New York City Solar Water Heating Roadmap

New York City Solar Water Heating Roadmap June 2013 Prepared By Meister Consultants Group for The City University of New York (CUNY) New York City Solar America Partnership DOE Solar America Cities Initiative

Executive Summary Within New York City, over 50% of building energy use is for space heating, space cooling, or hot water representing a significant driver of fossil fuel-based greenhouse gas (GHG) emissions, poor air quality, and energy import dependence. By encouraging local development of renewable thermal technologies, especially solar hot water (SHW), New York City could develop cost-effective solutions to transform the nature of energy production for hot water and space heating. It could additionally create significant GHG emission reductions, improve air quality, and create skilled, local jobs for its residents. To date, solar hot water and other renewable thermal technologies (such as biomass thermal and advanced heat pumps) have been slow to develop. With only 43 known solar heating installations in the New York City, which has a stock of over one million buildings, it is clear that a number of barriers inhibit investment. Key barriers include high first costs and inadequate incentive or financing programs; opaque permitting and regulatory requirements; and poor awareness, education, and training programs among consumers, policy-makers, and professionals. The New York City Solar America City Partnership (NYC SAC partnership) a coalition led by Sustainable CUNY and comprised of the City University of New York (CUNY), the New York City Economic Development Corporation (NYCEDC), and the New York City Mayor s Office of Long-term Planning and Sustainability (OLTPS) has developed this roadmap to assess solar heating market barriers and opportunities in New York City. The roadmap lays out policy and program recommendations designed to drive forward the solar heating market and also address key New York City clean energy and GHG emission reduction goals. The New York City Mayor s Office plans to reduce GHG emissions by 80% in 2050. i As illustrated by the blue wedges in Figure 1 below, New York City will achieve its GHG emission reduction goals by deploying a variety of energy efficiency, clean energy, sustainable transportation, and waste management initiatives. 1 Additionally, the City, through the NYC SAC partnership, has been working to strengthen the local solar photovoltaic (PV) market since 2007, with a resulting growth of 1MW to 14 MW of installed PV over six years. In 2009, NYCEDC launched a solar thermal pilot program to provide financial assistance to city-based building owners installing solar hot water systems. Each system installed under the program is equipped with performance monitoring equipment. At the completion of the program, NYCEDC will evaluate performance and identify key next steps to facilitate solar thermal market growth in NYC. Further, the NYC Department of Citywide Administrative Services (DCAS) has also implemented pilot solar heating projects on several City-owned buildings. To date, however, the City has not developed a comprehensive initiative focusing on renewable energy technologies to serve heating and cooling loads. Looking ahead, it will be important for NYC to expand its emissions reduction portfolio to incorporate new and existing renewable heating and cooling technologies. Assuming that GHG emission reductions continue at currently projected rates, NYC could face a 15.7 million ton annual shortfall in GHG emission reductions by 2050 (represented by the red arrow in Figure 1). 2 By developing strong markets for solar heating and other renewable heating and cooling technologies now, NYC can position itself to fill its GHG emission reduction gap by deploying proven and cost-effective technologies. 1 2030 projected emission reductions do not include any contribution from solar thermal or other renewable heating and cooling technologies. For more information, see PlaNYC 2012 Progress Report at www.nyc.gov. 2 Based on data provided in PlaNYC documents, NYC s current GHG emission reduction trend was extended into the future to estimate potential GHG emission reductions by 2050. At current emission reduction rates, NYC is expected to have a 15.7 million ton shortfall relative to its 2050 target. ii

Yearly Emissions in Million Metric Tons CO2 Equivalent 80 70 60 50 40 30 20 10 Solid Waste Sustainable Transportation Clean Energy Supply Efficiency 0 2009 2014 2019 2024 2029 2034 2039 2044 2049 Figure 1: Greenhouse Gas Emission Reduction Strategies in New York City by 2030 and 2050 2050 target Business as Usual from 2009 2030 target 2050 GHG emission reduction gap Furthermore, NYC and NYS policy-makers have an enormous opportunity to achieve short-term air quality goals (in addition to GHG emission reductions) by encouraging SHW adoption in the city s dirtiest oil burning facilities. To date, solar heating has not been incorporated into the City s efforts. According to the Mayor s Office, in 2011 roughly 10,000 of [NYC s] largest buildings use[d] residual fuel oil, a viscous fuel that is nearly as dirty as coal, which causes 86% of soot pollution from NYC buildings. ii As a result, the City has implemented a major Clean Heat initiative to transition buildings using dirty oil to cleaner burning fossil fuels like natural gas or #2 oil. By deploying solar heating in these buildings, the City can encourage development of renewable energy, reduce GHG emissions, and additionally reduce emissions of harmful air pollutants like particulate matter (PM) and nitrogen oxide (NOx) the latter of which are a major cause of respiratory illnesses and hospitalizations among NYC residents. The National Renewable Energy Laboratory (NREL) estimated in 2011 that by deploying solar heating on these buildings, New York City could reduce GHG emission by 260,000 tons, particulate matter (PM) emissions by 1,800 tons, and nitrogen oxides (NOx) emissions by 13,500 tons each year. In addition to the above targeted deployment to reduce GHG emissions, solar hot water technologies are an effective in buildings types with consistent hot water load, including: single-family residences, multi-family residences, hotels and motels, dormitories, nursing homes, hospitals, restaurants, laundries, car washes, fire stations, correctional facilities, food processing facilities, and commercial (or school) swimming pools, among others. This report outlines strategies that could improve the market for all buildings in NYC. To achieve such objectives will require the deployment of a variety of policies and programs that address market barriers and stimulate investment in the solar heating sector. For instance, because only about 4% of residents or businesses use electricity to heat their homes and hot water, iii New York s current incentive structure severely limits the opportunity for customers to cost-effectively install SHW. iii

