"We have 41 million sf of roof space in their service territory," says Drew Torbin, manager of sustainability for ProLogis. "The rooftop in Kaiser will be first, but we don't expect it to be the last."Nor is the Los Angeles-based utility company the only energy provider with which ProLogis is working. The REIT is exploring similar relationships with providers in Northern California, Oregon and Colorado.
Though Tobin is not at liberty to give financial details of the present agreement, he acknowledges the leasing of rooftop space is a largely unexplored new revenue source not just for ProLogis but for all owners of large industrial buildings. Southern Edison alone wants to install solar panels capable of generating 250 megawatts of electricity over the next five years. Every megawatt requires 250,000 sf of space, creating a need for 62.5 million sf of roof space or land. Furthermore, adds Tobin, ProLogis will earn money as construction manager for the solar installation.
The relationship between the two companies began last year when ProLogis responded to the utility company's RFP for new alternative energy sources. The Denver REIT proposed putting solar panels on its buildings and selling the energy to Southern Edison, but the utility company would not agree to the requested price. This year the company issued a new RFP seeking space for installation of its own panels.
According to Tobin, it took significant time and effort to work out a viable lease rate that took into account not just the value of the roof space but also liability issues in terms of both public and employee safety and potential damage to the buildings. "There are a few comparables but not exact ones," the exec tells GlobeSt.com. "At the low end you can look to wind farms and the cost of renting dirt. At the high end, you can look to what it would cost for Southern Edison to buy land and build facilities from scratch. But the real market value is still being worked out."
The lease of rooftop space for solar energy generation is not new for ProLogis. The company's European division has one-megawatt solar panel projects installed or under development at ProLogis Park Chanteloup in France and ProLogis Park Penedes in Spain.
"Our experience to date in France and Spain has shown that we can effectively use rooftop solar panels to generate environmentally conscious, renewable energy, meeting the needs of local communities while also enhancing the return on investment from our properties," says Jack Rizzo, managing director of global construction at ProLogis. "Our agreement with SCE is the first of its kind in the United States and lays the groundwork for similar programs throughout the country. With more than 500 million sf of roof space worldwide, we see continued potential in harnessing the power of solar energy from our rooftops."
One benefit the company will not see is free power for its properties. All the power generated belongs to the utility companies and flows directly into the energy grids for the benefit of all customers. None is diverted directly to the buildings on which panels are located.
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