By Rob Crauderueff and Alexis Saba
Now is the time to install solar in NYC. In the midst of economic and climate uncertainty, solar development in NYC can help bolster the real estate industry and our communities. Solar projects create value for building owners, generate green jobs, support grid resiliency, and advance social equity.
Solar also provides the opportunity for property owners to generate economic value while meeting the City’s new Climate Mobilization Act requirements. And critically: time is running out to take advantage of some substantial incentives, which will diminish or disappear by the end of 2020.
Strong Financial Returns
Solar projects can generate large returns for property owners, driven by strong incentives and high electric costs. At the Federal level, the Solar Investment Tax Credit covers 26% of project costs, in addition to accelerated depreciation, which can be taken in the project’s first year. At the State level, NYSERDA provides a grant worth $0.40/watt (approximately 15% of a project’s cost) for all solar projects in ConEd territory. And at the City level, there is a Property Tax Abatement worth 20% of project costs. Several of these incentives even cover re-roofing costs, reducing a project’s payback period by several years.
Moreover, NYC’s electric rates are some of the highest in the nation and are set to increase by over 4% annually in 2021 and 2022. Avoiding these costs makes solar that much more valuable.
No-Cost Solar Solutions
For property owners who lack the tax appetite or cash, or whose energy load is much less than a solar system can generate, third-party financed solutions can cover the full project cost.
Community solar projects typically provide a lease payment and electric bill discount to the property owner, for up to 40% of the energy credits generated on-site. For the remaining 60% of energy credits, a discount on electric bills is provided to renters or homeowners. Community solar is well established for commercial and industrial buildings here in the City. Progressive solar developers offer electric bill discounts for local, low-income tenants, creating community benefits and advancing social equity.
Affordable housing owners also can benefit from solar on ground-up construction or existing buildings. Third-party solar developers can aggregate portfolios of affordable housing at no cost to ownership, provide a lease payment and discount on energy to the properties, and extend energy cost savings to the tenants. NYSERDA offers generous grants that help the numbers pencil out on affordable projects.
Meeting New City Laws
Solar is a significant component of the Climate Mobilization Act, a suite of laws passed by the City Council in 2019. One set of laws requires building owners to install solar and/or a green roof on all new and substantially modified roofs. Another law, Local Law 97, requires many building owners to meet stringent greenhouse gas emissions caps, and solar is a key compliance tool. Solar reduces a building’s use of utility electricity, thereby decreasing its emissions under Local Law 97. Solar also can provide a deduction to building owners as a clean distributed energy resource or by producing renewable energy credits. Finally, the City is studying the potential for an emissions trading scheme whereby building owners may be able to sell credits for the amount that they are under their emissions cap.
Creating Green Jobs
Solar also can help power an equitable economic recovery in NYC by creating a variety of local jobs. According to a 2019 study by The Solar Foundation, solar provided 10,700 jobs in New York State—the second most nationwide—with a 30% increase since 2015. A recent Brookings report found that clean energy jobs pay 8-19% higher than comparable jobs, while approximately 50% of clean energy jobs require no more than a high school degree. New York’s robust workforce development programs can ensure that a diversity of workers, including those with barriers to employment, gain access to career pathways through solar projects.
The Time Is Now
Property owners can reap the greatest returns before the following incentives diminish at the end of 2020. A project completed before year end can capture the expiring NYC solar property tax abatement, worth 20% of project costs. Also, the Federal Solar Investment Tax Credit (ITC) reduces from 26% to 22% at year end. Fortunately, property owners can lock in, or ‘safe harbor’, the ITC by placing a small deposit before the end of the year. Finally, the ‘tranches’ of funding through NYSERDA’s grant program will diminish by 25% in the near future but can be locked in by submitting an application early in the design process.
Rob Crauderueff is CEO and founder of Crauderueff Solar, a New York-based solar consultancy and development firm. Alexis Saba is an attorney at the environmental law firm Sive, Paget & Riesel PC.