As described in greater detail in Sections 5, potential solar heating market development policies and programs include: Streamlining the SHW permitting process and driving down SHW soft costs: Compared to conventional domestic hot water heaters, solar heating systems are expensive. Installers report that a significant portion of the cost is due to high permitting and inspection costs. By streamlining permitting and driving down other soft costs, SHW systems could be installed for significantly less upfront costs in NYC. Realigning state renewable energy incentives to enable SHW to displace all fossil fuels: Current New York state SHW incentives, which typically reduce upfront installation costs by 15%, are applicable only to systems displacing electric heating and not to systems displacing fuel oil or natural gas. Because electric heating makes up a very small portion of heating fuel in NYC (less than 4%), the state incentive program has limited impact of market development. By realigning state renewable incentives to displace all fossil fuels, SHW could be cost-effectively deployed across a far larger portion of NYC buildings. Creation of local SHW incentive programs in NYC: Similarly, high upfront costs of SHW could be further reduced by deploying local SHW incentives, such as utility rebates or the NYC solar property tax abatement (for which only solar PV systems are currently eligible). CUNY and the NYC SAC partnership should collaborate with local and regional authorities to explore the possibility of funding for new incentive programs or pilot programs to help mitigate the high upfront costs of SHW in NYC. Creation of a solar heating empowerment overlay for the NYC Solar Map: CUNY and its partners could focus SHW outreach and marketing efforts at high-value, cost-effective opportunities in NYC. By identifying building parameters that are optimal for SHW, and incorporating that analysis into the NYC Solar Map, CUNY and its partners could enable residents, city officials, and installers to quickly complete a high level evaluation of SHW potential on NYC buildings. This could drive down soft costs and increase awareness of SHW. Encouragement of development of solar heating financing programs: The high upfront cost of solar heating remains a key barrier to investment, and several experts note that developing an environment encouraging turnkey solar heating financing and development services could transform the solar heating market in NYC. The NYC Energy Efficiency Corporation (NYCEEC) could be an effective vehicle to finance solar heating projects. Implementation of metering for SHW project in NYC: Currently, SHW projects are not typically metered in NYC, making it challenging for customers to evaluate production performance and energy savings. In order to communicate the value generated by a SHW system and ensure proper maintenance, SHW need to be metered, at a minimum on commercial projects. Metering is additionally critical if SHW production based incentives were to be implemented. Creation of a SHW building ready policy in NYC: By incorporating SHW into the building code, CUNY and its partners can drive demand and create awareness of SHW benefits among consumers and policy-makers. In particular, the NYC SAC partnership could develop a solar building-ready policy and/or guidelines for all public buildings (e.g. NYC Housing Authority, schools, etc.), which could potentially be expanded to the private sector in the future. Development and implementation of SHW training programs for building managers and decision-makers: To address poor awareness of and increase consumer confidence in SHW, CUNY and appropriate industry and government partners could collaborate to develop a series of SHW training programs to reach commercial building managers, industry vendors, and decision-makers. For example, training programs could assist commercial building managers to iv

understand the benefits and maintenance requirements of SHW systems in order to increase confidence and willingness of building maintenance staff to operate and maintain systems. This roadmap represents the first step in the creation and implementation of a comprehensive strategy to break down market barriers and stimulate greater investment in New York City s solar heating sector. While all of the recommendations described above may not prove to be feasible, by describing the NYC SHW market, identifying barriers, and proposing recommendations, this report represents a starting point to develop policies and programs that drive forward NYC s solar hot water market. Moreover, the report lays out pathways for renewable thermal market development that contributes to New York City s broader social, environmental, and economic objectives namely to achieve the cleanest air of any big city in the world, reduce energy consumption, and deploy clean energy technologies across the city. v

