Happy Earth Month friends. We continue our blog series from where we left off to focus on the last step in our value add process… power generation.
Step 3 of our process takes advantage of the reduce energy usage from building upgrades to add a right sized onsite power generating system, in this case photovoltaic or solar panels.
- Measure: Conduct an Energy Audit of the subject property to create an energy blueprint.
- Reduce: Implement energy conservation measures (ECM)
- Offset: Add onsite renewable energy systems.
There is a lot of different view points on the value of solar panels. I will admit there was a time in my engineering career that I stayed away, but that was then and it’s now a decade later and technology has changed substantially. For me many critics leave out key benefits of local power generation because calculating their monetary value is difficult, maybe even impossible. Do not confuse this with “limited” value, that is not the case.
Why should you install solar panels? “Because I can power my house with clean energy. What if you rephrase a bit differently… “Because I can be produce clean energy and power my home.”
The key word is “produce” and now our value creation can seen. When we become our own utility company we become: prepared, resilient, and caring. We increase profitability by making our tenants safer.
Let’s recap our property details and run though how a solar system plays out
Multifamily Property #1
- Location: ???, Texas
- Size: 100 Units (50,000 sf)
- Style: Garden w/ pitched roof
- Mix of 1 bd and 2 bd apartments
- Annual Energy bill: 495,300 kWh/yr (U.S. Energy Information Administration estimates avg. electricity usage per month for a 1/2 bd apartment at 635 kWh less energy efficient upgrades (-266,7000 kWh))
You’ve hired a contractor to design and install a solar panel system with battery backup for the property. The system consisted of 660 solar panels with a total capacity of 200 kW, which was sufficient to offset approximately 50% of the power consumption.
The solar panels were installed on the rooftops of the apartment buildings, which had ample space for the panels and were unobstructed by trees or other buildings. The installation took three months to complete and involved minimal disruption to the residents.
The total cost of the solar panel system installation is estimated at $290,000, which includes the cost of materials, labor, permits, and design fees. However, this cost is reduced by a federal tax credit of 30% (2022 Inflation Reduction Act, section 179D), which comes out to $87,000, bringing the net cost to $203,000. Consult a professional regarding tax impacts.
After the installation was complete, the system began generating clean energy from the solar panels, which offset a significant portion of the property’s electricity usage. The solar panel system is expected to generate approximately 280,000 kWh of electricity per year, which will result in a savings of $42,000 annually on electricity bills. This savings = cashflow. Remember we are now a utility company and we can offer our tenants something our competitors can’t; reliable less costly energy.
Based on the estimated annual savings the solar panel system has an annual return on investment (ROI) of around 21%. This means that the solar panel system will pay for itself in about 4.8yrs.
Moreover, the solar panel system has reduced the property’s carbon footprint, which aligns with our sustainability goals. The system is estimated to reduce the property’s CO2 emissions by 220 metric tons annually, which is equivalent to taking 48 cars off the road for a year.
The installation of solar panels has proven to be a successful investment, providing financial and environmental benefits to the property. The solar panel system has helped reduce energy costs and carbon emissions, and will continue to do so for many years to come.
Your specific project will have many more steps, but we hope you can see the opportunities that are available you. Doing better and doing right creates Spiral Compounding Value Add.
BE IMPACTFUL!!!!
