The growth of solar energy on Long Island has centered on residential systems, but changing subsidies and shifting market dynamics could tip the focus to lagging commercial systems in 2016 and beyond, experts say.
The expiration of a lucrative federal tax credit for home systems by next year’s end, and the looming end of a local rebate program for residential installations is slowly turning the focus to commercial systems.
Some businesses are taking advantage. Brinkmann True Value Hardware, a six-store hardware and paint store chain, is in the process of building a new 23,000-square-foot headquarters facility in Sayville that will be the state’s second net-zero energy retail facility, said co-owner Hank Brinkmann. (The first, at the company’s Miller Place store, opened in June.)
The Sayville facility, with a large solar array among other green-energy improvements, is expected to be finished in August, in time to take advantage of the 30 percent federal credit, said Brinkmann. “We needed the credit to make it feasible,” he said.
Earlier this month, one of the Island’s largest commercial rooftop installations was unveiled at the Clare Rose beverage distribution facility in Yaphank, a $3.5 million project that will supply more than 90 percent of the company’s electricity and pay for itself in less than five years. The federal tax credit for that project will exceed $1 million.
“It’s pretty simple math,” said Clare Rose chief executive Sean Rose, estimating the company will make a 10 percent return on its investment.
Solar installation companies that have been scrambling to keep up with a record year in residential installations say they are adjusting their businesses to track an expected uptick in commercial systems, which are larger, more lucrative and typically require longer lead times.
“There’s a flurry of activity right now,” in the commercial sector, said David Schieren, chief executive of EmPower Solar in Island Park, one of Long Island’s largest installers. EmPower expects to see a 10 percent shift toward commercial sector next year, to 40 percent of its overall business, Schieren said. “Commercial is a booming part of our business.”
That’s in part because the subsidies for business installations will have a life beyond those for the residential sector. Some installers are hedging their bets out of concern the home market could see a sharp decline with the end of the federal credit. For commercial systems, the federal credit drops to 10 percent from 30 percent at the end of 2016. A state rebate for commercial and municipal systems businesses remains funded, while the residential rebates are expected to run out by the first quarter of 2016, according to PSEG Long Island, which administers the program.
Even with three weeks remaining, 2015 was by far the Island’s largest year for solar, said PSEG’s Mike Voltz, director of renewable energy and efficiency programs. Rebated home systems for 2015 are approaching 7,000, or about 12,000 if non-rebated systems are included. PSEG expects to end the year with a total of 25,000 systems installed for all years combined.
But to date, Long Island businesses have been slow to follow the trend. The number of rebated commercial systems is down for the past three years, to just 59 as of the end of November, compared to a high of 235 in 2011. The total number of megawatts on the commercial side is increasing, however, from 4.1 megawatts in 2013 to 6.1 megawatts thus far in 2015, according to PSEG figures.
One company that benefited from two large commercial projects is Ronkonkoma distributor Quality King. The company in 2011 erected a 2-megawatt rooftop system at its massive Bellport distribution facility. Al Zerafa, director of operations for the company’s health care group, said economics clinched the deal.
“We couldn’t pass it up,” he said. The pharmaceutical and personal care distribution company opted for a second large rooftop array at its Ronkonkoma facility, one that’s part of PSEG’s feed-in tariff program that sells all its energy back to the grid. Zerafa said the systems have been low maintenance and high return. “It’s just set it and forget it,” he said.
One reason typically cited for slower business acceptance is the structure of the solar rebate program, which is funded by the New York State Energy Reseach and Development Authority. On Long Island, rebates for businesses are capped at systems of 200 kilowatts, so systems that are larger don’t get the benefit of a full rebate. The same program doesn’t have such a cap elsewhere in the state.
Voltz said Long Island is different because there’s a limited pool of money and PSEG wants a larger pool of businesses to be able to benefit. “We don’t think the need is really there to be more generous than we currently are,” he said.
Brinkmann said the rebate helped make his company’s first solar array feasible. The company bought and renovated a 10,000-square-foot store in Miller Place, where installer GreenLogic Energy of Southampton installed a 123-kilowatt solar array, a geothermal energy system, efficient lighting and appliances, and tightly sealed insulation. The system will produce more electricity than it can use, exporting some of that to a second location through a program called remote net metering.
For the solar array, Brinkmann paid $359,000 upfront. The federal tax credit put $123,058 back in company coffers, and there’s a $53,000 state/PSEG rebate. Along with other tax benefits, including accelerated depreciation, the company expects the solar array will cost it a net $116,550. Its energy bill for the store would otherwise have been $35,000 a year, Brinkmann said.
But it wasn’t just economics that motivated the company.
“We’ve challenged ourselves to make our company net zero by 2025,” he said, meaning no energy bills or usage beyond what the green-energy systems produce. “We’ll be 100 percent renewable energy by 2025.”
John Rocchetta, vice president of GreenLogic, said the company is devoting more resources to commercial jobs like Brinkmann’s in 2016 to capitalize on the growing market. “I’m putting resources into it,” he said, a move that could push commercial systems to half the business from a current 30 percent.
One of the limitations on the number of systems that can be installed next year, particularly on the business side, is the ability of the electric grid to accommodate larger systems in areas that are hosting big ground-mounted solar arrays. Each of the more than 200 substations around Long Island can accommodate around 10 megawatts of distributed power, and when a big solar array, such as one that was recently completed in Calverton, goes into service, it can lock out new projects.
PSEG has said it is working to manage such bottlenecks, even as it continues to process and review a record numbers of solar applications. Voltz said the company is up to the task.
“We’re fully prepared for 2016 to be a big year for solar,” he said. “We’re confident we will be able to meet the volume that’s coming.”