Acknowledgments This report was commissioned by the City University of New York under the auspices of the New York City Solar America City (NYC SAC) partnership. New York City is one of the 13 inaugural Solar Cities recognized under the US Department of Energy s (DOE) Solar America Initiative. The NYC Solar America City partnership, led by Sustainable CUNY, is comprised of the City University of New York, the New York City Economic Development Corporation and the Mayor s Office of Long-term Planning and Sustainability. The primary goal of the New York City Solar America City partnership is to create and implement a strategy supporting large-scale solar energy market growth in New York as part of PlaNYC s long-term sustainability goals. The partnership is driven through the collaboration of three key organizations in New York City. The City University of New York (CUNY) As this nation's largest urban university, CUNY plays a transformational role in New York City s sustainable future with an educational footprint that spans 23 academic institutions and over half a million students, faculty and staff. CUNY is dedicated to integrating sustainability into the university and the surrounding metropolitan area through its curriculum, policy work, research, retrofitting, capital projects, workforce development and economic development activities. Sustainable CUNY is leading CUNY s efforts through three key pillars: the CUNY Sustainability Project, city-wide Sustainable Energy projects and SustainableWorks NYC. The New York City Mayor s Office of Long-term Planning and Sustainability (OLTPS) The Long Term Planning and Sustainability Office coordinates and oversees efforts to develop and implement a strategic vision for the City's future working with City agencies and the Mayor's Advisory Board for Sustainability. On December 12, 2006, Mayor Bloomberg challenged all New Yorkers to take part in a conversation about how to transform New York City into a sustainable city by 2030 - an effort called PlaNYC. As part of this effort, the Mayor has outlined 10 goals to make New York City a healthier, more reliable and sustainable place -- not only for us, but for generations to come. The New York City Economic Development Corporation (NYCEDC) NYCEDC is the City s primary engine for economic development charged with leveraging the City s assets to drive growth, create jobs and improve quality of life. NYCEDC's mission is to encourage economic growth in each of the five boroughs of New York City by strengthening the City's competitive position and facilitating investments that build capacity, generate prosperity and catalyze the economic vibrancy of City life as a whole. vi

Acknowledgments Lead members of the New York City Solar America City Partnership, who provided project leadership for this report, are: Tria Case, University Director of Sustainability, City University of New York Alison Kling, New York City Solar Coordinator, City University of New York Jeremiah Couey, NYC Solar Ombudsmen and Special Project, City University of New York Laurie Reilly, Communications Director, Sustainable CUNY Steven Caputo, Deputy Director, Mayor s Office of Long-term Planning and Sustainability Jamil Khan, Policy Advisor, Mayor s Office of Long-term Planning and Sustainability David Gilford, Assistant Director, New York City Economic Development Corporation Lara Croushore, Senior Project Manager, New York City Economic Development Corporation The lead researchers and authors of this report are: Neil Veilleux, Senior Consultant, Meister Consultants Group Wilson Rickerson, CEO, Meister Consultants Group vii

Contents Executive Summary... ii Acknowledgments... vi Acknowledgments... vii 1 Introduction: Thermal Energy and NYC s Climate and Energy Goals... 9 1.1 The Solar Heating Opportunity in New York City... 10 1.2 Methodology... 11 1.3 Report Structure... 11 2 Solar Heating Technology, Applications and Potential... 13 2.1 Solar Heating and Cooling Applications... 13 2.2 Solar Hot Water (SHW) Design Overview... 14 2.3 NYC Building Parameters & Potential for SHW... 14 2.4 SHW Potential in Buildings Burning Dirty Oil... 16 3 New York City s Solar Heating Market... 18 3.1 Historical Market Growth... 18 3.2 Market Value Chain... 19 3.3 SHW Project Economics in NYC... 21 3.3.1 Installed Costs... 21 3.3.2 Solar Heating Incentives... 24 3.3.3 Payback and Net Present Value of Selected SHW Systems... 25 4 Barriers to SHW Market Development in New York City... 28 4.1 High First Costs and Inadequate Incentives... 28 4.2 Opaque Permitting and Regulatory Requirements... 29 4.3 Low Awareness and Inadequate Education and Training Programs... 30 5 Recommendations and Next Steps... 32 5.1 Streamline the SHW permitting process and drive down soft costs... 32 5.2 Re-align state renewable incentives to displace all fossil fuels... 32 5.3 Create local SHW incentive programs... 33 5.4 Create a Solar Heating Empowerment Overlay for the NYC Solar Map... 33 5.5 Encourage development of low-cost solar heating financing options... 33 5.6 Encourage metering for SHW projects in NYC... 35 5.7 Create a SHW building-ready policy in NYC... 35 5.8 Create SHW training programs for building managers and decision-makers... 36 6 Conclusion: New York City s Solar Heating Outlook... 37 References... 38 viii

1 Introduction: Thermal Energy and NYC s Climate and Energy Goals As part of PlaNYC, New York City has established ambitious clean energy, economic development, air quality, and greenhouse reduction (GHG) goals. New York City aims to achieve the cleanest air of any big city in the world, reduce energy consumption, and deploy clean energy technologies across the city. It additionally plans to reduce greenhouse gas emissions 30% by 2030 and 80% by 2050. iv The scale of change required to meet New York City s energy and climate goals is enormous. It requires an altogether new framework, which as expressed by a recent PlaNYC report leap-frogs over an expansion of current efforts to massive change. v In particular, it will require the city to bring transformative renewable energy technologies to scale in order to address electricity, transportation, and heating and cooling (thermal) needs of businesses and residents. Figure 2 illustrates New York City s approach to achieving its climate goals. As illustrated by the blue wedges, New York City will achieve its 2030 GHG emission reduction goals by deploying a variety of energy efficiency, clean energy, sustainable transportation, and waste management initiatives. 3 The city, through the NYC Solar America City Partnership, has been working to strengthen the local solar photovoltaic (PV) market since 2007, with a resulting growth of 1MW to 14 MW of installed PV over six years. To date, however, while the City has supported the development of the biofuel market, to date there have not been initiatives focusing on solar energy technologies to serve heating and cooling loads. Yearly Emissions in Million Metric Tons CO2 Equivalent 80 70 60 50 40 30 20 10 Solid Waste Sustainable Transportation Clean Energy Supply Efficiency 2050 target 0 2009 2014 2019 2024 2029 2034 2039 2044 2049 Figure 2: Greenhouse Gas Emission Reduction Strategies in New York City by 2030 and 2050 Business as Usual from 2009 2030 target 2050 GHG emission reduction gap Looking ahead, it will be important for the city to expand its emissions reduction portfolio to incorporate new and existing renewable heating and cooling technologies. Assuming that GHG emission reductions continue at currently projected rates, NYC will face a 15.7 million ton annual shortfall in GHG emission 3 2030 projected emission reductions do not include any contribution from solar thermal or other renewable heating and cooling technologies. For more information, see PlaNYC 2012 Progress Report at www.nyc.gov. 9

