by Drew Torbin, ProLogis
The solar industry has taken off as a result of renewable energy benefits and increased pressure on companies to build renewable energy portfolios. Nevertheless, the details of how to install solar installations and where to put them have stalled the process.
Challenges remain in finding appropriate locations for utility-scale, rooftop solar installations. The best locations are near utilities’ customer bases, where the energy is ultimately used. Infill areas where these customers are located, however, are packed with existing infrastructure.
Partnerships between utilities and commercial and industrial real estate owners make sense for many reasons.
Industrial Warehouses Are Ideal for Solar Installations
The potential impact distribution warehouses enable for the solar industry is tremendous. For example, my company, ProLogis, owns more than 2,898 distribution warehouses worldwide, totaling more than 540 million square feet of roof space (the equivalent of more than 10,000 football fields). Using a 1-MW-per-300,000-square-feet ratio, ProLogis can host 1,800 MW of solar installations on its roofs.
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Industrial warehouses offer an ideal solution because of their:
- Location. By design, industrial warehouses are near major populations. Mainly occupied by consumer-related companies that distribute goods locally and regionally, warehouses reach the same populations that are connected to local utilities’ electrical grids.
- Size. The average size of a U.S. distribution center is 312,000 square feet. A typical 300,000-square-foot building can hold a 1-MW system, or enough to satisfy a year of energy needs for some 1,000 houses.
- Design. Industrial warehouse roofs are flat and sit slightly lower than exterior warehouse walls, making installations viewable only from above and unnoticeable to passers-by on the street. In addition, construction does not negatively impact communities, and location enhances security, which prevents vandalism and theft.
- Availability. Warehouse roofs are immediately available for solar installation. In ideal situations, power generation can begin in as few as 90 days.
- Existing Space. Environmentalists appreciate rooftop solar installations because they don’t take up green fields.
- Stability. Rooftop solar installations are more stable on a commercial scale because utilities can harness distributed generation benefits, making the aggregate system more resilient in cases of outage or other disruptions.
Creating a Successful Solar Project and Deal
ProLogis partnered in 2008 with Southern California Edison (SCE) and Portland General Electric (PGE) for rooftop solar installations. As team leader, I determined what I think are the most important aspects of these lease agreements.
It makes sense for utility companies to lease roof space from warehouse owners. Commercial and industrial real estate owners are experienced in leasing space; it’s the most significant part of their jobs. Plus, leasing roof space for solar is good for the environment, and it helps real estate partners gain additional income from existing assets. Owners’ building tenants also benefit from additional roof insulation, which reduces cooling and heating costs.
Building owners experienced in construction are familiar with their buildings’ structural elements and know how much load roofs can take. In addition, owners have relationships with local architects and contractors who can best complete projects within necessary timeframes and budgets.
On the other side, it is advantageous for utilities to own and operate solar installations. This way, they can help fund projects through their rate bases, which can limit the exposure projects have to the current credit crisis. Many utility companies can take advantage of government-related subsidies and tax incentives thanks to a recent extension and revision of the federal investment tax credit. Plus, it is in utility companies’ best interests to maintain ownership of systems to control maintenance and general repairs. They are, after all, being used to service their customers.
The best real estate partner for utilities is a company that can navigate all the relationships and hurdles associated with pulling rooftop projects together. This ability is the biggest deal maker of all. Relationships between utilities and real estate companies make sense because each partner can use core competencies while doing good for the environment. Large, commercial-scale solar projects supported by these industries have tremendous potential to make a lasting impact.
Drew Torbin is manager of sustainability for ProLogis where he is the point person for renewable energy projects worldwide. Reach him at email@example.com.