Sometimes good enough just isn’t good enough anymore. When I reflect on my job before we started adding solar power to facilities at Extra Space Storage, it was good. Now that I’m part of a nationwide solar power initiative, I feel that the sustainability work by Extra Space Storage is more than good. It’s amazing. But let’s back up just a bit from the amazing phase.
Before we started adding solar power to storage facilities in 2010, our investors often asked me what we were doing to take care of the environment. (They still ask me this today, but now I have a better answer!) Our pre-solar years were progressive. We completed lighting upgrades and other energy-efficiency projects, but I knew that we could do more. As I started to do analysis, I saw solar installations as the best opportunity to really benefit the environment and Extra Space Storage.
I spent at least six months persistently communicating the opportunities solar installations afforded Extra Space Storage to our senior leadership team. Fortunately, I eventually persuaded them to put the power of solar energy to work for us. And, work it has!
Solar energy is now a big part of our corporate responsibility program to help offset our impact on the environment. It lowers our funds from operations (FFO) by helping us greatly reduce utility costs, and also lowers our carbon footprint. That makes the decision to add solar power to our facilities a good choice not only for the environment, but also for the bottom line and our investors.
Process of Solar Installation
One of the things I’ve learned is that it’s just not as easy as simply saying, “I’m going to put solar here,” and then we go put solar there. After selecting a company to complete the installation, there’s still a lot of work to be done, including agreements to be signed, and a governmental reviews process.
Adding solar to a property takes about three to five months from the date the property is evaluated for solar to actual completion of the project. Here’s a look at the process from start to finish:
- Identify properties that are good candidates for solar.
- Complete a return on investment (ROI) evaluation.
- For encumbered properties, get lender approval.
- Get local permits after submitting designs and plans.
- Apply for an interconnection agreement.
- Set up net metering.
- Install the solar panels.
- Connect solar to local grid, and turn system live.
- Get commissioning date from utility company.
- Generate electricity!
Approvals and Agreements
It all starts with identifying the properties that meet certain criteria. We install solar on properties where there’s a strong environmental benefit paired with a financial benefit for our investors. Completing an ROI evaluation is the easiest way to determine if it makes sense to install solar from a financial prospective. Consulting with our solar partner, 1st Light Energy, can also help us determine the best sites for solar power generation.
After selecting a property for solar, we go through the approvals process. For encumbered properties, we also have to make sure we have lender consent for solar installation. Then, it all starts on a local level. We submit design calculations and plans to local building departments to make sure we comply with their building standards.
After receiving the proper local permits, we apply for an interconnection agreement, which allows us to connect to the grid, a vital part of how we’re lowering our utility bill! With solar power, excess electricity is pushed back onto the grid, and that lowers our utility costs.
The net metering agreement with the power company is how we keep track of all that electricity moving around. I’ll discuss the importance of net metering in just a bit, but let’s get to the installation already.
Finally, Solar Installation
After all the approvals and agreements, we can get down to the actual solar installation process. Installation is a fairly simple construction project that can be completed in a few weeks.
We use 1st Light Energy, a valuable partner in helping us calculate and execute solar installations. It’s been very efficient to have one company that helps us through the whole process. 1st Light Energy not only assists us with the permits and agreements, they also install and maintain the installations. Plus, they understand our long-term strategy: to benefit the environment as well as our investors.
Connecting at Last
After construction is complete, we connect solar to the local grid and turn the system live. Once the system is running, we obtain a commissioning date for the utility company to inspect installation to approve the system for adding surplus solar power to the grid.
After the commissioning date, we can start generating electricity. The systems that we’ve installed will benefit the environment and Extra Space Storage for the next 25 to 30 years. I find that really exciting!
Importance of Net Zero to Our Bottom Line
After connecting to the local grid, we focus on net metering. It’s like a report card. It’s also a reward for a lot of hard work and planning. Net metering reveals the amount of electricity we consumed, and how much we gave back to the grid.
Just imagine the needle on your electric meter at home. When the installed solar panels generate more power than we’re using, the needle on the meter moves backwards instead of forward. When the needle moves backwards, we’re pushing more energy onto the grid than we’re using. If we give back enough electricity, we’ll reach net zero consumption, and pay nothing for energy at that location! Even at solar-powered locations where we don’t reach net zero, we’re still offloading up to 70 percent of our utility costs.
Just what is all this stuff we’re installing, anyway? Solar cells are also called photovoltaic (PV) cells. NASA provides a great explanation of how solar cells turn sunlight into electricity.
In general, PV cells work because of the flow of electrons through a circuit. Solar panels include layers of semiconductor materials. One layer has a positive charge, and the other a negative charge. Conductive wires are sandwiched between these layers.
Natural sunlight is the magical ingredient that can bring it all together for the formation of electricity. And, for Extra Space Storage, PV cells translate into savings after a carefully planned implementation.
Solar Installations at Extra Space Storage
In 2011, we got much more aggressive with our renewable energy program. In 2010, we had five test installations, but for 2011, that number rose to 51 solar installations initiated! Our installations were completed in New Jersey, Massachusetts, Maryland, California and Hawaii.
So far in 2012, we’ve completed 16 solar installations that were started last year and we completed installations in Ohio for the first time. By the end of the year, we expect to have installed solar on over 100 properties since we started in 2010.
