The self-storage industry is tuning in to the potential savings of solar power. Owners both large and small are finding a way to put rooftops to use to slash energy bills and boost net operating income.
“Self-storage, for all intents and purposes, is a perfect fit for solar,” said Jack Rogers, vice president of business development at Uncle Bob’s Management, the third-party management division of Uncle Bob’s Self Storage.
Property rooftops typically are flat and facilities often are in areas where there aren’t a lot of obstructions for solar, such as trees or tall office buildings, Rogers said.
Rogers estimates that the rooftops across its portfolio of more than 500 owned and managed properties would span more than 25 football fields. So, why not put them to use? The company began adding solar panel systems to the rooftops of its properties about four years ago.
Uncle Bob’s has about two dozen solar installations operating at its facilities, and it envisions adding 10 more over the next year. “Hopefully, we will continue to add 10 to 15 [solar] arrays per year as we go along,” Rogers said.
Not for Every Owner
Solar is not a good fit for every owner. Certainly, solar is more applicable to climate-controlled facilities that use more power for heating and cooling. In addition, solar panels are an expensive addition, with even a small project costing $100,000. But thanks to financial incentives that help offset the cost, solar power can be a viable option for large and small owners.
For example, Mike Perry first added solar to his facility, AA Valu U Stor Self Storage, in 2008. The Yuma, AZ, property spans 107,000 square feet with 832 rentable spaces, 38 covered RV spaces and 100 open RV spaces on 9 acres. The solar panels now generate about 112,000 kilowatts annually, which saves Perry $12,000 a year on utility costs. He spent about $400,000 on the solar installation.
The growing movement toward renewable energy and sustainable construction is drawing more attention to solar power.
In the U.S., the amount of solar installed in 2013 across all types of properties tripled compared with 2012. That growth is fueled in large part by policy, said M. Benjamin Montclair, solar project finance specialist at Smart Solar Solutions in Phoenix. Smart Solar is a design-build firm specializing in solar power installations for commercial customers. States are setting their own goals on what portion of energy must come from renewable sources, and they’re putting financial incentives in place to help achieve those goals.
Does It Make Financial Sense?
The first step for operators is determining whether adding solar will make financial sense for a particular property. “On its own, solar is very, very expensive. It is cost-prohibitive. You have to have those incentives,” said Rogers, the Uncle Bob’s executive.
The main incentive is a federal tax credit that amounts to 30 percent of the cost for installation of a turnkey system. For example, if a property owner spends $100,000 this year to install a solar power system, the owner would receive $30,000 back in tax credits that can be applied to the 2014 tax return. The owner also can apply that tax credit to the previous year, and the tax credits can be carried forward for 20 years to offset future taxes. It’s important to note that this is a tax credit, not a tax deduction, Montclair said. For example, if an owner receives $10,000 in tax credits and owes $10,000 in taxes, the net tax bill is zero.
What can really tip the scale for an owner is the additional state and utility incentives that are layered on top of the federal incentive. For example, Perry spent about $400,000 installing solar panels at his Arizona property. However, he received rebates from his local utility, as well as state and federal tax credits that amounted to about $290,000, reducing his net cost to $110,000.
“You need those incentives to create a financially acceptable and palatable ROI,” Rogers said.
Uncle Bob’s typically looks for a return on investment for its solar installations within four to six years. A solar power system has a shelf life of about 25 to 30 years, so yielding a return on investment within six years is a good deal. Rogers said. “You’re still going to garner another 20 to 25 years of free or reduced-cost power,” he said.
The Importance of Incentives
Incentives do vary from state to state in both the type and amount. Some states offer fixed incentives. For example, Arizona provides a 10 percent tax credit. Other states such as Connecticut and Ohio offer renewable energy credits. Essentially, the more power the solar panels generate, the more renewable energy credits an owner can create.
In addition, some utilities will provide a performance-based incentive–essentially, a utility buys renewable energy credits from a privately owned solar project.
“All of these incentives are designed to motivate owners to go solar,” Montclair said. “Solar is a big spend. You can get to $100,000 on a very small commercial system. So, the financial decision can be challenging.”
The best advice for operators is to hire a good solar consultant to help navigate the process and complete a thorough financial analysis. It’s equally as important to hire a competent, experienced firm to install the solar panels and to maneuver the complicated incentives process, Rogers said. For example, Uncle Bob’s does a thorough design and structural analysis for each project to ensure a rooftop can accommodate solar panels.
“It is self-storage. The last thing we need are roof leaks,” Rogers said.
To learn more about solar power in the storage industry, read these articles on The Storage Facilitator blog:
A-AAAKey receives award for commitment to solar power
Safeguard spending $6.7 million on solar installations at 25 facilities
Connecticut facility begins $165,000 solar installation