Environment Solar Energy
here is a huge opportunity for landlords and tenants of commercial properties to deliver signifi cant savings on energy costs through on-site generation. Indeed, one of the most historically underused areas of a building is now starting to create a stir, with the returns for rooftop solar PV fi nally beginning to stack up. As an industry, we’ve been talking about the benefi ts of solar power for a long time; however, the constant tinkering with subsidies and government policy has meant that solar has not always seemed like the most straight-forward choice and has put many investors off. Nevertheless, with the government’s New Solar Strategy set for a spring launch and the Department of Energy and Climate Change (DECC) aiming for commercial and industrial roofs to support around one-third of the UK’s future solar mix, the time has never been better to invest.
Over recent months, Savills has
modelled the energy
High returns T
usage of more than 400 warehouses and retail units against the predicted savings and returns which could be generated by an investment in rooftop solar and the results are impressive. For example, a 40,000 sq ft rooftop could support a 250kW solar system producing approximately 225kWh of power. That size of building may well be using in the region of 260-300kWh during the daytime, which means that solar could be producing the majority of the unit’s daytime power needs. Assuming the tenant saves a conservative 15-20% per kWh in their electricity costs by switching to on-site solar, the annual saving could be in the region of £4,500, adding up to hundreds of thousands of pounds over time when you build in the effects of electricity infl ation.
HIGH RETURNS
It’s good news for the landlord as well, who might spend in the region of £250-300,000 on a 250kW array. Over a 25-year payback period, the investor could expect to see returns in the region of 10-15%, generated from a combination of the sale of electricity to the tenant and claiming Feed in Tariff (FIT) subsidy payments from the UK government. Scale up to a distribution centre measuring hundreds of thousands of square feet and a 1-5MW solar system: while a change in tariff banding has a small impact on the return, an investor could still expect to see a yield in the region of 9-13%. However, there are other drivers at play beyond pure return on investment. Increasingly, property owners are looking to diversify their energy supplies in order to better control long- term costs. There is much talk about energy security and scarcity in the media and this has prompted resurgence in the popularity of on-site, off-grid power generation. Likewise, solar technology has improved suffi ciently to counter wetter climates. In addition, there are proposals
42 March 2014
www.shdlogistics.com
Investing in rooftop solar could deliver returns of 10-15% to savvy property owners who are willing to commit. Giles Hanglin, director at Savills Energy, explains why looking up to the roof could be an integral step in low carbon warehouse design.
out which will require all newly-let commercial buildings to have an Energy Performance Certifi cate (EPC) rating of at least E or above from the 1st April 2018. A rooftop array could go a long way to helping to meet those obligations. But it isn’t just about what’s on the roof. On- site power generation is at its most effective when combined with smart technology within the warehouse. For example, installing a rooftop solar system in conjunction with passive solar design technology can contribute to the heating, cooling and daylighting of almost any building. It may also be appropriate at the design phase to look at night storage heaters or air/ ground source heating systems, which can help to smooth out the intermittent nature of solar generation. As well as the temperature of the building, effi ciencies can also be gained with lighting, by looking at LED rather than halogen lights, set on a responsive system which reacts to the movement of occupants. Rising electricity prices are one of the big unknowns for businesses, while there is an increasing imperative for organisations to invest in effi ciency measures. Rooftop solar represents a real opportunity for commercial property owners and tenants to address the dual challenge of energy costs and environmental performance, while realising genuine commercial benefi ts for the long-term. Of course, solar is not right for everyone and it is important that landlords engage with experienced advisors who can identify, develop and commercialise energy generation opportunities to achieve valuable commercial benefi ts. Many commercial buildings have already been transformed to deliver future energy needs and we expect this trend to continue over the coming decade, especially with the government’s 2020 targets in sight. n
www.savills.com
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