Solar in the LEED: Significant changes for solar in LEED 2009

LEED 2009 introduces new standards for on-site solar power: “To encourage and recognize increasing levels of on-site renewable energy self-supply to reduce environmental and economic impacts associated with fossil fuel energy use.”

What are the basics, and what are the implications for LEED point calculations and actual energy cost reductions?  What are the likely trends for commercial solar when driven by LEED standards?

On site solar - along with wind, geothermal, low-impact hydro, biomass and bio-gas - is included in Energy and Atmosphere Credit 2 in LEED NC 2009 and shares LEED Existing Buildings 2009 EA Credit 4 with off-site “green power”.  (More about commercial interiors in a later post. [1])

For on-site solar, the primary differences between LEED NC 2.2 and LEED 2009 include:

• More potential renewable energy points in an overall rating system with higher overall point requirements.
• At the same time, individual points can be achieved by offsetting less of a building’s energy costs.
• As such, the cost per point to the building owner/project developer is substantially less.

In summary, there are more solar LEED points available, each is easier to achieve, and each point will require a smaller percentage of the project budget.

Excluding the first solar point for an existing building, all other points require fewer solar panels than LEED NC 2.2. Achieving the maximum number of solar points in the new standard requires 25 - 30% less in energy cost reductions than the earlier version.

Solar LEED points will cost building owner/developers significantly less to achieve. This may have several potential outcomes.

First, it may encourage wider use of on-site solar (and other renewables) by making them more accessible in terms of cost. For example, a 4-story 20,000 SF office building in Southern California with annual energy costs of about $41,000 could earn a LEED point with a solar system of 1.8 kW (dc).  That’s only nine 200-watt panels at a cost of about $8,400 after deducting the first year tax subsidies and cash incentives. [2] It could represent as little as 2/10 of 1% of the project budget.

Second,  four points could be earned for the same building under NC 2009 by installing a 12.6 kW (dc) solar power system (63 - 200 watt panels) at a cost of about $59,000 or as little as 1.7% of the project cost.  That is an $87,000 savings over NC v 2.2.

Should LEED 2009 succeed in encouraging the use of solar by making solar LEED points more affordable, it will provide the solar industry with something it currently lacks - a visible presence in everyday life.

Alternatively, on-site solar could become a cheap way of tacking on a few moderately priced points, but contributing very little to reduce the owner/developer’s energy costs, especially over time.  Why?

• In most office buildings, the ratio of roof space to floor space is such that on-site solar is unable to offset the entire electric load of a building, let alone the entire energy load (electric + natural gas).
• In our hypothetical Southern California office building, a 5,000 SF roof might generate enough solar power to offset about 43% of the building’s estimated energy based on cost.
• In contrast, design strategies that achieve maximum number of points for NC 2009 EA Credit 2, fall far short of a building’s potential for solar power generation.
• A strategy to achieve 7 points under LEED 2009 would leave more than 2/3 of the roof un-used.

This has huge implications for the building owner and/or tenants over time.  As utility rates increase over time, the value of solar energy savings will decline.  For example:

• Using a 4-point strategy, energy savings based on cost are 7% of the overall energy cost and a little over 16% of the potential savings that could be generated if the entire roof space is used for solar power.
• The yearly cost is about $42,000, of which the solar system offsets about $2,900. The amount the building owner or tenant pays annually is about $39,000.
• If the cost of energy doubles to $82,000 in ten years as is often predicted, building owner or tenant pays $76,000 annually.  [3]

From the customer’s standpoint, it’s just not enough. The contribution to energy savings and overall operations is relatively insignificant.

In California, solar will pay for itself in about seven years regardless of system size.  It may be as short as three years in Oregon.  Once paid for, the value of LEED driven solar is all about the energy savings, not the points.

When calculating the cost/benefit of solar LEED points, remember to also calculate energy savings cash flows over the life of the solar system, not just the cost per point.

[1]  Analysis of solar costs and benefits for Commercial Interiors is complex due to the wide range of lease terms.  CI deserves its own post.

[2]  In calculating the cost of an on-site solar system, I have used tax subsidies and incentives from the first year of operations to adjust the budget cost of the solar power installation.  Subsidies and incentives actually run for 5-6 years.

[3]  Assumption about the hypothetical 20,000 SF office building are too numerous to list in this post.  Contact me if you are interested in the math.