Solar pool and hot water heating has never been more profitable… but it’s about to change. The current economic landscape for solar is excellent however, apartment and commercial property owners need to be aware that there have been (and will continue to be) many changes in the California Solar Initiative (CSI) Thermal Rebate Program.
In general, major federal tax credits and Gas Company rebates, combined with rapidly increasing costs of natural gas has created a fertile economic climate for multi-family and commercial solar hot water systems. Typically, 70 – 80% of the cost of a system is recovered in the first year, with a complete return on investment in two to five years (the bigger the building or hot water use, the faster the recovery). After payback, many thousands of dollars end up staying in the owners’ pockets which would have otherwise been paid out to utilities. By year 10, solar clients will see a profit of around 250% of the 1st year net cost!
For clarification, it’s important to note that Solar Thermal (“ST”) and Solar Electric (“PV” or photovoltaic) systems are completely different and never compete for the same task. ST is three to four times more efficient in converting the sun’s energy into useful energy and is used for any purpose that involves heat: pool, spa, domestic hot water, radiant, and process heat. PV is utilized for all other applications: lights, TV, refrigeration, and everything else electric.
ST is a mature technology, which has not changed in decades. However, the cost increases over time, like everything else, due to inflation and increases in labor and metal prices. This is why it’s important for owners of multi-family and commercial properties to take advantage of the current rebates before the funds run out.
Highlights Regarding the Current and Expected Rebate Situation
- In So. Cal. Gas Company territory, approximately 1/3 of Step 1 funds have been reserved or paid, but reservations are increasing rapidly as owners learn about the opportunity. This rebate pays for 40 – 60% of a system’s cost (75% or more on a low-income property). We expect Step 1 funds will be exhausted soon after the end of this year, if not before. Step 2 rebates will be 30% lower.
- Commercial Pool Heating has been added to the rebate mix this year, drawing from the same funds of other ST rebates. This is both good and bad, depending on your perspective: good for those who want to heat apartment pools, and bad for the rest of ST applicants because it will further deplete the rebate funds available. It is expected that very soon the solar pool rebate will be capped at 50% of a system’s cost. Currently, it is uncapped. Therefore, if you are interested in a year-round pool heating system, you should act very quickly to get the maximum rebates available before this cap goes into effect.
3. Natural Gas rates have gone up approximately 66% since the low in June of 2012, which is an indicator of a considerable increase in long-term solar profitability.
Figure 1: California Natural Gas Prices in the Past Two Years *
* Energy Information Administration, “California Price of Natural Gas Delivered to Residential Consumers,” available at http://tonto.eia.gov/dnav/ng/hist/n3010ca3m.htm
Solar Pool Heating has been excluded from all Federal tax credits and rebates for the last 30 years, labeled a “luxury” by Congress and the IRS. However, the CSI is more interested in offsetting greenhouse gases and correctly determined that pool heating is one of the most efficient of solar thermal applications…hence the state rebate program in California.
What You Should Know Before Purchasing Thermal Solar
- There are huge differences in the quality of pool heating installations offered by solar contractors, resulting in a significant variation in cost: The most important two things for a buyer to know is how the system will be attached to the roof and whether it will drain by gravity back to the pool daily. Roof attachments that are not into rafters tend to loosen and leak over time. Panels that are not pitched installed flat on a horizontal roof, tend to be ruined within 10 years. The alternatives are more expensive, but last longer (up to 30 years) and are more trouble-free.
- There are two types of panels that can be installed for pool heating, glazed and unglazed: Glazed panels are the same panels used in solar hot water installations to provide 140 degree water for showers. These more costly panels are recommended for pools in areas with a sea breeze or for all-year pool heating applications (including in the height of summer). The majority of solar pool heating systems consist of unglazed panels, those with no glass cover. Usually plastic, these provide an April to October swimming season in most parts of Southern California.
- The best solar pool heating installation supports the panels at a minimum pitch of 1” per foot so that all the water will drain out by gravity. Otherwise, “winterization” should be performed annually, with the panels turned off, piping disconnected from the collector arrays, and the water drained out. Every city in California reaches freezing temperatures now and then, destroying hundreds of solar pool collectors that are not properly installed or winterized.
- Solar hot water systems installed under the CSI program must be freeze-proof, and must employ one of two technologies, glycol (anti-freeze) or drainback: In a glycol system, the collectors have non-toxic antifreeze circulating through the collectors, transferring solar heat to the building’s hot water via a heat exchanger. In a drainback system, pure water is used instead of glycol, with a heat exchanger for transfer of heat and a small (2.5g per panel) drainback tank. The collector water drains back into this small tank whenever the pump is off by gravity, which cannot fail. Of the two, I personally prefer drainback as a more trouble-free and maintenance-free system, but it also requires a more experienced solar contractor. Drainback systems have only ONE moving part, a pump.
Glycol systems include many more items that can fail, including a second pump, an expansion tank, air vents, check valves, and pressure relief valves. Glycol breaks down over time and must be checked and replaced before it becomes acetic and eats up the copper piping, including “toxic-waste disposal”. Glycol systems also can overheat, breaking down the glycol pre-maturely or causing relief valves to open, which can ruin the pump.
The Opportunity Is Now!
To summarize, any business that uses a lot of hot water, including heated pools, should not miss this rebate and tax credit opportunity before it’s gone. If you do not need the tax credit, companies with Power Purchase Agreements (PPA’s) can install a system on your building and sell you hot water at a discount. This is also a great option for non-profits.
Very few will argue that solar is the right thing for the environment by helping to reduce our carbon footprint. However, savvy property owners also understand the economic advantages:
● Receive a relatively short-term ROI and then no longer pay for heating much of your water
● Insure against ever increasing gas prices
● Increase resale value of building due to lower operating costs
● Extend the life of your water heater by many years (it fires significantly less often)
● Maintain higher occupancy rates (studies show tenants prefer “green building” designations)
The time is now for owners of apartments and businesses to stop being “renters” themselves by renting natural gas monthly with nothing to show for it except a bigger bill next month. Solar is here to stay, but not these types of rebates and incentives.
Ted Bavin is the owner and CEO of All Valley Solar and is the author of the soon to be published book “What to Know Before You Buy Solar: 10 Tips for Maximizing Your Investment.” He has designed and installed over 8,000 top quality solar hot water systems for more than 37 years and is the authority on advanced drainback technologies. Ted’s company serves all of Los Angeles, Ventura, Orange County and much of the Inland Empire. For questions or more information feel free to contact [email protected] or 1(800)-400-7780.