Sobering studies have recently been published by organizations like the International Energy Association and the National Petroleum Council suggesting that the planet's supply of traditional energy sources may not meet demand by as soon as 2015. That alone is alarming enough—but add the fact that utility rates are continuing their rapid ascent to record levels, and it would seem an emergency is on the way.

Members of co-op and condo associations have seen their maintenance fees rise as a result of continuous utility increases. Builders are also realizing that utility and associated maintenance costs can greatly impact the salability of the apartments and condos they're producing.

Alternative energies such as solar power are being increasingly recognized as viable energy sources. Recently, Wal-Mart announced plans to install solar energy systems at 22 of their store locations. Solar has gone mainstream.

When viewed over a seven-to-10-year term, solar economics are compelling. A solar electric system will produce electricity at a fraction of today's rates for in excess of 30 years, resulting in considerable energy savings as well environmental benefits.

State and Federal Incentives

In the past, the cost of installing solar cells and switching to solar power was prohibitive. But both New York and New Jersey residents enjoy programs that, coupled with a federal credit, substantially reduce the cost of installing solar electric systems.

The federal Credit for Residential Energy Efficiency Property can provide each shareholder in a co-op or condo with a tax credit of up to 30 percent of his or her prorated share of the net cost of the system after any state rebates.

In New Jersey, a new program commences in October 2007. Through at least 2022, the revised Solar Renewable Energy Credits (SRECs) program earns the solar electric system owner credits for their production of "green" energy. These SRECs will be worth nearly double their current value starting June 1, 2008 under the new program (approximately $0.45/kWh). For example, a 10,000-watt system is likely to yield SREC annual income of approximately $4,500. SRECs afford an average return on system cost of 7.2 percent annually, over 10 years. In addition, there is an average annual return of 6.8 percent in energy savings, for a total of 14 percent per annum. Estimates are that income from SRECS combined with electric savings will bring payback time to eight years or less.

In New York, there are no SRECs, but instead rebate incentives of $4 per watt for systems producing up to 25kW, and $3 per watt for additional watts up to a maximum of 50kW. In practice, 50kW is enough to supply the energy needs of at least seven families of four, or the common space electric needs of a large co-op complex. The rebate for a 50kW system would be $175,000.

In New York, favorable financing is also available. The Energy Smart Loan Fund currently subsidizes the interest rate for loans from dozens of lenders, reducing the interest rate by 6.5 percent for specified energy-related improvements such as solar electric. These lower interest rates are for multi-family units served by Con Edison, with a maximum loan of $5,000 per residential unit up to a maximum of $2.5 million total. For example, if the typical commercial loan rate were 8 percent, your association would only pay a 1.5 percent interest rate.

Solar's Surprising Cost Benefits

A single solar module can cost over $1,000—but each solar panel is capable of producing between 140 to 200 watts of electricity. For example, a 50kW system—the largest size subject to rebate in New York—requires over 250 modules and can cost about $480,000 fully installed, depending on the type of installation. Once the project is approved however, the state solar program will cover $175,000 of this cost. Federal solar tax credits of 30 percent of the net cost could total an additional $91,500 in tax savings. Savings in energy costs, at Con Ed's current rates, would run about $12,500 per annum.

In New Jersey, installations have been as large as 700 kW, capable of supplying about 100 units. If the rooftop space is insufficient, 1.5 acres of open field could accommodate a 1,400-panel, ground-mounted array. The system cost would be about $5.6 million less a federal tax credit of up to $1.08 million. The annual savings in energy costs, at PSEG's current rates, would run about $115,000. SREC payments should be almost $400,000 annually.

Challenges of Going Solar

The prospect of solar energy usage in co-ops and condos is not without its challenges. Moving forward takes conviction and perseverance, even more than a typical association faces in seeking to build consensus for any major capital improvement or maintenance project.

There are limits to what can be done in high-rise buildings. The average solar panel measures over 10 square feet. Panels need sun, and they need space. An average suburban house has enough roof space for solar panels, sufficient to provide the electricity for a family of four. With every additional floor or living unit under a roof, the proportion of energy that the system will provide will be diminished. But most high-rises in New York have enough roof space for the maximum system of 50kW, even if it only supplies a portion of electric use - say for common areas.

A large solar array system requires a sizable capital investment, and associations sometimes choose to finance the system by taking out a loan. In New York, the interest-reduced loans soften the blow. Other financing options exist in both New York and New Jersey, such as lease/buy arrangements and Power Purchase Agreements (PPA). With a PPA, the solar company finances, installs, and owns the system, but contracts with the building owner to sell the electricity at defined prices over a 20 year term.

Despite these challenges, solar energy is full of promise, even in existing co-ops and condos. Fortunately, there are solar consultants and installation companies capable of addressing your questions, and dealing with the design, engineering and paperwork.

A properly designed solar energy system can supply electricity for 30 to 40 years. In the increasing uncertainty of the energy markets, a reliable long-term source of energy at a fraction of the cost of prevailing utility rates is an attractive option.

George Engelbrecht is the co-op and condo specialist at The Solar Center, the largest solar installer in the tri-state region.