Tax Depreciation

The printed IRS tax manual is literally more than 73,000 pages.  IRS agents and their teams can’t even keep up with tax changes let alone the volumes of code.  That’s why CPAs are more like general practitioners and need to rely on specialists to help maximize savings.

One such opportunity for maximizing savings is with depreciation for your buildings.  When purchasing, refinancing or remodeling a building, your depreciation schedule is affected – or should be.  Even though buildings have a typical 39 year depreciation basis, all the materials, wiring, insulation, fans lights and other components affixed to the structure need not have that looooong basis.  As you can imagine, there are a lot of materials in a building that can (and should) have a much shorter depreciation period. Segregating or quantifying and adjusting those costs can result in substantial and immediate tax savings.

How much is this worth?
Say you remodeled or refinanced your half million dollar building 5 years ago, you might be eligible for a refund of $30k – $40k right now!  Let’s say your building’s book value was $10M, you might expect to save $600k – $800k.  Would that pay off debt?  Fuel your next expansion?  Buy a competitor?  Kick start your retirment?

Is that it?
For many of our customers, we find 5x those amounts by combining other tax and utility savings!  What if your profit margins went up 30% or 50% or doubled, sustainably?  Would it change the valuation of your company?  For most, that helps vault them to “top dog” status.

What if I delay?
Unfortunately, the ability to reclassify costs from past renovations will end with the 2018 tax year.  While this method will not go way anytime soon, the ability to reach back in time will.  So, if you remodeled or even had a small upgrade in the past, you must act now BEFORE filing your 2018 returns.  Miss that window and you’ll throw away thousands in potential savings.

What if I do nothing?
If you get an email and don’t read it now or don’t reply right away, what are the chances you ever will?  In the competitive business world, delaying and doing nothing are the same thing.  Competitors are always looking for advantages to eliminate competition.  This happens every day.  One competitor quietly grows profits while others who don’t simply fade away into the sunset, never to be heard of again.

So don’t seal up the entrance to your “gold mine”.  Let our engineering and construction experts find your hidden tax savings.  For a free, no cost assessment that could change your business dramatically,

Click here to see if you qualify.

Grid (un)reliability

US utilities have traditionally been known for high reliability, but all that is changing.  Fast.

With power lines causing some of the biggest fires in US history, utilities are learning to cope with the risk by simply switching power off to large areas when it gets windy.  With wildfires consistently getting bigger and more frequent, that means grid power is already becoming less reliable.  But what if you run a business or a city or hospital or even a school is supposed to be an emergency shelter for the community?  This new variable will change your plans whether you like it or not.

Most organizations simply can’t just send people home or work in the dark or without air conditioning.  Building codes and safety regulations have a variety of requirements for occupant safety and comfort.  During natural disasters schools, hospitals and other critical infrastructure is heavily relied upon to avoid serious calamity. So, what are your options?

You actually have several options, but they all have pros and cons:

  1. Install diesel backup generators.  That’s good, except two problems.  Diesel is a very dirty and smelly fossil fuel, and is often limited to emergencies only.  For some districts, an intentional outage may not qualify.  Also, if you have a serious emergency like a wildfire or earthquake, getting a refill of diesel fuel may be impossible for quite awhile after.
  2. Install solar.  Unfortunately, many customer are finding out that their solar was required to be installed with anti-islanding features and simply will not work when the grid is down.  Those need to be retrofitted with new inverters and switches to enable “safe islanding”.  Unfortunately, solar only works during the day, so if an outage happens when it’s cloudy or at night, you’ll be out of luck.
  3. Install wind.  Small wind helps provide power for smaller loads or buildings, even when it’s dark, but it’s intermittent.  Meaning it can go off suddenly and back on, but it often works at night when the sun doesn’t.
  4. Add battery storage.  Batteries can provide backup power reliably. With time of use electric rates and demand charges, batteries make solar and wind much more economical, except the added first cost and safety.  Most chemical batteries like lithium are pretty rare elements, toxic and hazardous.  Historically, they have been relegated to small computer backup systems and mobile devices, but with demand ramping up exponentially, research and improvements in materials, capacity and manufacturing are pushing prices down really fast and safety up. But there are other storage solutions too.
  5. Add thermal storage.  Ice storage, as in frozen water, has been around for hundreds of years and is very economical for special applications where cooling or refrigeration is needed.  Since most buildings have air conditioning and many in the food sector have large refrigerators and freezers, there’s a lot of opportunities for ice storage.  Perhaps the best part of ice storage is the storage medium itself. In many cases it’s one of the most abundant and sustainable chemicals on earth – good ole’ H2O.
  6. Finally, there’s the “do nothing” alternative and hope it doesn’t affect you.  Good luck with that. Since we live in a competitive world, others will solve the problem leaving you losing business or revenue you need to pay all those fixed costs and retirement checks.  Again, that may work once or even twice, but with a prolonged outage or frequency of outages, you’ll be out of business.

