Solar’s Benefit Extends Beyond ESG

Investments in solar, energy storage and electric vehicle charging are no longer “nice-to-haves” for today’s building owners. According to the Urban Land Institute’s Emerging Trends in Real Estate 2022, 82% of respondents consider ESG elements when making decisions, with 48% citing tenant or investor requirements as motivation.

Blair Herbert, CEO of Coast Energy, believes they’re now essential not just for their ESG contribution, but also because of their impact to the bottom line.

“We always start with the core understanding that most folks aren’t going to make a change to solar energy storage unless it positively impacts them financially,” says Herbert. “They have investors; they have to report to stakeholders. At a basic level, solar increases net operating income (NOI) for property owners. And a substantial increase in NOI correlates into higher property values.”

Herbert says setting baselines can help demystify projects for property owners, allowing them to measure progress and cost savings, which can then be shared with stakeholders.

PPAs, not just for energy

Building owners are typically surprised to learn that solar and energy storage projects allow them to lower their electricity bills through a power purchasing agreement, or PPA. Herbert says Coast Energy will develop, own and operate solar systems sited on customers’ property, usually on a rooftop or covered parking structure. The company then sells power to the customer through their PPA at a cost that’s often less than their current utility rate, allowing owners to realize immediate savings. He notes some non-energy financing options as well.

“Often we’ll meet with a commercial real estate owner who happens to say ‘Hey, I’m repaving my parking lot’ or ‘I have to replace my HVAC,’” Herbert says.  “That’s interesting because we can fold that into our financing and offset capital expenditures they might have coming up.”

And long-term, contracts are typically fixed-price – meaning customers lock in an energy rate with Coast Energy and hedge against other forecasted electricity cost increases or inflationary upticks.

Solar Savings Across a Portfolio

Another challenge Herbert notes is for owners who have a portfolio that span multiple jurisdictions. The best energy solution may vary by jurisdiction due to policies, incentives or other factors. Working with a single solutions provider who understands these nuances across jurisdictions is key to ensure a streamlined suite of solutions across the portfolio that offers the greatest financial benefit to the owner.

“It can take some time, but it is really not all that difficult if clients are engaged in the process with us,” says Herbert. “It’s easy for us to assess a large portfolio of buildings and come up with a suite of solutions that might be different for each property, but that all drive NOI growth.”

Herbert says Coast Energy’s systems utilize real-time monitoring to allow building owners to see how their systems are performing in real time – and he recommends that customers publish that data on their website or internally within their team to engage their employee base in the initiative.

ESG Incentivized in the IRA

As the focus on ESG initiatives picks up steam, particularly on Wall Street, solar and energy storage projects provide a strong ESG benefit to building owners. The federal government has recently stepped up to incentivize this type of investment with the Inflation Reduction Act of 2022, which includes policies that will invest in US energy production and reduce carbon emissions. The legislation includes $369 billion in energy and climate change investments, with substantial tax incentives on the horizon.

Herbert says within that package, the energy industry is receiving an increase in solar tax credits that will allow companies like Coast Energy to effectively install solar systems that receive higher investment tax credits. This results in providing lower cost electricity to building owners. The legislation extends the Investment Tax Credit, and myriad other new or extended tax incentives – some of which can be stacked – which ultimately provides greater benefits to commercial real estate owners.

“We’re expecting a lot of positive news coming out of DC as it relates to solar and decarbonization,” Herbert says. “There’s going to be a really strong movement toward solar, energy storage, and the decarbonization movement more broadly.”

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