This article was posted on Friday, May 01, 2015

The economics of solar water heating just got a huge shot in the arm!  While the payback for apartment systems was already a reasonable three to six years, rebate reservations were not moving fast enough for the California Energy Commission.  Therefore, they increased the rebate by 39% (29% for low income housing), effectively lowering the complete payback to only two to five years. 
With the 30% Federal Tax Credit and five year accelerated depreciation still in place through 2016, many owners with taxable income get back 70 to 90% of a system’s cost in the first year.  By the 10th year, owners have pocketed around two to four times their net first year investment. 

If you have no “tax appetite” (non-profit or low-profit entity), there are several PPAs (Power Purchase Agreement companies) that will install the system for you at no cost and sell you hot water at a deep discount – no strings attached.  This mechanism to “go green” while saving money “with no money down” has been used for solar electric installation for years, and is now available for commercial solar hot water as well, thanks to the current rebates and tax credits.  All maintenance and monitoring are included, and in 15 to 20 years you can buy the system from them if you want … cheap.  This is perfect for Homeowner’s Associations (which are non-profit) or apartment owners that have so many tax credits, expenses or investments that no income tax is ever due.   

Here is a typical example for a “difficult” 83 Unit Apartment Complex that we just completed: 

System Cost                                                    $204,920

Rebate                                                         $124,270

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30% Federal Tax Credit                                  $  61,476

1st Year Net Cost (remaining investment)      $  44,609 (only 22%)

Complete ROI is achieved                              2.5  Years

10 Year Net Cumulative Profit                       $  74,182 (lost if system not installed) 

If you have any buildings with an existing old solar hot water system from the 1980’s, you can replace and update it and get the exact same rebate as a brand new system, resulting in a one to two year payback.  Existing tank(s), collector racking, piping and valves can remain, but the solar panels must be replaced along with new monitoring, pumps and controls.  Payback is achieved in only one to two years.

All of these systems are required to be freeze-proof by the CEC, a big improvement over the direct city water type of the 1980’s.  Buyers have the choice of either glycol-based systems, or drainback-type systems.  Drainback systems have less maintenance and offer overheat protection as well.  Most systems are also installed in a way that allows for reroofing the building without removing the system.  There is a definite economy of scale, with larger systems costing less per unit than smaller…but with these new larger rebates, even a small eight unit usually makes sense.

Do you heat an apartment swimming pool?  The Gas Company will also pay around half the cost of that installation.  The most critical thing for a buyer to know is that on apartment building flat roofs, pool panels should be pitched at least one inch per foot in order to drain nightly back to the pool.  Without proper installation, the life of a system could be shortened from 30 years to less than ten.   Systems can either have unglazed panels (usually plastic panels that keep a pool comfortable from April to October), or glazed panels for coastal locations or year-round assistance in pool heating.

Reservations will accelerate rapidly as word of this deal spreads and the rebate will decrease as certain “steps” in rebate allotments are reached.  Each utility territory has its own pool of rebate funds, and some have already reduced to the Step Two level.  The Gas Company, however, is still in Step One, so rebates are still at their highest here.  Even new construction qualifies.  Locally, the building must have gas backup water heating from The Gas Company, which means Long Beach or Vernon customers cannot apply for these rebates. 

This rebate program is completely dependable with none of the horror stories you hear regarding solar electric rebates.  We have found the Gas Company to be an excellent administrator, with a very “pro-solar” attitude.  Your rebate is reserved upon contract within days on-line, and paid within 30 days of final building department inspection.  Your system is “turned on” and saving gas the minute it is completed.  Your solar contractor has gone through training to handle all the paperwork and install a top quality system that will meet the high standards of the program.

While gas bills are perhaps not the biggest concerns of an apartment owner, rates increased 66% between April 2012 and February 2014, and continue to increase by over 10% per year.  This is an excellent opportunity to reduce your cost of operation, increase profitability and resale value, and hedge against inflation.  Since funding for these rebates comes out of everyone’s Gas Company bills, you are contributing to the program whether you personally take advantage of it or merely help your fellow building owners get solar.    

Ted Bavin is the owner and CEO of All Valley Solar, Inc., and is the author of the soon to be published book What to Know Before You Buy Solar.  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 the Inland Empire.  For questions or more information, see or feel free to contact [email protected] or 1-800-400-7780.