With No Money Down, Co-op Cuts Electricity Bills

At the Lakeside Towers co-op in Bayside, Queens, the electricity bills weren’t going through the roof, but they were definitely on the rise. The 315-unit, 14-story complex was master-metered, which meant residents had no incentive to conserve energy. “You had people who would leave the AC on when they were gone for the month,” says Bradley Cohen, account executive at Lovett Realty, which manages the property. 

The board members started looking for a quick and easy way to trim the co-op’s electricity bills – and they found it in the form of a power purchase agreement, or PPA. This is an arrangement in which a third-party developer installs, owns and operates an energy system on a customer’s property. The customer purchases the system’s electricity output for a predetermined period, usually 15 to 20 years, at a rate that is typically lower than those of traditional suppliers. 

For co-ops, PPAs translate into immediate savings with no upfront costs, which makes them especially suitable for lower-income properties or properties without large cash reserves. “Any building that has high occupancy is a good candidate, because they’re paying a fixed rate, and they get hot water for free,” says Abinand Rangesh, director of corporate strategy at Tecogen, which manufactures combined heat and power systems (CHP), also known as cogeneration. 

With CHPs, natural gas internal-combustion engines generate electricity onsite, enabling buildings to recover “waste” heat, which can be used to provide hot water and heating. Because boilers don’t have to work as hard, gas bills are lowered as well. Waste heat can also be fed into a chiller that converts it into cooling, relieving a site’s typically electric-powered chillers from having to do so much of the air-conditioning. “Cogen works best at properties with several buildings fed by a central boiler,” explains Rangesh. “At a 150 to 200-unit building, you’re looking at savings of 10 to 15 percent, or about $3,000 a month.” 

Cogen offers another big benefit – backup power. The system acts like a generator, so it can power elevators, lights and water pumps in the event of a blackout. “A lot of buildings, especially high-rises, really like it,” says Rangesh.

So the board at Lakeside decided to enter into a power purchase agreement with Strategic Finance Group, a developer that specializes in CHPs, to have Tecogen to install a cogen system. “Having a backup generator, even more than energy savings, was the real selling point,” says Cohen, the property manager. “We have a parachute if there’s a blackout, brownout or any other catastrophe. It was done out of an abundance of caution.”

“The challenge for boards is that they’re not experts at cogen or how to take advantage of federal, state and local incentives,” says Sid Singh, a partner at Strategic Finance Group. “With PPAs, boards can also maintain liquidity, so they have cash left over for a rainy day or emergency fund.”

Installing the system, which consists of modular units that can be scaled according to a building’s energy needs, was seamless. “We have a boiler room the size of Rhode Island,” Cohen quips. “The biggest inconvenience was when we did the electrical switchover to test the automatic backup, but that was done in the middle of the night.”

As for maintenance or glitches, Strategic Finance Group is there. “We’re the one who handles it, so the board doesn’t have to worry,” says Singh. “We might ask them to hit the reset button, but that’s about it.”

“We’ve only had cogen since late fall, so it’s early in the process, but we should have big savings when electricity demands go up this summer,” says Cohen, who highly recommends PPAs to other large buildings. “They’re ideal for co-ops that don’t have a big cash flow and don’t want the headache of putting in and maintaining a system. With PPAs, you get savings – and peace of mind.” 

PRINCIPAL PLAYERS — MANUFACTURER: Tecogen. DEVELOPER: Strategic Finance Group. PROPERTY MANAGER: Lovett Realty.