Solar arrays crack the Twin Cities apartment market

As solar energy installations grow sharply in Minnesota, apartment owners and developers in the state have stayed in the shade.

But new forays by a pair of Twin Cities apartment owner/developers is casting new light on the potential for solar in multifamily buildings.

St. Paul-based At Home Apartments, which boasts more than 4,500 apartments under ownership or management in the Twin Cities, St. Cloud and Kansas City, Mo., in August switched on what is undoubtedly the largest solar installation at any Minnesota apartment building — a 145 kilowatt array at the CityVue Apartments in Eagan. It's part of a larger "green initiative" that will see additional rooftop solar installations at more than a dozen of the company's local properties.

Meanwhile, Melrose Co. of Shorewood is incorporating both solar and geothermal into its new Arlington Row Apartments and Townhomes in St. Louis Park, which have received final city approvals and are set to begin construction shortly. That project — financed by a $581,000 Metropolitan Council demonstration grant — will see a pair of 40 kilowatt systems installed on the roofs of parking-lot carports.

While each developer is motivated by the long-term energy cost savings and available subsidies to help defray the upfront costs of installation, they are also using their solar moves as a marketing tool — some prospective tenants view the availability of green energy as an important amenity when making their choice of where to live.

Commercial building owners generally are quickly ramping up their solar commitments, according to the Minnesota Solar Energy Industries Association. Some 13 megawatts of solar capacity were installed in the state last year, boosting Minnesota's total solar capacity to 33 megawatts, of which 23 megawatts have commercial owners.

Credit for the surge is given to the plummeting costs and greater efficiency of solar panels and to government and utility policies designed to drive the solar market, such as the $15 million Made in Minnesota Solar Incentive program, a rebate incentive for consumers who install photovoltaic and solar thermal systems using materials that are manufactured within the state.

But few of those commercial installations are at apartment buildings.

Despite their advantages in providing a hedge against rising energy costs, adding to property values and creating a marketing amenity, solar advocates said adoption has been hampered by "split incentives" pitting the interests of the tenant against the owner. Units in a typical multifamily building are individually sub-metered for electricity usage, meaning tenants who would otherwise go solar would need to install solar panels on the owner's property. Owners are not inclined to allow that since tenants are temporary residents.

One reason At Home proceeded with its big solar array at CityVue Apartments is because that particular problem was not an issue there, co-founder Alan Spaulding said.

"At CityVue, all of the units are on a single meter because it is a former office building," he said of the 11-story former Blue Cross Blue Shield tower. At Home converted it into a 113-unit residential building in 2014 and now is planning to add a new-construction second phase with 122 units.

"There is certainly a marketing element to it. We want to attract a clientele that cares about their carbon footprint, takes pride in where they live and wants to take care of the property," Spaulding said. "But solar also stands on its own as an investment. The state and federal incentives for solar, such as accelerated depreciation and the Made in Minnesota program, allow you to defray the initial costs and get to the energy savings in just a few years."

The "split incentive" problem is also not an issue for common areas within multifamily buildings, such as lobbies, fitness rooms and the like. That is where landlords interested in making the solar plunge could begin, he said.

Don Jacobson is a freelance writer based in St. Paul. He is the former editor of the Minneapolis-St. Paul Real Estate Journal.