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GREEN Talk: Best Practices on Solar Energy Investments in Affordable Housing

Investing in solar energy systems for affordable housing properties continues to be a critical opportunity and issue for nonprofit housing owners and public housing authorities throughout California. The California Housing Partnership hosted a GREEN Talk on May 30, 2018 with discussion focused on solar operations and maintenance.

Collin Tateishi, Policy Manager

Our three esteemed presenters touched on issues of performance monitoring, financing models, buy-back due diligence and proactive maintenance. They shared best practices for affordable housing owners to lower utility costs through investments in solar energy.

Financing Models from Nick Dirr, Director of Multifamily Technical Services, Association for Energy Affordability

  1. The “own or Power Purchase Agreements (PPA)” decision is influenced by project costs (post-incentive), site conditions, liability, and timing for re-syndication.
  2. Property owners with solar PPAs should always do buy-back due diligence as solar agreements come to an end. Is it worth buying the system? 
  3. Own
    1. Properties get the full benefit of solar generation but are responsible for operations and maintenance.
    2. Properties may purchase the solar PV system if they are re-syndicating because of access to funds, otherwise dependent on whether program incentives are enough to cover costs without gap financing.
  4. Power Purchase Agreements (PPA)
    1. This is a common option for properties that are not able to buy the system outright. A Third Party Owner (TPO) owns the solar system and sells energy to the property, but the financial benefit to the property is less than it would be if they owned it.
    2. Smaller systems may not generate enough power to make the financial benefits worthwhile in the long-term.
    3. While a TPO is typically responsible for operations and maintenance, property owners must be vigilant to ensure repairs are done on time and the system is performing as expected.
  5. Trends from the Low-Income Weatherization Program (LIWP)
    1. Nearly 75% of solar PV systems installed to date are owned by the property because the program covers 100% of tenant solar system costs and a healthy portion of common area solar costs. Projects with larger tenant solar systems tend to have a greater overall incentive cost-coverage.
    2. The incentive structure for the California Public Utilities Commission’s (CPUC) new Solar on Multifamily Affordable Housing (SOMAH) program is similar to LIWP. SOMAH requires both common area and tenant solar systems. At least 51% of VNEM credits generated by the solar system must go to tenants. Projects that are close to the 51% minimum threshold may be more likely to need financing. The larger the percentage of the system is going to residents, the less likely financing will be needed since incentives are designed to cover the full cost. Owners interested in SOMAH should not assume they can own the system outright.

 

Performance Monitoring from Sochiata Vutthy, Senior Asset Manager, Community HousingWorks (CHW)

  1. First round of Solar PV Projects (Owning the system)
    1. Portfolio: 42 properties and nearly 3,000 units.
    2. Incentives from the first round of MASH allowed properties to own systems outright. The program required 4-5 years of performance monitoring.
    3. CHW monitored cash flow and financials while their solar partner managed reporting, monitoring and compliance. As CHW made more energy efficiency and solar improvements across its portfolio, staff had a greater role in benchmarking energy use and monitoring solar production. Staff use WegoWise to benchmark energy use, but they could not monitor the impact of solar because it does not show up in utility bill data. 
    4. CHW staff monitored solar performance by reading inverters in-person, then partnered with WegoWise to create a monitoring system on the back end.
  2. Second Round of Solar PV Projects (PPAs)
    1. Incentives from the second round of MASH were not enough to allow properties to own the systems outright.
    2. CHW assessed 20 properties for PPAs, but focused on a handful of projects to commit for a 20-year solar agreement.
    3. CHW property, asset and resident staff got access to a better monitoring system that allowed them to see the solar impact on property financials. It also helped resident engagement. 
  3. Best Practices
    1. CHW monitors performance trends on a quarterly basis. Their solar partner does a true-up at a 5-year milestone. Looking back, a 3-year true-up would have been ideal because solar systems only took a few years to ramp up and stabilize. 
    2. CHW is not monitoring solar thermal performance but is less concerned because savings have been immediate and more consistent than with solar PV.
    3. Property owners will likely end up with several monitoring systems across their portfolio because you cannot contract with a solar monitoring system directly – it is determined by the solar provider and there is little room to negotiate.

Operations and Maintenance from Tom White, Sustainability and Energy Asset Manager, Eden Housing

  1. Portfolio
    1. Nearly 135 communities (~50% of which have solar). Eden used MASH incentives at 25 properties – with the same monitoring system and annual true-ups. 
    2. Eden bought down some PPAs to improve property financials.
  2. Performance Monitoring
    1. Owners should know how each system is expected to perform during different times of the year in order to compare against actual kilowatt hour (kWh) production and check TPOs monitoring and timeliness of repairs for underperforming systems.
    2. Monitoring each inverter will help identify problems and target corrective maintenance. Some systems are set up to track overall output (all inverters), or just specific systems (each inverter).
  3. Site Visits and Proactive Maintenance
    1. Annual site visits are critical for properties that do not have remote monitoring.
    2. Eden tries to clean panels and modules annually – varies by location, accessibility, environment and system age.
    3. Owners should always check warranty deadlines, especially for inverters.
    4. Groups of costs: Admin, corrective maintenance, monitoring, environmental conditions, service cost (cleaning, pests, etc).
  4. Informing new construction projects
    1. Asset and property management staff can engage with their development team during predevelopment/construction to ensure systems are sized appropriately and use a consistent monitoring system.
    2. Design teams should locate inverters where they can stay cool or get ventilation – may overheat during summer and impact performance.

Buy-back due diligence

Community HousingWorks and Eden are both evaluating buy-back options for properties with solar agreements coming to an end. Both are considering options to own the system outright, as well as create their own PPA where the organization can own the solar system and sell energy to the property.

 

About GREEN

The California Housing Partnership convenes the Green Rental home Energy Efficiency Network (GREEN), a network established in 2010 to increase access to energy efficiency, clean energy, and water conservation resources for low-income households living in affordable rental properties in California.  To receive notices about upcoming GREEN Talks, please contact Collin Tateishi at ctateishi@chpc.net.