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Money Talks Incentives—and Savings—Spur Funding for Green Projects

 There are many reasons for “going green” in a residential community, starting with the goal of shrinking the carbon  footprint and decreasing dependence on fossil fuels. But the real reason a  condominium complex or HOA seeks sustainable energy solutions is to save money.  

 Major projects such as solar panels, geothermal systems and wind turbines can  take advantage of the best deal of all—free fuel. To date, however, the single biggest barrier to the installation of  sustainable energy sources has always been the high upfront cost. Experts admit  that for solar, photovoltaic [PV] projects, approximately 90 percent of the  lifetime cost involves payments upfront, for panels and installation.  

 A community association that wants to cut its common-area energy costs by “going green” has a number of choices. Businesses and energy companies are evolving to meet  growing demands for sustainable energy and are finding ways to bring the  upfront cost down. There are solar installation firms that will install and  lease the PV panels, sometimes for a low [or no] down payment, so that  customers realize savings on electricity from day one. These businesses offer  various buy-back and energy credits in conjunction with utility companies, and  the offers differ from state to state.  

 Associations may also focus on tweaking or upgrading their property’s existing infrastructure rather than diving into a major, capital investment  with long-term debt. As an added benefit, upgrades that reduce energy use are  eligible for incentives and rebates from state and federal governments.  

 Look to Self-financing

 Some communities, though, bypass the funding and dig into their own pockets when  they decide to go down the green path. The largest solar water heating project  to date in California is scheduled to be completed this summer at a 320-unit  condominium community in San Jose called The Tradewinds. The rooftop system is  being installed by Free Hot Water, a San Jose solar distributor and engineering  firm.  

 As Tradewinds’ community association manager Craig Gorewitz explains, “Our gas bill, for hot water, was a big chunk of our budget. Our complex is a  little unique, in that we have a [common property] master boiler system that  supplies the hot water for most of the units.”  

 “About two years ago,” he continues, “we researched a project for installing solar water-heating thermal panels. We  presented the proposal to the membership… things move slowly in a condo community, and this spring the construction  finally started. To pay for the project, with members’ approval, we are borrowing from our own reserve account. We figure the system  will pay for itself in less than three years. Even if it took five years, it’s still a great deal.”  

 Cashing In with Incentives

 At the federal level, a program is currently underway in which homeowners are  eligible for tax credits for qualified solar water heating and PV systems.  Solar water heating systems like the one at Tradewinds involve outdoor piping—usually rooftop—to produce hot water, while photovoltaic systems produce electricity and may  include solar-powered attic fans. The credits are available for systems “placed in service” at any dwelling unit, not necessarily the primary residence, between January 1,  2006 and December 31, 2016.  

 The Solar Energy Industries Association (SEIA), a Washington-based advocacy  group, notes that tax credits go to businesses that install solar equipment for  their use, and to individuals who install qualifying systems on homes they use  as a residence (unlike other consumer incentives, the dwelling does not have to  be the taxpayer's primary residence; second homes are eligible, although rental  properties are not).  

 In the case of cooperative apartment buildings owned by a corporation, SEIA  states that "if the corporation spends money on installing qualified solar  property, each shareholder is allowed to claim residential solar tax credits on  his or her share of the spending."  

 In the case of condominiums, SEIA reports that when the condominium management  association "spends money on installing qualified solar property, each member  of the association can claim the residential solar tax credits on his or her  share of that spending," so long as the management association qualifies as a  homeowners' association under the law, and the majority of the units in the  condominium are used as dwelling units.  

 More detailed information regarding this legislation is available online at  www.seia.org by downloading the “Guide to Federal Tax Incentives for Solar Energy.”  

 Looking at what utilities can offer, National Grid—an energy supply company that operates in several New England states—provides an example. For small-business customers with an average demand use of  300 kilowatts or less per month, it can help reduce energy costs by installing  energy efficient equipment.  

 National Grid provides a free energy audit and report of recommended energy  efficiency improvements. It will pay 70 percent of the installation cost of  energy-efficient equipment and finance the remaining 30 percent, interest free,  for up to 24 months. Cost-cutting, energy- efficient equipment available  through this program includes lighting upgrades, energy efficient timeclocks,  photo cells for outdoor lighting, occupancy sensors and programmable  thermostats.  

 States and Utilities Get on Board

 Starting with Massachusetts as an example, the Renewable Energy Generation  division of the Massachusetts Clean Energy Center is responsible for supporting  renewable energy projects throughout the commonwealth. Working in partnership  with the state’s Executive Office of Energy and Environmental Affairs, MassCEC has supported  more than 2,000 projects in more than 275 communities with funding from the  MassCEC’s Renewable Energy Trust fund, which was created through the Electric Utility  Restructuring Act of 1997, and is funded by an electric utility surcharge.  