reductions by 2050 (represented by the red arrow in Figure 2). Renewable heating and cooling technologies 4 like biomass thermal, high efficiency air-source and ground-source heat pumps, and (especially) solar hot water represent a promising opportunity for New York City to close this gap and achieve emission reductions by deploying proven and cost-effective technology. 1.1 The Solar Heating Opportunity in New York City In New York City, over 50% of building energy use is for space heating, space cooling, or hot water. By encouraging local development of renewable thermal technologies, New York City could develop costeffective solutions to transform the nature of energy production for hot water and space heating; it could additionally create significant GHG emission reductions, improve air quality, and create skilled, local jobs for NYC residents. This roadmap focuses on the potential of solar hot water (SHW) to provide on-site, emissions-free, heat to serve domestic hot water, space heating, and process heat applications for buildings. Solar heating and other renewable thermal technologies represent the missing wedge in NYC s climate mitigation plans. As illustrated in Figure 2 above, renewable electricity (e.g. clean energy) and renewable transportation (e.g. sustainable transportation) sectors are key elements of New York City s climate planning. The renewable electricity and transportation sectors benefit from a wide variety of federal, state, and local policies. Solar heating, on the other hand, tends not to have comparable policy support. NYC policy-makers have an enormous opportunity to achieve short-term air quality goals (in addition to GHG emission reductions) by encouraging solar heating adoption in the city s dirtiest oil burning facilities. In 2011, roughly 10,000 of [NYC s] largest buildings use residual fuel oil, a viscous fuel that is nearly as dirty as coal, which causes 86% of soot pollution from NYC buildings. vi As a result, the City has implemented a major Clean Heat initiative to transition buildings using dirty oil to cleaner burning fossil fuels like natural gas or #2 oil. To date, however, solar heating has not been incorporated into the program. By deploying solar heating in these buildings, the city can encourage development of renewable energy, reduce GHG emissions, and additionally reduce emissions of harmful air pollutants like particulate matter (PM) and nitrogen oxide (NOx) the latter of which are a major cause of respiratory illnesses and hospitalizations among NYC residents. The National Renewable Energy Laboratory (NREL) estimates that by deploying solar heating on these buildings, New York City could reduce GHG emission by 260,000 tons, particulate matter (PM) emissions by 1,800 tons, and nitrogen oxides (NOx) emissions by 13,500 tons each year. Despite the potential benefits, and a stock of one million buildings, only 43 solar heating installations are currently in operation in the New York City. To contribute to air quality and GHG emission reduction goals in a significant way, considerable work needs to be done to scale up NYC s solar heating market. This solar heating roadmap examines how New York City can grow the SHW market, focusing in particular on integrating solar heating into the city s existing energy and climate planning initiatives and programs. With the right policies and market development initiatives, the city can increase investment in solar heating and provide NYC residents and businesses with a cost-effective means to reduce GHG emissions, improve air quality, develop local clean energy, and create local jobs for the future. 4 Though definitions of renewable thermal vary by jurisdiction, they typically include biomass thermal, solar thermal, and high efficiency heat pumps. Any technology that produces heat from renewable resources to serve building heating and cooling loads may be considered renewable thermal. 10

