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What solar cost trends can we identify?
The Lawrence Berkeley National Laboratory has been tracking solar costs for
several years and has documented an average 6–12 percent annual cost reduction.
The most significant cost declines started in 2009, at first largely due to global solar
panel prices and in more recent years due to other hardware and "soft" costs (e.g.,
permitting and installation). For solar arrays on non-residential buildings, prices
fell 7–9 percent (depending on the system size) in the most recent year analyzed.
Installed prices have a large degree of variation across projects, indicating an
opaque market and ineffective buying processes.
How can solar improve fundamental property performance?
Energy cost savings alone can pay for the cost of solar projects on property
rooftops, carports, and the surrounding land in as little as two years. Properties
can leverage these attractive economics to improve property fundamentals through
energy cost reduction, energy sales revenue, and rent-based revenue.
Energy Cost Reduction
A solar array located on the property site reduces the amount of electricity that
the property owner needs to purchase from the grid. Depending on the amount
of electricity needed and the size of the solar array, the property can completely
eliminate its energy bill. Owners can either pass the cost savings along to tenants,
capture the savings for themselves, or take a hybrid approach to capture some
savings and pass the rest on, depending on the lease structure and owner/
tenant preference. General Growth Properties directly owns 31 megawatts of
solar capacity as of year-end 2016 (#9 among U.S. companies), cutting energy
consumption across its portfolio by 215 million kilowatt-hours since 2011, amounting
to tens of millions of dollars saved. Diligent deal teams will take energy cost savings
due to solar into account for property valuation.
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