How Commercial Real Estate Owners Can Easily Make Money From Solar Energy

Source:
Originally posted on April 28, 2016

With the quickly falling solar panel prices, and lucrative solar incentives in abundance, now is the time to leverage this arbitrage

If you’ve heard anything about the solar energy revolution that is happening these days, that’s already a step forward for the solar industry. When I was developing solar projects 5 years ago, the first step included convincing real estate owners that solar panels on their roofs would produce power. Today, it’s a lot more focused on return on investments (ROI) and bottom-line impact.

In many states, solar energy is already at grid-parity without any incentive. This means that the cost of energy produced from the sun is equivalent to retail utility prices. This accomplishment was due to panel prices dropping 90% and solar installations growing tenfold since 2008. Now, billions of dollars are invested in companies to fund solar projects and large corporations like Google and Walmart have already built dozens of solar plants on their facilities.

The conclusion is clear – solar is here to stay!

There are still many states offering attractive solar incentives to encourage job creation and meet clean energy goals. As we now know, solar power is already at grid-parity so if you add incentives to the project’s revenue stream you get a pretty great deal. Since regulators respond slower than the market to changes, there is an arbitrage now in the market. Early adopters can and should take advantage earning hefty profits.

”How can my business benefit from solar?”

Installing a solar PV system on a roof will increase the property’s net operating income (NOI) and will generate cash within the first year. There are several approaches to benefit from installing a solar PV system:

  • Leasing the roof – solar developers are leasing roofs for 20 year terms, allowing real-estate owners to have an extra “tenant” in an un-utilized space.
  • Lower the property energy bill – With $0 down, you can simply buy the energy from the solar system at a significant discount compared to the utility.
  • Great return on investment – By purchasing a system, real estate owners can benefit from the different federal and state incentives and enjoy 3-6 years paybacks and double digits IRRs.

“So, what’s the catch?”

Most real-estates owners have similar objections, the main one concerning the roof life. “Will installing a system damage my roof?” or “how will it impact my roof insurance?”. Insurance companies handle solar installations frequently and in most cases there is no addition to the insurance premium. Additionally, solar mounting systems are ballasted and placed on rubber sheets, therefore, there is no roof penetration or damage to the roof during installation. In fact, solar panels will extend the life of a roof as they block UV lights, which is the number one cause of roof degradation.

Another concern has been the maturity and stability of the technology. The solar industry has transformed and is now a multi-billion dollar industry. Panel manufactures are public companies and offer 20-25 years manufacturer warranty on their equipment. Further, panels are considered a commodity and are interchangeable between the different providers, eliminating the risk of a panel manufacturer going bankrupt.

“What next?”

For properties that meet all the necessary criteria the opportunity is huge. The first step before “going solar” is to conduct a brief feasibility analysis and see whether the building is a good fit for a solar installation. If the roof is right, the utility is supportive, and you have enough energy load, you might be the lucky winner and benefit from the energy source of the future.

This article was brought to you by SolarKal ( www.solarkal.com). SolarKal offers turn-key solar project development, solar financing, free feasibility tests among other services. Contact us for more information at info@solarkal.com.