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Solar adds value in more ways than one: Energy savings, marketing benefits, and an increase in repeat and referral business

Texas Hotel & Lodging Association

August 24, 2012

Sustainability and environmental responsibility are not new for hotels and hospitality providers. For years many establishments – from bed and breakfasts to large brand hotels – have been reducing operating costs and their environmental footprints by urging their customers to be more sustainable when they travel by conserving water and power during their stays. In Texas, hotels now have an opportunity to save more money, increase customer satisfaction and achieve environmental responsibility by producing their own clean solar electricity—a cost-effective way to hold energy costs in check while demonstrating a brand’s commitment to sustainability.

There are now almost three gigawatts of solar electricity installed all over the United States—that’s tens of thousands of utility customers producing their own energy, hedging against constantly rising prices. Solar is a proven technology and reliable long-term investment, backed by fully insured leading banks. Given the current financing and marketing paybacks available to hotels, plus Texas’ commitment to increase renewable energy investment, this is the perfect time for the hospitality industry to drive down its energy bills, reduce its reliance on utility contracts and build a true differentiator to attract new customers and increase satisfaction with a solar investment.

In fact, when you do the math, solar is really a no brainer for hotels in Texas. Financial returns in many parts of the state can be between 15-20 percent, and customers are seeing payback in fewer than five years. After that, they have a system generating free energy, under warranty for 20 years, and with a useful life of at least 30.

Why is it time to go solar in Texas?

There never has been, and there may never be, a better time to go solar in Texas. The cost of solar energy systems is at an all-time low and several markets (Austin, San Antonio, and Dallas, to name a few) have incentive programs that can help to increase the cash flow of a project.

Because Texas hotels’ electricity demand so closely mirrors the time that a solar PV system is producing—peaking in the late afternoon, when your business travelers want to return to comfortably cooled rooms and recharge their laptops—solar tends to pay off quicker for hotels than elsewhere. That’s particularly true for hotels that operate in areas where they are forced to pay more for electricity during daytime hours, or during “peak demand.” By incorporating solar energy, hotels can mitigate and stabilize costs during times of highest demand.

To show an example of what a solar electric project could look like consider a hotel with about 15,000 sq. ft. of available rooftop space. This would lend itself to the installation of about 150 kilowatt (kW) DC of rooftop solar producing about 240,000 kilowatt hours (kWh) per year. Currently in Austin, this hotel would receive $0.14 for every kWh produced by that system for ten years. In addition, every kWh produced from the solar power installation will be used by the hotel to offset a kWh that otherwise would have been purchased from the local utility. By combining the energy savings with the payment from the utility and then factoring in both the available 30% Federal Investment Tax Credit and the accelerated depreciation schedule offered by the IRS (50% bonus depreciation for projects placed in service for 2012), the hotel will realize a 14% ten year Internal Rate of Return (IRR) with a 5 year payback. Remember, the solar panels are warrantied for 20 years and have a useful life of 30-40 years, so after the first 5 years of the solar energy system operating, the value of the energy produced by the installation is just free money.

Solar Also Generates Increased Guest Counts

Beyond the obvious financial incentives of hedging against rising energy prices, recent studies have shown that travelers are aware of the environmental footprints of their travel and are responsive to steps taken to alleviate those impacts. MindClick recently released a large study, authored by Joanna Abrams, which found that hotels that make their own investment in sustainable practices (efficiency, renewables, water recycling, etc.) can expect to save money and increase the willingness of their guests to pay more. In the study, Abrams found that of a 5,000 traveler survey, the positive impression that guests received from awareness of hotel sustainability increased guest satisfaction scores by more than 9%.

While solar panels tend to be out of sight for guests, data about how much electricity a system is producing is available online, and it’s simple to set up a lobby kiosk that illustrates a system’s instantaneous production and how the hotel is using that power. These kiosks are prefabricated and can be customized by an installer.

One Size Does Not Fit All

All that said, there are many factors hotel owners should consider before going solar, including:

Rooftops—Not all rooftops are prepared for solar. Some have too many vents and HVAC equipment and other obstructions that may cause shading, and others are simply structurally unfit to handle the extra weight. Oftentimes, as an alternative, solar energy can be produced off site and transmitted at cost-competitive rates if rooftop solar is not a logical solution.

Local financial incentives—While there are generous municipal incentives in cities like Austin, San Antonio and Dallas, they apply to projects with certain criteria. A careful review of what is eligible is crucial before pursuing a solar energy system.

Utility Reaction-Depending upon which of the more than 100 utility companies in Texas that you would be interconnecting the solar with, the rules and regulations that guide the technical installation and the mechanism by which electricity generated is credited may differ.

Competent Partner-Last but not least, not all solar installation companies are created equal. It’s important to identify a company with a long track record of installing commercial –scale solar energy solutions and has immediate access to project financing. The longer a company has been in the space, the more accurate their ability to budget costs and model the system production. And without quick access to funds for financing, you could sign a contract and your project could sit in finance limbo for months, disqualifying your project from incentives and subsidies.

Hotel owners should treat solar like any other cap ex decision, and work with a trustworthy developer or experienced third-party consultant to determine the viability of the project. Many leading developers offer free upfront analysis of a project’s viability, to help customers avoid spending money for a project that may not see the light of day.

With the number of available rooms either flattening out or increasing slightly with new construction projects, hotels need to find new ways to differentiate themselves in an increasingly competitive market. Installing solar is not only going to save a hotel on operation costs, but increase the satisfaction of its patrons. And who knows, maybe at some point, the energy savings can be passed on to guests in the form of cheaper room rates and/or lower resort fees?

About Jon Sarno

Mr. Jon Sarno is a Senior Project Developer for Borrego Solar, heading the firm’s Texas operations. Jon joined Borrego Solar in 2007 after leaving a small renewable energy and energy efficiency firm in New York that he helped establish in 2005. Jon was one of Borrego Solar’s first hires on the East Coast and took a joint Project Management/Project Developer role as an Applications Engineer and Standards Engineer to drive both development and logistical deployment of large-scale commercial and municipal projects. In his current role, Jon is focused on developing MW-scale projects in the Texas market. Jon has extensive building science, photovoltaic, and solar thermal experience including whole building auditing as well as the design and installation of solar thermal and electric systems. In the first five years with Borrego Solar, Jon developed, designed, and constructed over 20 MW of solar. He is a NABCEP Certified Installer and earned his Masters of Science in Environmental Policy from Bard College. Jon also holds a Bachelors of Science in Biology, which he earned from the University of Texas.

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