Maximizing Asset Value: The Future of Up-Sized Solar and Energy Networks in Commercial Real Estate

Aaliyah Pollock, RICS 

Noaa Cohn, InRange

In 2023, sustainability became a key driver within the adoption data and technology across the built and natural environment. With increasing regulatory demands and changing tenant expectations, building owners and developers are focusing more on sustainable practices in order to future-proof their assets.

An aspect of this movement is integrating renewable energy solutions like rooftop solar panels. These solutions not only align with sustainability goals but also offer potential revenue streams and energy savings. It is evident that that rooftop solar can provide energy independence and stability amid volatile energy markets, enhancing properties’ energy efficiency ratings and attractiveness to sustainability-focused tenants.

Among future-proofing opportunities, solar panels also hold the potential to gain significant revenue streams from existing assets while saving tenants money on energy. To effectively capitalise on these opportunities, innovative approaches like up-sizing solar installations and securing guaranteed export tariffs are essential. Up-sizing involves installing more solar capacity than currently needed, with excess energy sold to a network of buyers which ensures a fixed, long-term revenue stream, and providing a buffer for future energy demands. Additionally, the Whole Life Carbon Assessment (WLCA) by RICS, which evaluates carbon emissions over an asset’s lifecycle, highlights the importance of sustainable practices in the built environment by considering both operational and embodied carbon.

Future-proofing your assets with up-sized solar and energy networks

Energy regulation for commercial buildings, such as the Minimum Energy Efficiency Standards (MEES), is rapidly increasing, putting assets at greater stranding risk. At the same time, customer expectations are shifting, with a growing expectation among large commercial tenants that the buildings they inhabit are greened in support of their own sustainability goals.

As building owners aim to strengthen the value of their assets long term, rooftop solar panels present a massive opportunity for futureproofing. Uniquely among future-proofing opportunities, they also hold the potential to unlock significant revenue streams from existing assets while saving tenants money on energy.

But for building owners seeking double-digit returns and stable long-term revenue, the project financials rarely stack up. This contributes to today’s low 5% adoption rate of solar projects in the UK’s warehousing sector, a number that’s echoed across other sectors such as manufacturing. Why is that?

Modernising “traditional” solar wisdom

The traditional advice given to commercial clients by solar consultants and developers suggest maximising project performance by right-sizing solar to match the needs of on-site tenants. Sometimes coupled with a battery, the idea is to minimise install cost and limit the site’s exposure to low grid export tariffs. 

However, this approach often results in a problematic misalignment: the on-site tariff required for a profitable project is too high for tenants to agree to. It excludes headroom for future expansion such as on-site EV charging, nor does it account for any revenue certainty in case the site experiences a tenant void. 

A new model that addresses these shortcomings is up-sizing: Installing more than currently required on-site and exporting the excess. This model can align incentives between building owner and tenant by increasing revenue, while also improving on-site tariffs. By generating more energy, it also future proofs the asset with headroom for expansions. But how can that be done profitably?

A guaranteed export tariff

For up-sized projects to be profitable, dumping the excess generation onto the grid’s low, volatile export tariffs just won’t cut it. Building owners require a guaranteed, fixed, long-term export tariff. 

A fixed, long term export tariff creates revenue certainty both in the face of energy market volatility, as well as for unexpected events such as tenant voids. It can improve project financials to the degree that building owners can offer tenants competitive on-site tariffs, saving them money while strengthening the owner/tenant relationship.

How can you get a guaranteed export tariff?

Export tariffs can be guaranteed by selling to a network of energy buyers, rather than directly to the grid. A network of buyers that have stable energy demands and can commit to purchasing the excess energy generated by the up-sized installation. 

Buyers can include tenants with buildings that have on-site solar, but don't generate enough. Or those that have buildings whose roofs can’t handle on-site solar. Large energy buyers such as data centres also can provide guaranteed export tariffs for the long term.  

Being a part of a network of energy buyers allows building owners to think beyond individual buildings, and balance energy supply and demand across and beyond their real estate portfolio. 

A fresh take on solar PV

Unused commercial roof space can offer significant untapped revenue potential if building owners adopt this modern approach to solar project planning. Integrating renewable energy solutions like rooftop solar panels not only aligns with sustainability goals but also holds the potential to unlock significant revenue streams from existing assets while saving tenants money on energy. Moreover, considering the environmental impact over an asset’s lifecycle, as emphasised by the WLCA, becomes crucial in ensuring sustainable practices in the built environment.

A guaranteed, fixed, long-term export tariff from a network of energy buyers and sellers can future-proof assets: improving energy scores, providing headroom for demand growth, giving certainty in the face of tenant voids, and strengthening the tenant/owner relationship. It can also yield significantly higher solar revenue for owners and meaningful energy savings for tenants.

This shift towards more sustainable practices can incentivize more building owners to evolve from conventional methods, up-size their solar ambitions, and move the needle on solar adoption in the commercial sector.