1.2 Methodology The SHW roadmap was developed by the New York City Solar America City Partnership (NYC SAC partnership) with support from Meister Consultants Group Inc. (MCG). Led by Sustainable CUNY, the NYC Solar America City partnership is comprised of the City University of New York, the New York City Economic Development Corporation (NYCEDC), and the New York City Mayor s Office of Long-term Planning and Sustainability (OLTPS). Together, representatives from these organizations comprised the solar heating roadmap project team. Additional expertise was provided by members of the New York City Solar Thermal Roundtable, which includes broad representation from city agencies, industry leaders, utilities, advocates, and solar heating experts. The development of this roadmap mirrors the framework laid out by CUNY and the NYC SAC partnership in 2007 to grow the solar PV market in New York City. Beginning with objective information gathering and stakeholder engagement, and continuing with ongoing market analysis, industry feedback, and strategic relationships, the NYC SAC partnership was able to develop and implement policy and programmatic recommendations to support market growth. This process has been rewarded by significant market growth. This model provides a template for the SHW roadmap as well as other technologies. To complete this report, the project team hosted a series of roundtables with solar heating industry representatives and experts. During the SHW roundtables, participants discussed market status, goals, barriers, opportunities, and needs of the NYC solar heating market. Industry representatives also provided insight into the current status of the regional solar heating market value chain and project development. The project team additionally surveyed and collected data from a variety of stakeholders including industry representatives, state and local policy-makers, and officials at the NYC Department of Buildings (DOB), among others. Data collected includes number and location of New York City SHW installations, installed costs and incentives in New York City and New York State, as well as financing assumptions and requirements. The project team also collected financial and performance data generated by the installations under the NYCEDC solar thermal pilot program. The project team then developed a series of residential and commercial SHW scenarios to assess lifecycle costs and payback for SHW systems displacing natural gas, fuel oil, and electric heating fuels. Additionally, in collaboration with the National Renewable Energy Lab (NREL), the project team assessed the technical and market potential for solar heating in New York City. Finally, after assessing the state of the SHW market in New York City, the project team created a series of recommendations intended to accelerate SHW market growth in New York City. In particular, the project team focused on opportunities to integrate solar heating into the city s existing energy and climate planning initiatives and programs. In addition to accelerating market growth, recommendations are intended to assist New York City in meeting GHG emission reduction, economic development, and air quality goals. 1.3 Report Structure This report is broken into five sections: Section 1 includes the report introduction, placing SHW within the context of NYC s climate planning, energy, and air quality goals. It additionally describes the report methodology and structure. 11

12 Section 2 describes solar heating and cooling technology and applications. It describes the typical design requirements for a SHW system and additionally estimates the technical potential for SHW in NYC buildings using #4 or #6 oil. Section 3 considers the current and historical state of the New York State and New York City SHW markets. It describes the SHW market growth in New York City over the past decade, the current SHW market value chain, as well as project economics for five residential and commercial scenarios. Section 4 describes identifies major barriers to SHW market growth, including high first costs, permitting and regulatory requirements, as well as low awareness and inadequate education and training programs. Section 5 proposes recommendations and next steps to accelerate SHW market development in New York City.

2 Solar Heating Technology, Applications and Potential Globally, over 195 GWth (approximately 3,010 million square feet) of solar heating collectors were in operation in 2010. Compared with other common forms of renewable energy, solar heating energy production is second only to wind power internationally (see Figure 3 below). vii However, in spite of its worldwide success, SHW is relatively unfamiliar to U.S. consumers, and U.S. markets remain relatively underdeveloped. With this in mind, the following section describes the typical applications and development requirements of SHW systems. It additionally estimates the technical potential for SHW in New York City. 600 heat power 514 capacity in operation (GW), 2011 produced energy (TWh), 2011 400 200 245.1 239 204.3 90 67.4 70.2 0 solar thermal heat wind power 12 geothermal power photovoltaic 1.2 2.9 0.6 0.8 solar thermal power ocean tidal power Figure 3: Worldwide solar heating and renewable energy capacity (GW) and generation (TWh) in 2010 (Source: IEA, 2012) 2.1 Solar Heating and Cooling Applications Solar thermal systems can be deployed to serve a number of heating and cooling applications. Typical solar heating applications include supplying hot water, space heating, process heat, or pool heating. To do so, water or another heat transfer fluid (commonly glycol) is heated in a SHW system by direct solar radiation in collector panels (typically located on rooftops). The heated fluid is circulated by a series of controllers through pipes to a storage tank, where the heat is transferred via a heat exchanger to serve a building s heat requirements. viii More recently, solar thermal has also been deployed to serve cooling loads (e.g. air conditioning), which could offer significant benefits to utilities by reducing energy use from air conditioners during periods of peak demand. However, solar cooling technologies are more complex than conventional SHW systems requiring use of chillers and desiccant systems and a number of solar cooling research, development, and deployment (RD&D) challenges need to be addressed. 5 As a result, solar cooling has not been widely deployed in the U.S. or abroad. By the end of 2010, for example, only about 600 solar cooling systems had been installed, mostly in European countries like Spain, Germany and Italy. ix Though applications for 5 According to the International Energy Agency s 2012 Technology Roadmap for Solar Heating and Cooling, solar cooling systems require optimized thermally driven cooling cycles (sorption chillers and desiccant systems) with higher efficiencies, lower costs, easier hybridization with other waste heat sources and integration with backup heating and cooling technologies. RD&D is needed in new sorption materials, new sorption material coatings for heat exchange surfaces and new heat and mass transfer systems. It will also require the design of new thermodynamic cycle systems. 13