So, how do you decide what is best?  It depends…

It depends on a lot of variables like your campus or building’s design, the age of your systems, your operations, safety or risk factors, utility costs, future costs, location risks (e.g. likelihood of interruptions and outages), code requirements and more.  Fortunately, 3fficient has done this analysis many times and knows how to help you decide on the best options for your business or organization.  More importantly, we can help you avoid getting “analysis paralysis” or getting wrong inputs that cost you a lot.

For a free assessment of your buildings, Click here

For a free assessment of your infrastructure’s resiliency and security, contact us >.

Are the days of ICE numbered?

Today, one of the biggest automakers on the planet and the company accredited with developing the mass production assembly line has announced they will be aggressively moving to electrifying their vehicles. This is significant because Ford Motors reiterated that they were going to halt production of most cars in the US – in favor of trucks and light duty vehicles.  Why electrify?

First, electric motors are superior to internal combustion engines in many ways.  Especially torque, when a lot of it is needed for pulling heavy loads uphill.  Second, consumer demand.  Electric motors are by far the most prevalent motive drivers in the world and automotive consumers are now widely recognizing how superior they are at moving vehicles.  Third, they have no air (and noise) pollution.  So, fuel economy standards become essentially irrelevant.  Replaced only by customer demands for adequate range and ready access to charging (refueling) stations.  With electrical outlets being nearly ubiquitous and solutions like Project FreeCharge filling in all the gaps sustainably, it’s easy to see how the days of the internal combustion engine are truly numbered.

As an engineer, I am honored to know that my profession has done great things and is responsible for many achievements in society – like mass production and automation.  I truly believe that engineers are the unsung heroes of civilization’s advances.  Always keen to solve a problem.  Always ethical and honorable – unlike lawyers, doctors and even accountants.  Engineers are very humble and rarely in the limelight – unlike actors, vloggers and politicians.  One might even say that is the engineer’s downfall.  But, that is another story for another time.

In looking back at history, I also know that without mechanical engineers, fossil fueled engines would have never reached the penetration they have today.  Mass production, automation and even the engines themselves would have never been so reliable as they are now.  So it is with mixed emotions, I am toasting the demise of the internal combustion engine!  It’s got some incredible engineering behind it.  But it is, at best, 30% efficient (vs 90% for electric motors) and the device primarily responsible for all air pollution and climate change on the planet.   Ugh.

Thankfully there is a growing organization of engineers committed to sustainable energy and energy efficiency.  The Association of Energy Engineers (AEE) is active in over 100 countries and always on the lookout to making man kind’s energy systems more efficient and sustainable.  So, a toast to my fellow energy engineers quietly and humbly dedicated to making the world a better place.  More efficient.  More productive.  And soon, a lot more sustainable!

I would challenge all drivers to demand change and buy only electric vehicles.  That will drive further competition to make better cars, better batteries and more ubiquitous charging outlets.  The end result – clean air and a slowing or halting of the pending disaster called climate change!

Solar Lease vs PPA

What’s the difference between a solar lease and a solar PPA?

In short.  Not much.  These days it’s mostly just the name, but here’s the skinny.

Solar PPA:

In a Power purchase agreement, you are agreeing to buy the power – whether you need it or not.  A third party is financing and building the power plant on your site with the deserved expectation that you will buy the commodity it produces so they can pay off the investment and make a profit.  This is basically what electric utilities have been doing for over a hundred years.

  • Solar PPA stands for solar “Power Purchase Agreement.”
  • PPA gives you a low up front cost.
  • You’re locked in for 10, 15 or perhaps 20 years to this agreement, which is transferable to a new owner.
  • They charge you a set electrical rate that is sometimes flat, and sometimes calculated to rise over the term of your agreement. So instead of paying for coal or gas fired electricity rates, you’re paying for PPA rates generated through your “local” solar panels.
  • The PPA company takes care of the maintenance and any needed repairs and monitors your system.
  • You don’t get any tax benefits or State rebates or Renewable Energy Credits (RECs).
  • You usually have some kind of option to buy later or at the end of the agreement for a set price per watt. Sometimes this is negotiable (and you should at least try since used solar panels aren’t worth much.)
  • You need to have an excellent credit rating to qualify.
  • You’re tied to the grid, so any residual electricity needs that your solar panels don’t produce is covered by your utility.

Solar Lease:

In a lease, you are leasing equipment.  A third party is financing and building the equipment (e.g. solar power plant) on your site with the deserved expectation that you will pay off the hardware over time.  When the lease is paid off you can usually “turn it back in”, buy it out at a predetermined residual value, or extend the lease term.

