to save $11,000 to $12,000 a year off our electric bill,” he said. “And with the incentives, we’re looking at a payback about Year 4.”

Incentives have greatly shortened the period of time that owners must wait to break even on their investment. LPS Industries, a packaging maker in Moonachie, N.J., worked with Solis Partners to install a system on its 165,000-square-foot rooftop last June at a cost of $5.7 million. Adding in federal and state incentives, LPS anticipates payback in about five years, said Madeleine Robinson, the company’s chief executive.

Ms. Robinson said she had been so pleased with the solar installation — for which she received her 30 percent Treasury grant about 20 days after installation — that she would like to install a solar farm on adjacent vacant land owned by LPS. The 704-kilowatt system on the roof at LPS now provides almost 25 percent of the company’s energy, saving about $10,000 to $20,000 monthly, she said.

Also, New Jersey, instead of offering rebates, has a thriving market for Solar Renewable Energy Certificates, which enable owners of solar installations to sell their clean energy credits to utilities looking to avoid penalties enacted by the state for generators of “dirtier” energy. Companies can sell these credits for 15 years after the system’s installation.

Other building owners have been scrambling to qualify for the Treasury grant. As a result, crucial equipment, like solar panels and inverters, are on back order, taking as long as eight to 12 weeks to arrive, Mr. Hahn said.

But owners still have time to sign a contract and start a paper trail demonstrating that they have paid for 5 percent of the project by Dec. 31, he said.

Owners who are considering a new roof could qualify for the credit by installing a system made by Solyndra, a solar manufacturer in Fremont, Calif., that uses photovoltaic cylinders that capture light not only from the sun, but also from a reflective white roof. Solyndra has determined that the re-roofing, if done before Dec. 31, can qualify for the Treasury grant — and the 30 percent grant will include the cost of re-roofing.

Mr. Hahn said the Solyndra system was optimal for owners facing weight constraints because it is light, and for those facing heavy winds because as air flows between the cylinders.

“You might get a roof laid in two weeks,” Mr. Hahn said, “and as long as the roof makes up over 5 percent of the project, that would qualify you for the Treasury grant.”

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