solar cooling may be appropriate in some cases in NYC, this report focuses primarily on solar domestic hot water applications. 2.2 Solar Hot Water (SHW) Design Overview In the United States, outside of pool heating, solar heating most commonly provides heat for domestic hot water use. 6 Because it is rarely cost-effective to size a SHW system to cover 100% of domestic hot water heating requirements, SHW systems typically require auxiliary (back-up) heating, which is commonly served by the existing fossil fuel system in the building. The U.S. Department of Energy (DOE) reports that SHW systems should provide a solar fraction that meets about 50% to 60% of annual needs. x However, considerable variability exists depending upon site requirements and costs. In New York City, for example, installers may design systems to meet solar fractions ranging from 25% to 80%. xi Solar heating systems can be designed to provide heat for domestic hot water and space heating applications a so-called solar combi-system. Compared to solar domestic hot water systems, solar combi-systems are much less common in the U.S. They also introduce some design challenges. For example, developers and installers must carefully size the solar combi-system, accounting for the mismatch between the seasonal solar resource available and the heating load requirement. This is because solar combi-systems produce the most heat in the summertime when the solar resource is highest and heating demand is lowest. Typically, installers in the northeast will size a solar combi-system to provide 40% or less of the total space and DHW heating load (e.g. a solar fraction of 40% or less). Solar heating can also serve process heat requirements in commercial buildings. Good candidates for commercial applications have large, stable hot water demand, like car washes, nursing homes, and hospitals, among others, which are described in greater detail in Section 2.3. Finally, SHW design configurations invariably include solar collectors, water storage tanks, piping, insulation, valves, gauges, and fittings. In NYC, they also require heat exchangers, pumps, and controllers as well as freeze protection during the winter. Appendix A provides a detailed description of SHW components. 2.3 NYC Building Parameters & Potential for SHW With regard to building requirements, cost-effective development of SHW depends upon three key factors: (i) large, consistent hot water demand, (ii) SWH friendly building characteristics, and (iii) the cost of alternative heating fuels. Each of these factors is described below within the context of New York City. Unlike grid-connected renewable electricity systems where electricity can be fed back into the power grid, SHW can only be utilized for local, on-site applications. 7 This means that heat production must be used immediately or stored locally in tanks. Accordingly, buildings with large, consistent, year-round hot water requirements tend to enjoy the best return on investment from SHW. High demand for hot water reduces the relative importance of the (large) fixed costs of SHW. Buildings or applications that tend to be good targets for SHW development include: single-family residences, multi-family residences, hotels and motels, dormitories, nursing homes, hospitals, restaurants, laundries, car washes, fire stations, correctional facilities, food processing facilities, and commercial (or school) swimming pools, among others. 6 According to the U.S. Energy Information Administration, in 2009 76% of all collector shipments were for low-temperature collectors, which are primarily unglazed collectors used for pool heating. 17% of shipments were medium-temperature collectors, which included glazed, evacuated tube, and concentrating collectors used primarily for domestic hot water, space heating, or process heat applications. Following precedent established by federal investment tax credit program guidelines, we generally exclude unglazed pool heating systems from consideration within the context of this report. 7 The exception here is if SHW is used in district heating systems. For example, District Energy St. Paul recently integrated largescale solar into its district energy network. For more information, see www.districtenergy.com/solutions/solar.html. 14

Estimating hot water demand for SHW applications is challenging. Hot water demand varies depending upon the number and efficiency of water fixtures, user habits, and required water temperature. Moreover, hot water use is not typically metered in buildings. As a result, several commonly used rules of thumb are available to estimate hot water use for a variety of buildings and applications. For example, the American Society of Heating, Refrigeration, and Air-Conditioning (ASHRAE) provides rules of thumb for stakeholders interested in estimating total hot water demand (in gallons per day or GPD) for residential and commercial buildings (see Appendix B). In addition, policy-makers and other stakeholders can quickly estimate hot water demand and size for SHW systems using RETScreen or other software. For more precise hot water demand estimates, stakeholders should consider metering hot water demand using ultrasonic flowmeters or other metering technology. This is especially important for large SHW installations, where variability in hot water use can significantly impact project economics. A number of building and project characteristics also influence the success of SHW projects. To be costeffective, SHW projects generally require short piping runs, large and unobstructed roof spaces, and easy accessibility to (basement) space for storage tanks. Such requirements generally preclude tall, narrow buildings from SHW development in New York City. Installers and developers indicate that commercial buildings between one and 12 stories are good targets for SHW development. Similarly, as a rule of thumb, a building needs unobstructed, south-facing roof space available for panels. At a maximum, systems should be sized to provide 1.25 square feet of panels for each gallon of hot water demand required daily (e.g. approximately 1.25 square feet of solar panels are needed for a one GPD of hot water demand). Larger systems will likely result in oversizing, which could lead to problems with stagnation or waste heat. CUNY conducted an analysis of the SHW potential of building sector types that are typically good candidates for SHW due to consistent hot water loads. Figures 4 and 5 below demonstrate the percentage of buildings within a certain class that have suitable roof space to meet 100% of hot water load in the summer months, as well as the relative size of each sector. Percentage of Buildings Suitable for SHW by Sector 100% 80% 60% 40% 20% 0% Unsuitable Buildings Suitable Buildings Figure 4: Percentage of buildings suitable for SHW in NYC, by sector. CUNY 2013. 15