  • There is usually no down payment, so $0 down.
  • You’re locked into 15 years or more years, which is transferable to a new owner or home.
  • In a solar lease, vs. PPA, you do NOT pay for any power that your solar panels generate.
  • Instead, you pay a lease payment plus any extra power you need to buy from your electric company. So, solar panel power is technically free, but you have a set lease payment that rises 3 to 4% a year. That’s typically less than the 5% rate increases by your electric company. Some programs have a flat rate, so no yearly increases.  You usually have flexibility on the payment model.
  • Like a PPA, they usually take care of maintenance and repairs and monitor your system, but that’s not always the case.
  • Similarly, you don’t get tax benefits or rebates or Renewable Energy Credits (RECs).
  • Like PPA’s, you have an option to buy later or at the end of your term for a set residual price. You should try to negotiate the Fair Market Value (FMV) at the end of the lease, as used panels aren’t worth much more than the cost of taking them off your roof.
  • You need to have a good to excellent credit rating also, depending on the program.
  • Also like a PPA, you’re tied to the grid, so any residual electricity needs are covered by your utility.

So, bottom line for a solar lease vs. PPA:

  • PPA, you pay for power generated by solar panels with some money down and flat or yearly increases on your PPA electric rate. You also benefit from tiered rates.
  • Lease, you have no money down (typically) and pay a flat leasing fee that rises every year by a certain percent, plus left over utility bill. You also benefit from tiered rates.

While both these options are good for low cost financing, there’s not a huge difference when it comes to a solar Lease vs. PPA. If it saves you money and you like what you see, go for it.

Now 3fficient is offering a new option.  It’s called an energy services agreement (ESA).  This new financial model is similar to a PPA or Lease, but instead of just solar, you can get various efficiency upgrades too.  Basically, by agreeing to host our smart microgrid on site and buying power at a lower cost than the utility, you’ll also get a myriad of building and process upgrades included.   Like a PPA, you will not own the energy equipment so it will not impact your credit rating or borrowing power.  You’ll be free to use your credit for important purposes like say, growing your business.  You’ll get resilient, clean energy that will “keep the lights on” even when the grid is down.

Either way, you have nothing to lose by getting a quote from and comparing the financial pros and cons. Upon request, we’ll even give you both options, so you can compare an energy services agreement with outright purchasing.

How to Make Your Multi Tenant Buildings More Valuable

Most apartment complex owners are very limited in what they can do to stay competitive with newer properties. Lower rents, remodel or tear down and replace?  But, what if there was a better option?  An option that actually reduced the tenant’s monthly expenses while increasing rental revenues AND property values for the owner?

Well now there is.  3fficient’s Smart Zero program is now available for multi-family building owners, like apartment communities.  This comprehensive green building program provides the capital and turnkey EPC contracting for efficient holistic modernizations coupled with on-site renewable energy generation and storage.  Owners get smart energy upgrades and substantially improved property values while tenants get more comfortable and modern spaces with really low utility bills.  A true win-win!

Here’s how it works:

Step 1.  Analyze

  • Property Owner completes the Quicklook survey to see if they qualify for this unique upgrade program.
  • 3fficient Customer specialist will contact the Owner to confirm their online application and compile some additional property details, e.g. number of apartments and SF for each (typically size per floor plan and qty of each).
  • 3fficient will provide a preliminary energy assessment of indicative savings and property value impacts.

Step 2. Engineer

  • Upon engagement, 3fficient will provide engineering and a detailed, bankable engineering estimate of costs and savings.
  • Owner can use that to decide on desired rent adjustments in advance – based on projected savings per metered dwelling unit.

Step 3.  Integrate

  • Upon funding approval, 3fficient will procure necessary permits and materials, then manage implementation and commissioning of desired upgrades.

Step 4.  Enjoy

  • Tenants will enjoy lower monthly expenses and tell their friends how sustainable and great their community is.
  • Owner will enjoy the many low and zero carbon accolades, the increased rental demand, the increased revenues, profits and property values that effectively cost the owner nothing.

Great Parks Need Great Public Safety

Urban planners and architects go to great effort and expense to design fun and interesting parks.  But is your urban park safe and secure for visitors?  Pretty easy to find tragic headlines that say no.  But how do you really know for sure?  Cameras, sensors, other smart tech?  Nice to have, but without electricity, that’s been pretty much impossible.  Until now!

Check out these cool new self-powered devices that are sure to bring attractive design, modern features and public safety to any park or urban space.  In fact, they double as cost effective furniture, community art and smart tech all in one.  A virtual 3-for-1.