 MassCEC has awarded grants to hundreds of businesses, towns, and organizations  for feasibility and/or design and construction of solar panels, wind turbines,  biomass systems, hydroelectric systems, and other clean energy projects.  

 In Connecticut, a similar program called the Energy Efficiency Fund will cover a  portion of the costs of energy-saving improvements, reports David Mann,  principal in Green Tek Consulting of Westport.  

 He says that condo and HOA communities have a real advantage for receiving  energy subsidies. “They can receive subsidies and get higher rebates, as a community, because  energy programs are customized according to size [of the community] and measure  of the energy-savings impact that the program would have. Per resident, a condo  association could get multiple the cost savings of a single family home.”  

 As an example, Mann cites an association in Norwalk, Connecticut. “This community had 222 units in 27 buildings plus common area structures, such  as a pool and clubhouse. They wanted to go green, and with lots of room for  positive improvement, their project could show a high impact [on energy  savings]. They got support from New England Conservation Services and the  Connecticut Energy Efficiency Fund (CEEF).”  

 Mann explains that utility companies in Connecticut are mandated by the state to  contribute to these funds with a percentage of their receipts. “Conservation and load management are the responsibility… of these quasi-public corporations,” he notes.  

 Experts Offer Direction

 For an association that wants to pursue energy savings, Mann outlines the  process his firm would take: “We evaluate the [residential] complex to identify cost-effective weatherization  solutions, secure the CEEF funding and implement a number of solutions.”  

 Starting with community-wide education sessions and condo units’ weatherization, improvements may include air sealing to eliminate leaks/drafts,  lighting replacement (including subsidized LEDs), programmable thermostats,  subsidized HVAC equipment upgrades (by rebate), subsidized timers, sensors, and  efficient fans. In common areas, Green Tek might survey and analyze the complex’s existing building envelopes, and a deep energy retrofit of common facilities  could cover high performance insulation, HVAC upgrades, weatherization,  efficient interior and area lighting, and analysis for future implementation of  renewable energy.  

 Mann cites the example of a complex in Connecticut that implemented this  comprehensive set of services. It became a competitive advantage as a real  estate marketing tool—in one board member’s appraisal for refinancing, the appraiser noted the program in his report.  

 As another example, John Greeno, the president and owner of New England  Conservation Services, says that his company “provides an analysis of conservation and energy-saving systems for residential  customers. In Connecticut, the program is geared to the electric and [natural]  gas utilities.” He notes that each New England state has different criteria for their  energy-saving programs; for instance, “Massachusetts is ‘fuel blind’ so home heating oil is included.”  

 He explains how his firm would organize a program that earns energy incentives  for condo or HOA communities. “We would start by scoping out the property with a walk-through, and maybe do  some work in individual units as an example.” The analysis may suggest improvements in any number of areas, such as  insulation, sealing and weatherproofing, heat pumps, more efficient boilers or  air conditioning, fans or exterior lighting.  

 “Then,” continues Greeno, “an agreement is drawn up between the association and the contractor who provides  the conservation services. A representative from the utility company reviews  the proposed measures, to determine cost effectiveness and figure out the  incentives.  

 “Funding is paid in the form of incentives that ‘buy down’ the cost [to the association] of these improvements… this buy down could cover 100 percent of the project in some cases.” He adds that when homeowners participate, for improvements in their own units,  a cost-sharing system may be applied that is administered by the association.  

 Starts with the Audit

 Nik Clark, director of client services at Reserve Advisors, Inc. in Hartford,  Connecticut, believes that associations need to “figure out their reserves… Where do the reserve funds fit in with any ‘green’ initiative? Upgrades… from LED lighting to solar panels, need large capital investments, so figure  out the community’s reserve fund first.  

 “Then,” he continues, “have an energy audit—this is something many communities have not done yet. I would say, let’s troubleshoot you property first and see what we can make better, then figure  out return-on-investment. Any ROI can vary greatly” because of trends and fuel price fluctuations. Clark points out that oil, gas or other fuels might drop in price after a  community has spent money changing over to a system that promises eventual  savings. “You might get stuck paying off a huge investment… on what might [eventually] be a fad,” he warns. “How do you know what is legitimate?”  

 If an association decides on investing in a system with proven cost savings and  ROI, then “figure out how to fit this investment into your reserve plan,” Clark recommends.   

 Marie Auger is a Massachusetts-based freelance writer and a frequent contributor  to New England Condominium.  

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