5-12 Floors Residence, 18,417 Hotels, 225 Nursing Homes, 112 Dormitories, 16 Single Family Homes, 216,123 1-4 Floors Residence, 371,297 # of Buildings Suitable for SHW by Sector Figure 5: Number of buildings suitable for SHW in NYC, by sector. CUNY 2013. Finally, the cost of alternative heating fuels significantly impacts SHW project economics. At current prices, SHW tends not to be cost effective when displacing natural gas; however, it can represent an acceptable investment for buildings using fuel oil to heat hot water. Additionally, due to the high cost of electricity (as well as availability of NYSERDA incentives), SHW is very attractive for systems displacing electric hot water heating. The chart below illustrates fuel consumption in residential, commercial, and industrial facilities in New York City. Of particular importance, the residential (including multi-family buildings) and commercial sectors are large consumers of fuel oil (see Figure 6 below) for space heating and hot water production and are good candidates for SHW. Buildings using electricity also represent good SHW candidates, though they make up a small portion of the total building stock, serving just 4% of space and water heating needs in New York City. 200,000,000 150,000,000 Electricity, 2007 Fuel Oil, 2007 Gas, 2007 MMBtus 100,000,000 50,000,000 0 Residential Commercial Industrial Figure 6: Energy consumption by fuel type and sector in NYC (Source: Rohmund and Wilker, 2010) xii 2.4 SHW Potential in Buildings Burning Dirty Oil To estimate short-term potential for SHW in the commercial sector, the NYC SAC partnership collaborated with NREL to assess SHW development opportunities for buildings using #4 and #6 oil for heat and hot water production. These are particularly polluting fuels, causing 86% of soot pollution from buildings in New York City. To reduce air pollution across the city, these buildings will be required to transition to cleaner burning heating fuels in coming years. The NYC Clean Heat program has been 16

designed to assist building owners transition to cleaner burning fuels. As a result, building owners will be making large capital investments in new heating and hot water systems, which could include SHW. Moreover, because the cost of heating oil is significantly higher than natural gas, these buildings represent potentially attractive targets for SHW investment. NREL used the NYC Clean Heat database to assess solar heating integration potential for 4,565 buildings using #4 or #6 heating oil. The database provides square footage, annual oil consumption, number of stories, and a variety of other measures for each building. 8 NREL s assessment focused on four building types, which represent good SHW building candidates, including: (i) multi-family buildings (between four and twelve stories high), (ii) hotels, (iii) hospitals, and (iv) dormitories. For the assessment, NREL modeled direct hot water applications (e.g. not space heating or SHW combi-systems) and assumed conservative roof area availability (with a knock-down or derate factor of 48%). 9 This resulted in a solar fraction of 39% for the population of buildings assessed. Table 1 below illustrates the results. In total, NREL estimates that the city could reduce over 260,000 tons of GHG emissions annually and save over 87 million MMBtus of energy each year by integrating SHW into these commercial buildings. This could account for nearly 2% of the annual GHG emission reduction gap by 2050 (see Figure 2). Moreover, this represents energy savings of approximately $1.1 billion annually for building owners after capital costs. 10 City residents would also benefit from improved air quality and public health with over 1,800 tons of particulate matter (PM) and 13,500 tons of NOx emission reductions annually. Table 1: Potential emission and energy impacts by integrating SHW into NYC commercial buildings using #4 and #6 oil (Source: NREL, 2012) Building Type Annual GHG reductions (tons) Annual PM reductions (tons) Annual NOx reductions (tons) Annual energy savings (MMBtu) Multi-family buildings 249,172 1,791 13,077 84,110,845 Hotels 5,862 42 303 1,978,886 Hospitals 3,942 28 200 1,330,609 Dormitories 1,331 10 72 449,220 Total 260,307 1,870 13,652 87,869,560 A preliminary GIS analysis of buildings burning #4 and #6 oil with buildings that have good SHW potential demonstrates that there are significant clusters of opportunity in NYC (Figure 7, next page). 8 The database is available to the public at the Clean Heat website: www.nyccleanheat.org. 9 After reviewing a sample of commercial buildings within the Clean Heat database, NREL determined that a number of factors such as location of HVAC equipment or shading limited availability of roof space for placement of solar collectors. As a result, they estimated that approximately 48% of roof space on a typical building was suitable for solar panels. 10 This is estimated using the EIA reported 2010 price for residual fuel oil of $12.90 per MMBtu for New York State. 17

Figure 7: Buildings with good SHW potential within NYC s portfolio of buildings burning #4 and #6 oil. 3 New York City s Solar Heating Market Due to high fossil fuel energy costs and good levels of solar irradiation, New York City has been described as the most favorable market in New York State for domestic solar hot water systems. xiii Despite such advantages, though, a recent survey of SHW systems operating in the city revealed that the city s solar heating market has experienced limited growth over the past ten years with only 43 known residential, commercial, or government facilities installed since 2003 (see Figure 8 below). By contrast, over 560 solar PV systems have been installed in New York City in that same period. The following section describes the current SHW market in New York City. In particular, it describes the market growth in New York City over the past decade, the market value chain, as well as economics for residential and commercial projects. The data below is based on interviews with local installers, regional and national reports, the NYCEDC solar thermal pilot program installations, the NYC Solar Map, and NYSERDA project information. 3.1 Historical Market Growth From 2003 to 2013, fewer than three SHW facilities were installed in NYC each year. In 2011, the number of SHW installations increased significantly, to 22 systems, representing over half of the systems installed over the past 10 years. During this time, NYCEDC funded four SHW systems as part of the pilot program. Additionally, several real estate and property management companies installed SHW systems on multiple properties, giving the market a significant boost. 18