Civic planners, architects, landscapers and public safety officers take notice.  You now have some great new tools to activate and energize your parks and open spaces.  Learn more.

Rising Seas from Melting Ice Caps

OK carbon emitters and deniers, you’ve ignored the warnings and now you are getting the results.  Cities like Norfolk and Miami as well as the military are planning on building sea walls, raising buildings and fortifying themselves, but they’re in a long race with a relentless rising tide that is picking up speed.  If you’re in naval facilities,  that means billions in repairs.  Great news for infrastructure contractors and really bad news for taxpayers.  NPR published this advanced NOAA report here.

Urban Wind Making a Comeback?

About 2 years ago, I got a call from a local homeowner asking if we could help troubleshoot why his turbine was not generating electricity.  I said we typically work on commercial only, but he was very frustrated and seemed to be a genuinely nice person – and local. So, I agreed to see if we could lend a hand.

I stopped by the next day to take a look at his installation. The turbine was a 5-blade 1.5 kW Chinese model I had not seen before.  It was mounted on a heavy duty 30 foot steel pole, bolted to a solid concrete foundation.  The inverter was a legacy Power One inverter (now ABB).  No batteries – grid connected.  The connections looked good and the wire routing was decent (not up to our tidy standards, but acceptable).  The pole was located near the utility meter and breakers so the wiring run was relatively short.  However, the turbine was located directly in front of a large tree with prevailing winds coming over the single story house.  Observing the turbine in action, it seemed to always orient back to the same location.  It didn’t seem to stay oriented exactly with the wind though.  The inverter showed the system was on.  Cycling through the LCD display showed zero cumulative energy in the last several months since install.  So my concerns were the siting and if the inverter was programmed properly for this turbine.  Wind testing was apparently never done.

So, we installed a small pole mounted anemometer with data logger near the turbine.  We tested at the same elevation as the turbine, then lower to check winds there.  Going higher was not an option due to local codes.  The anemometer showed consistent intermittent winds, but at low speeds (6-12 mph) with a prevailing direction about 10 degrees different from what the turbine was observed tracking.  Armed with that, we decided to check the inverter next.  After troubleshooting with the manufacturer, we ended up modifying the inverter programming to try and match the turbine output better.  Unfortunately, there’s no elegant method for doing that on the Power One inverter, except trial and error.  So, we set up several curves and honed in on the best results.  It took a couple site visits as the wind wasn’t always cooperative with our availability.

As far as inspecting or even maintaining the turbine, we would need a lift which meant added cost.  Translation – diminishing returns for a project the homeowner was already frustrated with. So, we agreed to stop there and let the system “earn its keep” for a while.

Like many projects we work on, we are able to identify a lot of design and application improvements we would have made.  These may seem obvious, but here goes anyway:

  1.  The turbine was too heavy for an appropriately smaller pole which drives up install and maintenance costs.  A lighter weight turbine on a telescoping or pivot mount pole would have been far better.
  2.  The Chinese manufacturer had opposite hours from ours, poor telephone support, email support in broken english – overall poor service.  Too many chances of making a bad mistake.
  3. The siting of the turbine was poorly executed.  The homeowner did end up trimming back the tree which helped, but proper testing beforehand would have resulted in a much better outcome.  A bit more expensive for the longer wiring run, but far better output.
  4. The cut-in speed of the turbine was obviously too high for this (or most urban) installation(s).

From an energy output perspective, the big misnomer on small or urban wind turbines is not the rated size (max watts or kilowatts at optimal speed).  What matters most is output at the typical wind speeds for the intended location.  Case in point, the homeowner’s turbine had a “1500w” turbine (at a rated speed of 26.8 mph).  With typically 6- 10 mph winds on this project site, the expected output, from that turbine, would only be around 100w.  That’s 1/15th of what most people would expect looking at the product’s label.

As an energy practitioner and sometimes inventor, this little project prompted me to refresh my knowledge of small wind turbines in the market.  Aside from country of origin, they are all about the same design.  A little after this project, I was introduced to the CEO of a local small wind turbine startup (Primo Wind) looking to flesh out their designs and hopefully go commercial.  Interesting timing!  After doing a deep dive on the market and the company, I was really pleased.  The market opportunity is huge and the company has solved the big hurdles for small wind: i.e. makes power in a gentle breeze (4-5 mph) or gale force (110-120 mph), holds up in near hurricanes, easy install or takedown using lightweight and sturdy telescoping pole with really innovative cantilever pivot.  Install by one or two people and no heavy equipment.  Reasonably priced product cost with easy and fast installation means low cost of energy production that is very competitive with distributed solar.   Bingo.  The resurgence of small wind may be upon us.

Note:  I liked Primo’s product so much, we decided to dive in and help them scale up commercially.  Product info is available here.