Renewable energy's role in achieving net zero carbon
How onsite rooftop solar can deliver an array of benefits including attractive financial returns for both occupiers and landlords
Real estate is a resilient asset class but with the drive towards net zero carbon, the built environment sector is being challenged to make the necessary changes. The latest IPCC report issued in August 2021 serves as a timely reminder that action now matters to ensure climate goals do not slip beyond reach.
The operation of existing buildings and the procurement of renewable energy are a key focus for achieving a net zero carbon agenda. Increasingly developers, investors, and occupiers are embracing the challenge and seeking ways to reduce construction impacts, limit operational energy use, increase renewable energy supply and offset any remaining carbon through a recognised scheme.
With an array of potential solutions, it can be difficult to know where to start and which actions will have the greatest impact. Net zero carbon audits help in this respect and many conclude that alongside efficiency measures on-site renewable energy sources can play a vital role.
To the roof
Rooftop solar PV is one of the more accessible on-site technologies to consider for buildings with available roof space. An onsite rooftop solar system can deliver an array of benefits including delivering attractive financial returns and providing high quality electricity procurement options to both occupiers and landlords.
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Learning the ropes
The opportunity for installing rooftop solar is widely available in the commercial real estate sector but understanding the value dynamics and navigating the installation process requires careful consideration. Stakeholders can have different motivations for taking action and different concerns when it comes to the practical realities.
5 things you should be thinking about when it comes to rooftop solar PV include:
- What properties are suitable and which solar design should be considered?
- Who will own the solar asset and what contractual arrangements are needed to monetise and maintain the project?
- What are the expected financial and environmental benefits and how are they impacted by different input assumptions?
- What does the installation process involve and how will the performance of the asset be monitored going forward?
- Which contractors offer the best combination of financial return and overall service offering?
Finding a foothold
Properties come in many shapes and sizes and motivations for installing solar vary based on the strategic importance of different goals. For example:
- We are working with a large real estate fund to understand the potential for solar PV generation on a large industrial property in the south of England and strategic considerations for matching onsite green power with the wider fund landlord's electricity supplies.
- We are working with a large occupier interested in maximising rooftop solar PV on a new development where the developer is only incentivised to install solar PV up to the level required to meet select building regulations.
- We are working with a landlord interested in installing solar PV to serve multiple occupiers across a single site.
- We are working with a public body interested in understanding the value uplift that should be considered alongside the property value from a balance sheet funded solar project.
Making the climb
For new projects, our approach aims to minimise upfront cost and risk to our clients through an initial feasibility assessment using the latest solar design management technology and our in-depth knowledge of the market. The objective of this feasibility analysis is to determine an optimal solar design that considers installation costs and financial returns alongside practical considerations on what equipment to install and what level of performance monitoring is required.
Depending on our feasibility findings we can then support through procurement and implementation to identify best value proposals, ensure critical due diligence items are addressed, and establish operations, maintenance, and monitoring systems aligned to serve client needs.
The top 5 considerations for any new solar PV installation include:
- Suitability of building for solar including assessment of onsite consumption, state of roof repair, and expected useful life.
- Optimal solar design and equipment selection, including inverter and metering set up to ensure robust long term performance plus accurate and timely reporting of electricity usage.
- Understanding of key value drivers, installer exclusions, delivery timescales, and options for coordinating works with roofing and other contractors.
- Experienced installers and sequenced site investigations, including liaising with the DNO on potential grid connection constraints, and selection of suitable O&M service levels.
- Commercial terms for occupiers and energy suppliers for the purchase of power and introduction of suitable lease provisions governing access and maintenance.
For existing sites, we draw on our valuation and M&A experience to assist in determining market values that support internal decision making.
Our specialist Energy and Infrastructure Advisory team are committed to supporting clients make the transition to a more sustainable future. We provide clients with a variety of transactional advisory and consulting services for renewable energy and clean-tech assets, by sharing our deep understanding of these markets gained from 100+ years combined sector experience. If you have an energy related query and need support, then our team are here to help.
Contact Bertie RedheadDirector, Energy and Infrastructure Advisory, International Capital Markets, EMEA
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