Greening Existing Commercial Real Estate With Solar Panels
Most of the talk about greening real estate is about building practices. Until now, the focus has been on the development side of the business. But there are some interesting ventures popping up with innovative business models. One in particular capitalizes on the enormous potential of existing commercial real estate space, where the owners do not have the incentive to add solar panels to the roofs.
Here is a quote from the National Real Estate Investor:
Rooftops covering roughly 2 billion sq. ft. of major U.S. commercial real estate controlled by institutional investors could accommodate solar power equipment. But as that figure suggests, few REITs and pension funds are loading up their rooftops with solar panels.
The problem: Triple net leases, which discourage building owners and tenants from undertaking multimillion-dollar solar installations. Even so, a major change in the solar landscape for REITs and pension funds may be on the horizon.
A California startup is signing up its first customers for a new service that it claims will make solar more attractive to owners of big property portfolios by counteracting certain elements of triple net leases. Recurrent Energy Inc. will build, own and operate solar power systems for institutional investors.
The company will rent rooftop space from building owners (generally at 20 to 40 cents per sq. ft. of roof used), creating a revenue stream for the investors. Meanwhile, Recurrent will sell what it says is market-competitive power for those buildings, generating cost savings for tenants’ electric bills.
As it stands now, Recurrent CEO Arno Harris says, the structure of triple net leases hinders investments in solar technology. Building owners are reluctant to buy equipment that ultimately benefits tenants through lower utility bills, he says, while tenants are unwilling to pay for equipment on rooftops that they don’t own.
According to this month’s Solar Electricity Industrial Price Index from solar information provider Solarbuzz LLC, a 500-megawatt, roof-mounted solar installation for a large industrial building costs about $2.5 million. That price tag excludes any government incentives or utility rebates.
So far, much of the focus in green building has been on new construction. Harris says his company’s service allows portfolio owners to green existing buildings without having to re-engineer structures or equipment.
I think this is very exciting to see in the field of real estate and I am hopeful that it will catch on sooner rather than later. Since most commercial real estate is owned by large institutional investors, such as pension funds, this could realistically be done in large chunks, which would make the transition happen much faster. Keep this trend on your radar because it’s one that is not going away.
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Comments
Dude, you’re speaking my language. This is exactly the type of thing I was talking about in my post “Emerging Technology…who needs it?
Incorporating existing technologies into current structures is the ideal way to make the most progress in terms of green building, even when constrained by a lease. Props to the guys who thought of this.
Exciting news. THis will make the transition happen faster.