Solar panels and heat pumps in sectional title schemes can reduce overall electricity bills by as much as 40%. But companies which provide financing to bodies corporate and homeowners’ associations differ as to how long the payback period for these special projects is, with Propell arguing two to five years, and Trafalgar positing up to seven years. In either case, a feasibility study is in order.
Both agree that with yet another Eskom electricity price increase having been approved by NERSA of 9,4% for 2016/2017, beginning April 1, it may be time for trustees of sectional title schemes or their managing agents to consider installing environmentally-friendly systems to heat water and to save electricity in other areas.
Propell director Willem le Roux says “installing equipment such as solar panels or heat pumps to heat water, LED lighting or lights with movement detectors for common areas, and other energy saving devices, will contribute to raising the value of units in the scheme. In addition, these devices will help residents control their expenditure and save on electricity.”
“Solar panels and heat pumps reduce a large percentage (around 40%) of the overall electricity bills. These energy saving systems usually pay for themselves within two to five years, after which the residents will continue to enjoy the reduction in their electricity bills each month.”
Le Roux explains that this type of installation is usually considered a special project. “Despite the obvious benefits, bodies corporate often postpone special projects due to a lack of funds and a reluctance to raise a special levy to cover the costs. Owners might also be reluctant because it is a large outlay of cash if the job is done without financial assistance. But if they have an option of paying it off, it might seem more feasible. In addition, if a contractor is approached with a bulk order, he might be able to offer a discounted price.
“Propell can offer project finance for large projects like this and, because many home owners are now feeling the need to save energy and money, it might be easier to get everyone to agree to it,” he says.
“The finance available through Propell will enable the scheme to fund the installation in full and in many cases the monthly saving on the municipal account could cover the repayment instalment each month.
“Once the loan is repaid, the saving will help the body corporate’s cash flow and reduce the need for future increases in levies or the need to raise special levies for other projects (i.e. they will be able to “bank” the surplus and build up a reserve fund).
“Propell offers this project finance to assist managing agents and trustees get the job done with minimum fuss and without having any of the trustees sign surety for the loan. The facility can remain in place indefinitely and will only incur costs when used. With easy access to funds when needed, the trustees and managing agent are, therefore, able to do their job properly, which ultimately is to ensure the scheme is run efficiently.”
Trafalgar Group MD Andrew Schaefer says he supports the recommendations “albeit I have found from experience that the project payback is closer to 7 years and not the 2 – 5 years as suggested. Either way it is very important to conduct a detailed feasibility study to define the saving and payback periods and make informed decisions accordingly. Meter readings and a history of the appliances being replaced would be very important to establish a clear baseline and then demonstrate savings following the project. Very often the feasibility study is compiled by the service providers selling the new equipment therefore creating a potential bias with the feasibility study. I would recommend an external utility specialist to audit the project feasibility assumptions to validate the recommendations. Project finance is helpful as proposed by Propell and our financial services company offers similar loan products too.
“I am aware of only a few case studies where conversions of this nature have been undertaken as retrofit projects are generally perceived as expensive and therefore difficult to obtain body corporate approval for versus a new development or replacement on the back of a necessary repair or refurbishment. Established bodies corporate are generally very cost sensitive with tight cash flow parameters based on levies being derived to only cover monthly operating expenses plus a small reserve fund. As electricity costs continue to rise there will likely be a steady increase in projects of this nature albeit I would think penetration is small at present.”