Brian Hegarty, partner in Ashfords LLP Renewable Energy Group, spells out why there is much room for optimism in the commercial rooftop PV market, despite some well-publicised barriers to uptake.
We hear a lot about the problems associated with commercial rooftop solar but, like Ian Dury, I think that there are several reasons to be cheerful.
We are fast approaching the so called holy grail of grid parity. Many believe that grid parity will trigger a huge increase in the growth of commercial rooftop solar. The term ‘grid parity’ is not precise, having a number of definitions including the point in time when the cost of rooftop generated solar is the same (or less) than the cost of buying from the electricity grid. Some experts predict grid parity will be reached as early as 2018. It may not in fact be the holy grail but its rapid approach is likely to contribute to stability and confidence that will help stimulate the continued growth of rooftop solar generation.
Lift and shift
The government consultation on so called ‘lift and shift’ closed in 5 January 2015. Lift and shift will remove one of the perceived barriers to commercial rooftop solar, by allowing a business to take its rooftop array and Feed-in Tariff with it when it moves and thereby providing a greater certainty on return on investment – which may in turn decrease both the cost and availability of credit.
The government response (published on 20 March 2015) confirms that: "We will introduce transferability through secondary legislation later this year…" It is likely that there will be a four year lead in time to enable the administrative framework to be put in place. Importantly planning permission and grid acceptance will not be required to facilitate the move.
The solar industry is moving and maturing very quickly whilst the cost of PV plant and equipment is reducing all the time. Storage technology is improving all the time. Storage may well be the real holy grail for renewable energy, particularly since some areas have reached grid capacity. Western Power recently announced that for the time being the grid is closed to new large scale renewable energy schemes. Smaller commercial and domestic schemes should not be affected. Neither will it affect existing grid offers. Returns on investment remain strong.
Attitudes are changing with many well-known brands helping that process by ‘going solar’. Most recently Marks and Spencer commissioned a 24,272 PV array (5MW) at its 900,000 square foot distribution centre at Castle Donnington for example. Sainsbury’s, Apple and many other leading brands have also turned to rooftop solar. Solar has a positive effect on the investment performance of commercial property. This was confirmed in a report in October 2014 by JLL. Rooftop solar can reduce running costs, (bear in mind that some predict as much as a 60 percent increase in the cost of industrial electricity by 2021), help meet government targets for improved building performance and increase property value through provision of additional income streams.
The perceived tension between landlords and tenants is often cited as a barrier to the growth of commercial rooftop solar. In fact that tension (where it exists) is often based on misconception and is easily overcome. With the Feed-in Tariff and power purchase agreements, rooftop solar is a classic ‘win/win’, landlords getting a good (often double digit) guaranteed return on investment and tenants getting cheaper electricity. Rooftop leases and power purchase agreements have become standardised with few variations on a theme and are generally quite simple documents easily agreed and completed. Technically the rooftop array presents little practical risk of damage to the building or conflict between landlord and tenant.