Many multifamily property owners are making a sustainability statement through green energy contracts. And all they are doing is asking.
Ask where electricity comes from and the obvious answers are natural gas and coal generation. While they are still dominant sources for supplying the electric grid, renewable energy is catching up. Solar- and wind-generated power is making more fiscal sense for apartment operators who are utility-cost conscious and/or have targets to reduce their conventional energy consumption
Green energy contracts, or renewable power purchase agreements, are available but sometimes get overlooked because of perceived high installation costs that drag out financial returns. Truth is, a property can operate on renewable energy with minimal or no investment and reap the benefits of an environmentally friendly power option.
The value of renewable energy has increased such that Fannie Mae and Freddie Mac are offering to finance incentives at multifamily properties through green loans.
“You just have to ask your energy provider or a solar contractor if they offer any type of renewable power purchase agreement,” says Mary Nitschke, RealPage Vice President of Sustainability.
Solar is the darling of renewable energy
As business sectors have argued for their fair share of economic relief, advocates say renewable energy should be an economic and environmental priority. Wind, solar and other renewables are more environmentally efficient energy sources and represent an industry that is expected to reach $2.1 trillion by 2025.
Solar, wind, hydropower and others account for nearly 20 percent of net domestic electrical generation in the U.S.
The darling of renewable energy is solar, the process of taking the earth’s natural light and converting it to clean energy. Through investment tax credits, the renewable energy source has grown significantly.
Last year, solar accounted for 40 percent of all new electric generating capacity added to the grid – more than any other energy source and the highest share in the industry’s history, according to the Washington, D.C.,-based trade group, Solar Energy Industries Association. Generating electricity from the sun reached 77.7 gigawatts of capacity, which is enough to power 14.5 million American homes. Growth projections going into 2020 included 20 more gigawatts to be added.
Before the financial crisis began, SEIA was well on its way to creating a framework for solar that will achieve 20 percent of U.S. electricity generation by 2030.
The U.S. Department of Energy has a broad solar energy education platform that includes the Solar Decathlon, a collegiate competition that each year showcases new technologies and innovations. The competition, initiated in 2002, inspires student teams to design and build highly efficient buildings powered by renewables.
Students from the University of Arizona, who teamed to win the Mixed-Use Multifamily Division, will discuss their ideas of community, affordability and sustainability in the RealPage webcast, “Solar Innovations in Multifamily,” on July 28.
Stage is set for the future of solar
While COVID-19 has had a significant negative impact on the industry, the pillars remain for a renewable energy sector that has made great engineering strides in recent years. Like everything else, more is packed into less through technology.
Solar technologies used to heat and cool water and space for residential, commercial and industrial applications have improved vastly over the past 20 years. Demand and better technology has drastically reduced the cost for photovoltaic cells, structures that convert light energy into electricity.
Panels are smaller and are more efficient. SEIA says a typical return on investment for a complete solar energy system is 3-6 years.
“The cost for solar has come down substantially and technology has improved exponentially,” Nitschke said. “It’s like other green technology when it emerged. The costs have come down and the payback is better.”
Also, solar energy isn’t only for the sunshine states. California, Arizona, Texas and Florida rank in the top five in solar capacity, but so does North Carolina. New Jersey and New York round out the top 10. In the past six years, New York City, Dallas and Seattle have quadrupled their photovoltaic capacity.
Renewable energy makes more sense now
Nitschke said a big reason why multifamily properties should consider renewable energy is that it makes more sense to convert now than ever before.
For one, reduced financing costs through green loans are more readily available and utility company rebates are reducing installation costs. Also, energy brokers can set up multifamily properties with renewable energy sources without having to make significant infrastructure investment.
Nitschke said making a commitment to renewable energy doesn’t mean that properties have to drastically reduce usage to qualify for green financing.
“If you’ve made a commitment to go green, you don’t have to necessarily change your load. You change your usage type to a renewable for that load,” she said. “You may not have to reduce common area consumption, just add a renewable source of energy to the property. Freddie and Fannie typically allow renewable energy to be an offset so it fulfills the requirement for a green loan.”
The investment can make a big statement for a portfolio’s environmental social governance policy (ESG), which is attractive to investors.
“If you are working with an investment group, you may have a company goal to reduce greenhouse gas by a certain amount within a certain time,” Nitschke said.
Energy procurement specialists can make a difference
Multifamily housing operators should consider enlisting the expertise of a seasoned energy procurement specialist because renewable energy payback can be complex. Rates can be complex and rebates must be factored in to arrive at a justifiable return on investment.
Another way a third-party energy procurement specialist can help is helping a property set up purchase agreements that don’t require infrastructure investment. Solar providers install the equipment and users buy the energy generated. Wind energy doesn’t require any equipment to be installed by either party; the electricity that arrives through existing power lines is simply provided by a wind farm.
Power purchase agreements don’t qualify for a green loan but are efficient ways that a property can go green on the grid without a significant investment.
Flipping on the switch for solar energy
Nitschke says multifamily operators need to work past the myth that solar and other renewable energies are on specific to regions. Energy generated from the sources is available most anywhere.
Solar energy can be produced as long as there is light, and not just when the temperature outside is warm and sunny. The same goes for wind generation − a property doesn’t have to be based in Fargo, N.D., or Amarillo, Texas, to reap the benefits of wind power.
“There’s a big misconception about solar energy,” Nitschke said. “Everybody thinks solar is heat. It just needs light. Solar panels are actually more efficient at lower temperatures.”
Cold and dreary days in Seattle actually fuel solar production. Solar electric panels generate more power when they are cooler. Also, diffused light can still be collected and converted to electricity.
“If you can see without flipping a light switch on, you can use solar,” Nitschke said.
For more on how to go green on the electric grid, visit RealPage’s Sustainability Suite.
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