WSG February 9, 2009

Catching Some Rays
Yulia Chernova

Condos and apartment buildings have proved resistant to solar power. That's starting to change.

The benefits of solar power are starting to spread beyond the single-family home.

For legal and practical reasons, installations of solar power have largely bypassed buildings with multiple residential units. Laws in most states, for example, require each solar-power system to have only one meter.

Such laws, devised in large part to prevent the rise of rival power suppliers, also prevent different users in the same building from sharing a system. Individuals in condo or co-op settings who want their own solar, meanwhile, face other obstacles such as limited roof space and the hassle of getting approval from other residents or boards.

In recent years, however, surging interest in solar power has led legislators and utilities to revise some of these laws and to create innovative utility programs that encourage using solar power in multifamily dwellings.

It only makes sense. Utilities can benefit because solar power can reduce heavy electricity loads and help prevent outages. There's also a question of equity: In many places, apartment and condo dwellers pay higher utility bills to help cover the cost of solar-rebate programs, even when they can't take advantage of those programs themselves.

Solar has long been thought of as an elitist resource, says Shaun Chapman, East Coast campaigns director for Vote Solar Initiative, a San Francisco-based nonprofit promoting solar legislation in the U.S. The challenge now, Mr. Chapman says, is, "How do we get it to everyone?"

The California Public Utilities Commission has taken a step in that direction with a new ruling, set to take effect next month, that will make it easier for affordable-housing properties to install solar power in multifamily buildings. As a system produces power, its electricity feeds into the larger grid. The utility company measures that power and awards credit to the electricity bills of each unit in the building. A tenant's credit depends on the size of his or her unit. This type of arrangement is known as virtual net metering, because instead of using individual meters, the utility uses a space-based or another formula to estimate each customer's power usage.

Owners of the affordable-housing developments will pay for installation but can recover their costs by charging renters a flat monthly fee -- if the project helps reduce the tenants' utility bills. Owners will benefit, too, from lower costs for common areas, like hallways. To help pay for the installation, owners earn credits based on the size of common areas. Those savings can also help keep rents down.

Serving Many Goals

"These multifamily-tenant buildings are ideal sites for solar," says Curtis Seymour, energy adviser for the California PUC. "Opening up the market to a broader sector of customers," he adds, benefits all California residents by serving "the aggregate goals of the state, to reduce greenhouse-gas emissions and to increase renewable energy production."

Mr. Seymour says the commission has received many inquiries from owners of multifamily buildings -- not just in affordable housing. He says the commission will consider extending the program to regular multifamily housing, since renters in apartment buildings could also reap savings and credits in their individual utility bills. Similarly, landlords who install solar could recover their costs through monthly fees or small rent increases, and make their buildings more attractive to renters seeking environmentally friendly apartments and lower electricity bills.

The one-meter, one-system rule shows signs of eroding in other states as well. Some that allow net metering, however, limit tax rebates for installations to relatively small systems. Pennsylvania, for example, has a cap of 50 kilowatts -- power for about a dozen apartments -- on systems eligible for rebates.

New York State Incentives

New York state is giving condominium and co-operative owners a reduction on their state income tax if their buildings install solar power. The rebate allows 25% of a system's cost to be divided among the owners. The same tax break is granted for installing solar power in single-family buildings.

"We get several calls per week from co-ops and have five to 10 proposals outstanding," says Richard Klein, president of New York-based solar-installation company Quixotic Systems Inc.

U.S. Energy Group, a real-estate and energy-conservation company in New York, is buying a 24.85 kilowatt solar-power system to power common-area lighting and other electricity use in its six-story 120-unit co-op building in Fresh Meadows, N.Y. "I intend to do this in every building," says Gerald Pindus, chief executive of U.S. Energy Group, which owns 15 buildings with a total of about a thousand apartments in the New York metropolitan area.

The city of New York, for its part, this year began offering a property-tax abatement of 8.75% a year for four years, up to $62,500 a year, for buildings that install solar. The abatement can be applied in addition to the state tax break.

Community Power

In Massachusetts, meanwhile, the new Green Communities Act, which went into effect in July, requires utilities to allow "neighborhood net metering," which would permit residents of several housing units to band together to be co-owners of a solar-power system and use the power produced to offset their individual bills.

The same concept is being explored in other states, as well, including New Jersey, Virginia and Colorado. "The multifamily solar issue is as a subset of the larger and more important issue of community solar," says Kevin Fox, an attorney with Keyes & Fox LLP, a Seattle-based law firm that specializes in distributed-power-generation law. The biggest challenge in getting people to use solar is "the high upfront cost and the long-term commitment," Mr. Fox says. Partaking in community solar can lower that long-term commitment threshold, he says.

A community effort in Sacramento, Calif., meanwhile, predates the utilities commission's ruling on solar for affordable housing. The Sacramento Municipal Utility District since July 2008 has encouraged use of solar power in multifamily properties by letting the residents buy some of their electricity from a central one-megawatt solar-power system. To participate, customers pay a fixed monthly fee starting at $10.75 for a 0.5-kilowatt share, based on their power usage. Then, each month, they receive a credit on their electricity bill; the credit amount is determined by how much power the solar plant has produced.

The utility says this program, which it calls SolarShares, has proved more popular than a rebate program for solar installations on roofs of single-family houses. While 90% of the one-megawatt system had received subscriptions from 574 customers, as of Dec. 19, the utility says it had subscribers for only 210 kilowatts of rooftop solar through its rebate program as of the same date, according to Rachel Huang, who manages SolarShares.

So far, participants in SolarShares have seen their utility bills rise, because the monthly fee is higher than the reduction they receive for solar energy their system produces. But Ms. Huang says this may change over time. Once you buy into SolarShares, she explains, your fee will stay steady and the same number of kilowatt-hours will be cancelled from your electricity bill. Meanwhile, the value of each kilowatt-hour cancelled will rise because rates will have risen. According to Ms. Huang, customers eventually may wind up making a profit by participating in the program.

The Sacramento utility devised the program in such a way that subscription fees are lower for those who use less energy, reversing one of the typical benefits of solar, which is that users see a quicker return on their initial investment the more energy they use. SolarShares charges higher fees to the bigger users to cover the costs of transmitting the power to the building and other costs of running the program. When solar panels are installed directly onto a building, by contrast, the transmission costs are next to nothing.

Los Angeles is proposing to implement a similar program, which city officials hope might account for 100 MW of solar by 2020. Similar programs, on a smaller scale, are already in place in Ashland, Ore., and Ellensburg, Wash.

Write to Yuliya Chernova at yuliya

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printed February 9, 2009, page R5
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Edited by: on Monday, 09-Feb-2009 15:12:13 EST