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Renewables

Overview

Solar photovoltaics (PV) reduces electricity costs and site greenhouse gas emissions, offering an opportunity to align with Colorado's 2040 100% Renewable Goals.

By combining the solar Section 48 investment tax credit (ITC) with Housing Tax Credits (HTC), affordable housing projects can super charge on-site renewable economics. The 2022 Inflation Reduction Act increased the base solar ITC to 30% of installation costs [for projects under 1 million watts MW). Additionally, the solar ITC no longer reduces the eligible basis for HTC-supported projects. Together, the ITC and HTC can yield a combined cost offset equal to over 60% of the solar installation value. When utility incentives, Renewable Energy Credits (RECs), and the solar production value are factored in, solar PV often has less than a 10-year payback (with an estimated system life of 25 years).

Technology and Design

Onsite Solar PV

There are a number of onsite PV installation configuration options. A solar PV contractor should be engaged early in the project (concept or schematic design phase) to help optimize design and provide budget pricing.

  • Roof-mounted: Roofs are a great location for gathering solar energy, minimizing the visual impact of the array, and are typically the most cost-effective system type. Flat roofs are ideal, as they allow for optimal system orientation. Pitched roofs can also work depending on the roof design. Early engagement of the solar PV contractor allows for coordination around roof loads and mechanical equipment location.

  • Ground-mounted: Ground-mounted PV arrays can have similar performance to roof-mounted systems but are less feasible on smaller sites.

  • Carport-mounted: This style is more expensive due to the cost of the carport structure. Carport PV systems are primarily used when carports are already being provided due to other requirements, or the project needs to maximize solar for net zero energy goals.

  • Facade-mounted: Facade-mounted solar is not recommended due to the increased installation cost, shading/orientation issues, and lower production than other configurations. Facade-mounted arrays should only be considered for specific, unique applications where it is recommended by the solar PV designer.

Interconnection Requirements

Each electric utility has unique rules governing solar PV, depending on building type, electrical service level, metering, and other items. Identifying project-specific utility interconnection requirements should be an early design action item. This should be done in partnership with the solar PV contractor and can inform provisions for PV interconnection in the electrical gear.

Between the solar array and interconnection, solar PV systems will require space in or near the building electrical infrastructure for additional utility and code-required equipment, such as inverters, panelboards, disconnects, and PV meters. Early design engagement with the PV contractor can ensure sufficient space allocation.

Metering

Cost-effective PV design typically maximizes system size and integrates with a single electricity meter. The size of the array is limited by the amount of electricity consumption tied to this meter. To increase return on investment, connecting the array to the large electrical load is ideal.

For sites with larger PV systems, a typical configuration is one master utility electrical meter for the whole building, with submeters for individual units and shared spaces as needed. If a project requires utility residential meters for apartments, the PV system is usually limited to the house electric meter and load. Energy modeling can be used during the project to size PV systems to anticipated loads and may be required by the utility.

International Energy Conservation Code (IECC) Compliance

Solar PV can be used to boost the modeled energy performance of the building, making it easier to meet minimum energy performance targets in code or green building certifications. This creates an opportunity to pair more cost-effective HVAC and domestic hot water (DHW) systems with solar PV to meet requirements at an overall lower construction cost. For example, a project with packaged terminal air conditioners (PTACs) and electric-resistance water heaters for DHW may fall short of the energy performance target. However, the project may be able to install a solar PV system that offsets the modeled shortfall and brings the design in compliance with IECC requirements.

Some jurisdictions require that a percentage of building energy use is offset by onsite solar, or that the building is designed to be PV-ready. As the Colorado Energy Office’s model energy code requires buildings to be PV-ready, it is likely that this will become a more commonly adopted code amendment.

Utility Tariff Rate Structure

Rate structure options for PV integration should be carefully considered during design, as PV-specific tariff rates can lower utility costs. Xcel Energy, for example, offers the Secondary PV Time-of-use rate structure for meters that meet the following criteria: have service loads between 50-1000kW, have 10 kW or larger PV systems, and are participants in the Solar*Rewards program (which requires selling the RECs to Xcel). These PV-specific rates increase consumption costs and reduce demand charges. As demand charges can typically account for more than half of the electrical bill, and solar offsets consumption costs, securing this rate structure can provide significant savings. Design phase energy modeling can help quantify the operating cost benefit of different utility tariff options.

Operation and Maintenance

Affordable housing staff are typically not equipped to perform operations and maintenance tasks on PV systems. Preventative and corrective maintenance will need to be supported by an annual maintenance service agreement from the PV contractor, including equipment maintenance as required by the Original Equipment Manufacturers (OEMs) to maintain their warranties. Service agreement pricing should be solicited during design and incorporated into the project economic evaluation. Online dashboards that show real-time PV system production are standard and can be used to verify ongoing performance with minimal effort.

Offsite Solar PV

Community solar gardens offer an opportunity to access some of the benefits of solar without requiring PV installation on the property.

Community solar participation is typically managed through a subscription model. This allows participants to subscribe to a fixed percentage or annual electric consumption amount from an offsite solar garden. The subscriber then receives a bill credit on their electricity bill each month, while making a separate payment to the community solar garden for subscribed energy. For income-qualified customers, the utility bill credit received may be larger than the payment made to the community solar garden operator, creating a net discount on electricity costs. Upcoming Solar for All-funded community solar may significantly expand both availability and the discounts offered.

When participating in a community solar garden, it is important to review subscription management, contract length, bill credit pricing, escalation rates, and exit flexibility terms. There can be some administrative burden, especially when managing subscriptions for a large number of resident meters.

If community solar is being used to help meet jurisdictional building performance standards, whether RECs are retained by the subscriber can impact if renewables are counted towards performance goals.

Impact on Residents and Owners

Community solar garden participation can create bill credits that can be directly subscribed to utility-owned resident meters. In this case, resident energy burden is reduced, typically without adjustment to utility allowances.

Onsite solar typically benefits the building owners, as opposed to residents. Depending on the building configuration and ratio of available roof space to conditioned square feet, solar PV energy production can sometimes exceed common area usage. When gross rents are utilized and buildings pay for all utility costs, 100% of the financial benefit flows to the owners. When apartment-level electric submeters are combined with utility allowances, there can be more flexibility on how the financial benefit for resident consumption offsets are allocated.

Costs and Financing

The Inflation Reduction Act revised the section 48 renewable investment tax credit (ITC) rates for 2023 - 2032. All rates are applied to eligible solar basis to determine the tax credit amount:

  • 6% base credit that increases to a 30% credit for systems under 1 MW or that are above 1 MW and meet prevailing wage criteria.

  • 2% Domestic Content bonus credit that increases to a 10% credit bonus for systems under 1 MW or that are above 1 MW and meet prevailing wage criteria.

  • 2% Energy Community Bonus that increases to a 10% credit bonus for systems under 1 MW or that are above 1 MW and meet prevailing wage criteria. To see if a project is located in an Energy Community, reference this online map.

  • 20% solar ITC Environmental Justice Solar and Wind Bonus for income-qualified properties. Credit guidance and the allocation application is still under development as of Q3 2023.

The Section 48 ITC is eligible both for transfer and direct pay, making it easier for not-for-profit and other entities to monetize this credit. An accountant should be engaged to produce an opinion letter that quantifies eligible solar basis. For Housing Tax Credit projects, sale of the ITC can be coordinated with the Housing Tax Credit investor when there is interest.

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