SAN DIEGO-Wholesale Distributed Generation rooftop photovoltaic installation may not yet be a household term, but it’s a fast-growing solar-energy procurement program that can provide industrial property owners between $40,000 and $60,000 a year of extra income at no cost to the landlord whatsoever. Major California utilities have implemented programs focused on WDG, which involves property owners renting their unused rooftop space to solar-energy companies for the installation of solar-energy systems. The companies in turn sell the generated power to the utilities and, in exchange for the rooftop space, landlords get a significant break on their energy bills.
Local company Borrego Solar Systems develops photovoltaic projects for the utility companies’ new program and is the first developer to successfully complete two operable installations under this new program, which utility companies SDG&E and Southern California Edison began a couple of years ago, Brian von Moos, director of utility project development at Borrego Solar, tells GlobeSt.com.
The best location for the WDG arrangement is a building that is at least 100,000 square feet, built after 1960, with a flat, unshaded rooftop, energy-grid interconnection and good infrastructure. Large industrial and commercial properties typically meet these qualifications and are often owned by REITs, so Borrego has targeted this owner classification, particularly industrial REITS, as ideal for future WDG PV installations.
Borrego has been in business since 1980 and is a long-standing solar contractor that offers a full suite of services including project finance, development, engineering, construction, operation and asset management. “The way most of our projects have happened in the past is that we’ll work with a school or a big Fortune 1000 company to design a system that would meet their needs,” von Moos tells GlobeSt.com. “We’d install it on their roof, and the energy that came off their roof would come off their utility bills.”
This type of power purchase agreement works well for schools and owner-occupied buildings, but Borrego is seeing the value in the WDG model—completely bypassing the tenant and only working with the utility and the building owner, which allows for the long-term lease contracts that make solar energy cost effective. “Utilities generally have much better credit ratings than typical tenants,” says von Moos. “We sign a lease with the building owner to rent roof space. The lease can be 20 years with some options to expand. There’s very minimal effect to the tenants since we don’t really need to get inside the building or do anything to affect their business.”
There’s also very little required of the landlord, except to allow Borrego occasional access to the rooftop to maintain and service the system. An owner can even sell the building, since the solar lease goes with it. The landlord does relinquish the right to alter the rooftop or use it for other purposes that might interfere with the solar-energy system. And of course, owners lose the right to raze the building.
Another caveat is that the energy generated by the rooftop belongs to the utility company and doesn’t affect that building’s tenants’ bills. But landlords are afforded a 3% to 5% boost to their revenue on top of rental income, which could potentially free up funds for tenant improvements.
As GlobeSt.com reported in April 2011, solar power on apartment rooftops could generate up to 300 megawatts of power within City of Los Angeles boundaries in the next five to 10 years, according to a report by the Los Angeles Business Council’s Sustainability Summit.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
