Southern California Edison has launched one of the most ambitious solar initiatives yet. It involves using the roofs of commercial buildings to develop renewable energy resources. Building owners get paid to host the solar arrays on their rooftops, and the utility takes all the risk.
Misery makes strange bedfellows. And so can a renewable portfolio standard. With about half of states now giving their utilities deadlines to get a certain percentage of their energy from renewables, utilities have been forging new relationships with real estate owners and the solar industry.
Utilities across the country are announcing plans to develop tens or hundreds of megawatts of solar generating capacity in partnership with building owners. It has the markings of a national trend that could be very good for the solar industry — and for companies with certain kinds of commercial real estate.
When you see solar modules on the roof of a building, they might not actually belong to the building’s owner. Two common ownership scenarios have been around for several years: Buying and installing a solar power array means taking the financial incentives and risks, along with the power, with a fixed up-front outlay. There’s no incremental cost for the power.
When a third party owns the array, they own the power, and sell it to the occupants. There’s no up-front cost to the building owner, just a monthly power bill. The rate per kilowatt-hour is negotiated for the life of the agreement, so it acts as a hedge against fluctuations in utility tariffs.
Lately, utilities have been pursuing more solar power projects, and devising new ownership models, to meet renewable energy requirements in their states. In one model, the utility signs a lease for the roof of a building and installs a solar array on it. The utility keeps the power to serve local customers.
Programs like SCE’s utility-owned rooftop solar could create the revenue certainty landlords need, to develop solar into new buildings — especially where net-metering rates are low or the electric load in the building is small.
But for now there are enough flat roofs, and willing owners. SCE calls it “harvesting a scarce commodity,” referring to the unused rooftop real estate in southern California, an area with an abundance of warehouses.
To be selected, a building has to have a large roof — 250 thousand square feet or more. And it has to be in Southern California Edison’s territory — for now. PG&E, in northern California, is expected to launch a similar program soon.
Exactly how this model will expand is uncertain. It’s not just implemented state by state, but utility by utility. Regions to watch are Northern Carolina, where Duke Energy has proposed an 8 megawatt program, and New Jersey, where PSE&G wants to install 120 megawatts. Utilities in Colorado, Arizona and Texas are also lining up to install distributed solar resources, using this new ownership model.