REAL ESTATE INVESTORS CAN LEAD TOWARD SUN

Interesting statistics in this article about how much solar energy could be installed with a concerted effort from institutional real estate investors. But where is the profit? Appealing to the humanitarianism of real estate developers/landlords is about as useful as reasoning with a hungry lion.

So here it is: A solar energy installer leases the building’s rooftop space, installs the solar system and maintains it. The solar company sells electricity to the tenants via a power purchase agreement. The electricity is “green” and the cost is kept at or below utility rates, so the tenant is happy. The landlord gets an income stream from the rooftop lease. And the solar installation adds to the building’s resale value.

Arno Harris, CEO, Recurrent Energy: “It’s a winning proposition for everyone involved…there’s a window of opportunity for REITs and institutional owners of large real estate portfolios to embrace solar while federal and state incentives make it economically attractive.”

Rooftop Solar Can Help REITs Cut Buildings’ Carbon Emissions in Half and Tap New Revenue Stream
November 14, 2007 (Business Wire via Yahoo Finance)

WHO
Institutional owners of U.S. commercial real estate, publicly owned real estate investment trusts (REITs), solar services provider Recurrent Energy, Environmental Protection Agency (EPA), Department of Energy (DOE)

This solar installation atop Harvard Business School's Shad Hall suggests solar installations make good business sense.

WHAT
The large real estate-holding entities control enough rooftop space to generate 15,000 megawatts of solar energy. A power purchase agreement between solar services provider, landlord and tenant could make installations a win-win-win proposition.

WHEN
Presently, US solar energy is less than 750 megawatts.

WHERE
This summary of the potential for solar developments will work anywhere in the US.

WHY
- EPA: electricity use is the largest part of commercial buildings’ emissions. Installing solar could cut 50% of their emissions.
- With the described power purchase agreement, the landlord and tenant gain from participation, as does the solar company.
- With solar energy installations, real estate developers may find their buildings gaining value in another way, earning LEED certification from the Green Building Council and the EPA/DOE ENERGY STAR program.

Schematic outlining the power purchase agreement concept. (click to enlarge)

QUOTES
- Craig Cornelius, U.S. Department of Energy: “Organizations that own a substantial portfolio of commercial buildings have a critical role to play in reducing U.S. greenhouse gas emissions…Rooftop solar energy is an ideal building enhancement, providing on-site pollution-free electricity.”
- Arno Harris, CEO, Recurrent Energy: “By tapping the solar potential of empty rooftops, owners of large commercial real estate portfolios, such as REITs, have a unique opportunity to quickly and effectively reduce their greenhouse gas emissions…”
- Harris, Recurrent Energy, on the power purchase agreement: “Many of these buildings are covered by triple net leases – which unfortunately don’t provide an incentive for either landlord or tenant when it comes to ‘greening’ a building by installing solar…By developing a power purchase agreement structure which provides solar benefits for both tenants and landlords, we’ve effectively solved the triple net lease barrier and made it viable for landlords to finally open up their rooftops to solar across their entire portfolios.”