Impact of Solar Installations
With a careful blending of investor ROI with the environmental return, we’ve been very successful in reaching our goals with the solar program. What we thought would happen is happening! That is, the benefits of solar are really starting to show on the balance sheet.
I’ve seen substantial improvements in energy expenditures at the facilities where we’ve completed solar installations. Plus, we’ve lowered our carbon footprint, even reaching net zero consumption at some locations.
Conquering High Energy Costs
In each state where we have a solar presence, energy costs have played a role in the decision to install solar. With high energy costs and great incentives, it really wouldn’t make sense to not install solar. However, sometimes we go the solar route even when state incentives are lackluster or nonexistent. The reason is clear: the utility bill!
Even in the absence of strong state incentives, we’ve decided to install solar at several facilities in California, a state with one of the highest energy rates.
Likewise, we’ve also installed solar in Hawaii, a state with no incentives for solar, but with a price of around 36 cents per kilowatt-hour (kWh) for electricity. By comparison, the rate in New Jersey is about 17 cents per kWh, and in Utah, it’s only about 10 cents per kWh. The expensive energy costs in Hawaii make solar a smart business decision for our investors.
Solar Energy Incentives
I’m not going to say it’s easy to navigate the complicated land of solar incentives. I’d deserve quite a few nasty comments for implying that it’s a snap to get things moving, but the important thing is that with time and patience, it can be done!
One idea to keep in mind is that good things come in different forms. In the case of local or state incentives, that can mean a tax deduction. In some other areas, it’s a rebate check that’s offered after the solar system goes live.
Whether it’s local, state or federal incentives we’re pursuing, I focus on the end result – energy savings that helps the environment, our bottom line and investors.
In deciding where to install solar panels, incentives play a big part. Without proper financial incentives to help offset the expense of installation, the ROI for adding solar power doesn’t always make good financial sense. The exception, as we discussed earlier, is solar installation in areas with high energy costs.
Because incentives alone aren’t enough to justify the installation, we don’t install solar panels at facilities located in all states that offer incentives. However, if there’s a state that offers a more robust incentive, we’re more likely to pursue solar in that state instead of another state where the incentive or rebate isn’t as aggressive. In deciding where it makes the most sense to install solar, Extra Space Storage uses a mathematical matrix to determine ROI using information for energy consumption, energy rates, cost of solar installation, and benefits from incentives. As you can see, incentives play a huge part, but other factors also come into play.
Financial incentives from the government include tax deductions and grant programs, but loan programs and other forms of support are also available. There’s a tremendous amount of information available about these federal incentives online at websites like DSIRE (Database of State Incentives for Renewables & Efficiency). While DSIRE focuses closely on state incentives, the “View Federal Incentives” option offers detailed summaries and overviews on several federal incentives, complete with links to IRS forms.
Yes, it may take a long time to navigate through that information! Yet, it pretty much all boils down to this: Incentives in the form of a federal grant or tax reduction can help offset around 30 percent of solar installation costs.
New Jersey has been a pioneer state for offering incentives for solar installations, and the state has the second highest rate of solar installations and capacity in the country after California. Thanks to the state’s Solar Renewable Energy Certificates (SRECs), participants may earn a credit (SREC) each time their solar installation generates 1,000 kilowatt-hours (kWh) of electricity. The SRECs may be sold as a way to provide revenue during the first 15 years of a solar project.
New Jersey isn’t the only state with great solar incentives. Massachusetts and Maryland are also strong champions of solar incentives. In the last year, Ohio has joined ranks with the states that offer the most attractive incentives. The incentives offered by these states directly impact the ROI for a solar installation, and in turn, help us reduce our energy consumption.
Find out more at DSIRE, the best reference for locating information on the solar incentives available on a state level.
Incentives sometimes come in the form of grants from local municipalities. For example, last year we completed a project in Glendale, Calif., and received funding through Glendale Water and Power.
A small electric company with an aggressive solar program, Glendale Water and Power funds a generous amount of the cost of solar installation for businesses. We applied, and were given funding.
It’s becoming more common for utility companies to provide incentives for energy efficiency upgrades to both homeowners and businesses, so if you’re considering solar for your business or home, make sure to check locally for incentives that may help you offset the installation cost.
Getting it Done
At Extra Space Storage, we were able to use a lot of existing resources to make solar power a reality. On a corporate level we’ve minimized the need to add additional staff to implement our solar program since we already had a great deal of talent in place. Making solar power a reality at an increasing number of facilities is an ongoing collaborative effort between our field operations team, accounting and procurement.
Even with a great team of people working together, adding solar power to multiple properties is a large undertaking, the biggest in my 11-year history with Extra Space Storage. When we started looking at the solar program four years ago, there were plenty of open questions, but we’ve been able to bring it all together to strengthen our commitment to corporate responsibility, while also having a positive impact on the bottom line of the company.
This is really a situation where everyone wins, a goal we’re always striving for at Extra Space Storage. I won’t call this a happy ending though, because our story of solar is still unfolding. I look forward to sharing more updates on our solar installations, and their impact as we continue to make progress in this area.
What objections will you need to overcome to build cleaner energy into your organization? Does solar make financial sense for your business?
– Brent Hardy
Learn more about how our increasingly sustainable self storage facilities contribute to Extra Space Storage’s economic growth.