Commercial rooftop solar can boost property value, study finds

New research published by real estate company, JLL in conjunction with Solarcentury has found that solar PV arrays on commercial properties can increase their value through additional income streams.

The report Solar PV: shedding light on the opportunities states that, although there has been greater consistency and sophistication, the valuation of properties with solar PV assets is still inconsistent. The research says that a historic lack of knowledge about PV has resulted in varying approaches to valuation which has hampered the uptake of commercial solar as its true value has often not been reflected.

According to the report’s authors, discounted cash flow methodology providing a Net Present Value of income generated by the solar PV is the most appropriate and explicit.  

Chris Strathon, director in valuation at JLL, explained: “This is the first in-depth research into understanding the impact of solar and it is clear the majority of commercial roof space is untapped as an additional revenue provider.

“We believe rooftop solar on commercial property adds value by improving the marketability of a property to occupiers who are driven by cost or CSR objectives, and additional income which is received via power purchase agreements and government-backed tariffs.”

The research also reveals that rising energy costs as well as a strong governmental push for solar rooftop deployment are two key factors which are encouraging landlords and tenants to explore installing solar. The EU’s 2019 zero carbon requirement for commercial buildings combined with a predicted 60% increase in wholesale electricity prices in real terms by 2024 mean that solar is being considered by companies as a viable energy generation tool.

Frans van den Heuvel, CEO at Solarcentury added: “Whilst most of the growth to date in the rooftop solar market has been at the domestic and utility scale, there is strong evidence that commercial and industrial customers are now turning to solar, helped by the fact the technology is ready and now importantly, attitudes are changing too.

“A new wave of leading brands are going solar – Sainsbury’s, Google, Mars, IKEA and Apple among them – and this is undoubtedly stimulating the market. And with over 80% of the British public consistently supportive of solar, consumer awareness for companies choosing solar will only increase.”

There remains a number of non-financial barriers to the mainstream adoption of commercial-scale solar. The report acknowledges that there needs to be greater understanding of solar PV's capabilities, the legal implications of an installation and the management implications of the asset. The study identifies the responsibility of the roof as a key issue when installing solar, with landlords preferring FRI leases because they maintain the liquidity of the asset – the research adds that insurance policies have now almost solved the problem. However, the study points to recent commercial property transactions with solar PV that have achieved "premium prices" as proof of good liquidity.

Sainsbury’s is the largest multi-roof PV operator in Europe, with solar installed on over 200 of its properties in the UK. Paul Crewe, head of sustainability, engineering, energy & environment at the supermarket, said: “We will have 170,000 panels generating 40MW by spring 2015. This is key to enabling us to take control of our energy costs and minimise our environmental impact and achieve the environmental commitments we made in our 20 by 20 Sustainability Plan. Supermarkets have the equivalent of football fields on their roofs, many of them underutilised so it is ideal for turning that space into something positive.”

Speaking to Solar Power Portal, Amber Rudd, the minister for energy and climate change said that she wanted to put “green rockets underneath the [commercial solar] industry. One of the immediate things that the department did was have a roundtable with the industry, working with lawyers, builders, developers, some planners – to try and work out what the barriers are.

“What we’re trying to do is consult with industry to make sure whatever they are [barriers to deployment], we help get them out of the way. There is further to go, part of my visit here is to try and open up the possibilities and let people know more about what’s going on.”

Rudd concluded: “I think we will start to see a significant escalation of rooftop solar projects, it’s about education, engaging with the industry and publicising what’s going on.”