In the highly competitive and ever-evolving world of self storage, owners and investors are perpetually in search of the next opportunity to get a leg up on the competition. As we all know, Value = Income / Rate and, let’s face it, none of us can control rates. That said, sophisticated investors find ways to maximize Income either through optimizing miscellaneous income sources such as retail sales and insurance or they find ways to reduce expenses, and one of the trendiest methods of boosting Income in today’s marketplace is through the use of solar energy.
With a 70% drop in cost over the last decade, solar photovoltaic arrays are a rapidly emerging ‘norm’ across the United States. They allow for a quick return on investment considering the relatively low cost of panels and installation. A solar array is a renewable energy source that provides the opportunity for a facility to drastically reduce, but more often than not, eliminate electricity costs. This benefit can be immediately realized and allows for protection against rising energy costs in the future. There are implicit benefits as well. Demonstrating a commitment to sustainability can alter the image of a storage facility within local communities and leveraging solar power is a great way to protect the environment.
Extra Space Storage has recognized this opportunity and in February the REIT surpassed 100 solar arrays in 13 states, with partner Safari Energy. The combined impact was equal to offsetting emissions from 5,000 vehicles each year. The have also partnered with Pivot Energy in 23 locations in Colorado and Illinois.1 There are a few things to keep in mind when considering solar: Understand the Net Metering policy in your state, which could allow you to sell excess energy produced from a solar array to the local utilities servicing your community.
Research Solar Program benefits. These are ever changing but tend to include energy and/or tax credits and can come from the local municipality, state or federal level. Massachusetts for instance participates in a property tax exemption, as well as a renewable energy equipment sales tax exemption. The federal government has also rolled out the federal solar tax credit which gives you a dollar-for-dollar reduction against your federal income tax as well as a tax credit program designed to encourage rapid investment into solar energy with a declining credit from 26% in 2020, to 22% in 2021. In addition to the state and federal financial tax credits, owners can obtain a 100% property tax exemption for 20-years. A thorough resource for understanding many of these benefits is DSIRE, which is operated by the N.C. Clean Energy Technology Center at N.C. State University, https://www.dsireusa.org/.
If solar is something that you want to invest in to reduce your operating costs at your facility and reduce your global footprint consult with an experienced solar-energy company who will work with you as the owner or investor to understand the net impact and benefits. Equally, partner with your tax advisor to ensure thresholds are met and credits are obtained to optimize your Return.