Solar energy is one of the simplest and most profitable investments that commercial real estate developers (CRE) can make. Investing in solar power was once considered expensive and time-consuming by property owners and managers, who thought the effort wasn’t worth the financial return, but that’s no longer true. Installing a solar photovoltaic (PV) array is one of the most cost-effective strategies for reducing utility expenses, increasing rents, and reducing common area maintenance (CAM) reimbursements.

Many companies have agreed to get all their energy from renewable sources. Starbucks, Kohl’s, Apple, the National Hockey League and Intel are among the companies that have purchased enough sustainable energy to offset or run their entire operations. However, property developers selling or renting their properties, on the other hand, have been more reluctant to include rooftop solar in their plans as there has not been much incentive as their tenants usually pay the bills. of electricity.

Solar energy could previously only be used in the communal electrical spaces of multi-tenant properties. This is no longer the case. Individual tenants can now take advantage of commercial solar systems, thanks to the recent implementation of “virtual net metering”. As a result, higher rents can be offered and a tenant’s lease can be extended with assured energy savings. It allows a quick takeover of the solar asset without substantial financial outlay, and the lessor is often freed from the maintenance of the equipment.

A power purchase agreement (PPA) is another common alternative where a third-party developer, such as Sunpin Solar, owns, operates, and maintains the solar system while charging a fixed amount for electricity.

Even if a building is not suitable for a solar installation, it can benefit from bulk solar energy sales from other large-scale solar installations. The cost of wholesale solar has dropped considerably, and the CRE sector is starting up.

For CRE developers who are unwilling to bear the costs of owning and managing installed solar power, an operating lease is a popular option to leverage it through local community solar projects, municipal purchases and off-site solar supply, where it was previously. an unknown alternative.

Currently, photovoltaic systems are seen by some contractor developers as a way to achieve green building standards while reducing vacancy rates and increasing rental rates. More importantly, many people who are willing to make this investment have figured out how to recoup their installation and administration expenses – they have figured out how to profit from PV.

While net zero energy buildings or buildings that generate all of their energy are a popular goal in the green building industry, there is also space for buildings that use photovoltaic systems to meet only a portion of their energy needs. .

Under certain circumstances, developers may be able to use financial incentives to generate a small level of potential cash flow. Solar is a building upgrade that will increase revenue while dramatically reducing running costs. Owners of certainly huge warehouses or similar buildings with a clear roof can benefit from renting the space to such solar companies which will install solar panels and create photovoltaic electricity.

Attract a new segment of customers. Tenants and residents who want to use renewable energy sources have many options. Real estate developers can tap into an untapped audience of customers who are willing to pay extra for sustainable energy if their development can improve solar power infrastructure. At the same time, by hedging against fluctuating energy prices, developers can protect tenants and residents.

Solar power systems are used by property developers to keep tenants, increase rents, and even save money for businesses and individuals. Either way, adding solar power to the infrastructure is a valuable asset that developers can add to their list of benefits that tenants will appreciate.

Financial incentives and tax credits. Tax credits and other incentive programs are available to help fund clean energy projects as the government tries to help the nascent solar industry. However, these initiatives might not last very long, so if developers want to maximize the return on their solar investment, now is a good time. They may be able to use their financial incentives to achieve positive cash flow under certain circumstances.

Minimal opportunity costs for solar land development. One of the benefits of adopting solar power is the low opportunity cost for property developers, as solar panels are typically installed on vacant, disused land or in uninhabited locations such as rooftops. They have little to lose and much to gain by using a solar system to utilize their free space.

Return on investment. Solar power systems, unlike traditional power systems, are designed to provide full return on investment. If a developer opts for a traditional energy system, this is considered an operating cost and he will not get a direct return on his investment. On the other hand, with a solar energy solution, the promoter can anticipate his investment to amortize himself and perhaps earn money in the long term.

Developers should use five basic methods to manage the cost of integrating solar energy into their structures:

1. Use a Full Service Lease, Modified Gross Lease, or Gross Lease: The advantage of lower prices can be exploited to increase margins earned on rental agreements in models where the landlord pays all the bills of public services. They can set rental rates at market value, but they will profit more from the connection than their competitors.

2. Institute a green surcharge or a green lease: this would result in a “value” for the solar installation.

3. Selling PV-generated electricity directly to tenants: This technique is illegal in some places and may require a specific license.

4. Take advantage of Property Assessed Clean Energy (PACE) bonds: This form of lease allows the landlord to pass operating costs, such as property taxes, directly onto tenants.

5. Rent or loan the roof to a third-party solar company: Some developers may choose to rent their roofs to another company for solar growth. In this concept, a third party “owns” the power plant for a fixed term and pays the building owner rent for the use of the area. In fact, Prologis, a huge real estate investment company, was involved in a number of these transactions.

Gautam Solar has an R&D center and four factories in Haridwar for manufacturing solar components across the distributed solar value chain.

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