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SOLAR ENERGY: IS IT THE WAVE OF THE FUTURE!?

01/26/2012

   As promised last week, I would like to devote an article to the burgeoning use of solar energy panels throughout the tri-state area.  Solar energy has been a hot item, especially in New Jersey, for the past several years.  While federal incentives have recently been reduced substantially, there is still much to be said about creating solar installations in various states, including New Jersey.

   The benefits of creating a solar installation on top of or adjacent to your commercial property include production of your own energy; permanent ownership of your equipment; and qualifying for various federal and state incentives to recover a portion of the installation and a return on investment which is often very high.

FEDERAL INCENTIVES
 
   The Obama administration recently reduced the federal incentives significantly.  In New Jersey, these legislative changes have increased the payback period of a typical solar investment, from 3 to almost 6 years.  That means that the cost of your installation will now be repaid to you in 6 years instead of 3 years.

   That doubling of the time frame has convinced many landlords to defer indefinitely their plans for solar installations.  I think that is a mistake for several reasons:
•    The current in place incentives may be further reduced by a future Obama administration.  If you recover your investment in 6 years (now) versus a 10‑year timeline in the future, the choice is obvious – make the investment now.
•    Energy costs in general will continue to rise by significant margins over the next few years (at least).  You will be saving higher priced consumption by locking in such an installation now.
INSTALLATION ISSUES
 
   Since this is a relatively new field, you will need to be careful of the following issues.

   You must pick a seasoned installer that has been doing this at least 5-10 years.  Check with their references and ask the references to suggest other references.  The worst thing that can happen is to have a shoddy installation which will damage your roof or other portion of your property.

   Make sure the equipment used by your provider is American made.  Plenty of shoddy merchandise is being used in these installations and you must protect yourself against this recurring problem.

   Hire your own engineer to supervise every aspect of the installation.  If improperly done, the solar panels can cause permanent damage to our roof’s membrane necessitating costs repairs 10 or 20 years down the road.  Something as simple as screwing the panels into the roof can either be done correctly or with major damage to your roof structure.

   Negotiate with your energy company for the best rate for your electricity production.  With recent increased competition, it is worth a shot at trying to negotiate pricing with the utility companies.  At least in New York, the variety of energy companies allows some negotiation room on price.

   Examine the possibility of hedging investments to increase the value of your energy usage.

   The size of the installation, obviously, determines how much energy can be developed from solar panels.  The more room you have, the greater their output.  I recommend securing two bids for the installation in order to compare and contrast all the elements of cost, production and installation.

FUTURE TOPICS
 
   In the next installment we will address the purchase of single-family units in depressed areas such as Trenton, New Jersey.  This has become a choice area for many local investors.  This investment needs to be done carefully in order to make money in this field.

   We will try to address some of the bigger risks and pitfalls in this specialty real estate investment area.

   I appreciate your feedback.  The calls and e-mails I receive help shape the topics to be discussed.
 
 
 

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