Additionally, the NYC Department of Citywide Administrative Services (DCAS) has also implemented an initiative to install solar heating on a number of fire stations and recreation centers across the city. Two systems have been installed already and seven more are slated to be completed by the end of 2013. 50 40 Government Multi-family / Commercial Residential Cumulative installations # installations 30 20 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 year Figure 8: Number of annual (bars) and cumulative (line) solar heating installations in NYC (2003 to 2012) Although small, NYC s SHW market size does appear to be increasing with several new installations going in each year for the past six years. However, SHW market growth is inconsistent from year to year. Moreover, in a city with over eight million residents and 975,000 buildings, it is clear that the solar heating industry in NYC is still in its early stages, representing a young and emerging market. 3.2 Market Value Chain Due to its small size, SHW tends to be a secondary (ancillary) business service for plumbers, solar PV developers, as well as component manufacturers and distributors. Figure 9 below characterizes the SHW supply chain in New York. This includes (i) component manufacturers, (ii) distributors and wholesalers, and (iii) developers and installers. A brief description of the supply chain is below. 19

Figure 9: SHW supply chain and (examples of) companies serving the NYC market Component manufacturers make solar hot water collectors and mounting systems as well as balance of system components, including storage tanks, expansion tanks pumps, controls and valves. The Energy Information Administration indicates that two solar heating panel manufacturers operate in New York State (SunMaxx Solar 11 and Silicon Solar 12 ), though none are located in NYC. xiv Additionally, though a comprehensive manufacturing survey is beyond the scope of this report, it is important to note that there are likely a number of companies in NYC (or nearby areas) that manufacture or distribute balance of system components like tanks, valves, and controls that could be used directly in solar heating systems or readily modified to do so. The SHW supply chain also includes distributors and wholesalers. Though there are some exceptions, the SHW industry in New York tends not to be large enough for dedicated distributors or system 11 SunMaxx Solar is primarily focused on designing, manufacturing, and distributing solar heat and hot water heating products supplying solar thermal products to a variety of companies (including Silicon Solar). 12 In addition to solar hot water, Silicon Solar also manufactures and distributes a large selection of residential solar panels, solar cells, lights, and fountains. 20

integrators. In many cases, SHW installers source equipment directly from manufacturers. For example, within New York, SunMaxx Solar and Silicon Solar are manufacturers that also serve as distributors of solar hot water panels. Empire Clean Energy Supply distributes SHW as well as other renewable energy system components. Developers and installers design, finance, and install solar heating systems for end-users. NYSERDA reports that 40 contractors are qualified (under the state rebate program) to install systems in New York City; however, few companies are active in NYC. In 2011, three installers dominated the NYC market, accounting for approximately 70% of installations. The remaining NYC installations in 2011 were completed by a mix of traditional solar PV, plumbing, and mechanical contractors.. Finally, it is clear that NYC s SHW supply chain is small and fragmented. A fragmented supply chain can lead to non-standardized approaches to system design, which oftentimes contributes to high system costs and poor system performance. Combined with programs to increase demand, developing programs to create a stronger, more coordinated supply chain could improve the quality of installations, drive down costs, and increase the competitiveness of the SHW market in New York City. This is explored in greater detail in Section 5. 3.3 SHW Project Economics in NYC 3.3.1 Installed Costs Figure 10 and Figure 11 illustrate installed costs for residential and commercial SHW systems participating in NYSERDA s statewide SHW rebate program. These figures illustrate two important trends in New York s SHW market. First, installed costs (on a dollar per square foot basis) tend to decrease as system size increases. This is to be expected, as developers are able to leverage the economies of scale afforded by larger systems. Second, these figures illustrate the wide degree of variability of installed costs for systems across the state. For example, looking at the residential systems in Figure 7, installed costs for systems between 55 and 65 square feet ranged in cost from a low of $71 and a high of $427 per square foot. Similar trends are also apparent for commercial systems. Such variability of installed costs is typical of new markets, which lack transparency, standardized approaches to system design, and/or critical market infrastructure. As a result, installation costs for SHW systems vary widely. Similar trends are seen in the local NYC market as well. 21

$700 $600 Residential installations total sq ft $/sqft 250 200 $500 $ per sq ft $400 $300 $200 $100 150 100 50 $- installations Figure 10: Installed costs of residential SHW systems in New York state (source: NYSERDA, 2012) 0 $400 $350 Commercial installations total sq ft $/sqft 900 800 $300 700 $ per sq ft $250 $200 $150 $100 600 500 400 300 200 $50 100 $- installations 0 Figure 11: Installed costs of commercial, industrial and government SHW systems in New York state (source: NYSERDA, 2012) It is additionally worth noting that SHW systems are, on average, estimated to be more expensive in NYC than those installed elsewhere in the state. For example, commercial systems installed as part of the NYCEDC Solar Thermal Pilot Program were approximately $30 to $40 per square foot more expensive than commercial systems from NYSERDA s incentive database. Similarly, in a 2008 NYSERDA study of domestic SHW systems, installed costs for NYC installations were, on average, seven percent higher than the rest of the state; however, the 2008 study did not take into account the cost of NYC permitting and/or other local soft costs, which significantly impact residential system costs. 22