Choosing a Renewable Energy Partner for Rooftop Solar Development
May 30, 20233 Considerations to Keep in Mind When Choosing a Renewable Energy Partner
With the rapid growth of solar energy, commercial property owners—especially ones with large, flat rooftops—are increasingly being approached by, or seeking bids from, renewable energy firms.
However, with a booming industry comes high expectations. While some owners default to the highest offered lease payment, sometimes your highest-paying tenant isn’t your best one. Here are a few easy ways to see if your interests are aligned for your best outcome.
1. Earn Only a Fixed Solar Lease or Upside with Integrated Systems?
For a long time, solar contracts have been fixed price and paid on the energy produced. Utilities are shifting the economics to the time and volume of power dispatched, making storage and controllable additional loads (like EV charging) increasingly valuable. Long-term renewable independent power producers can expand and optimize system to share that upside with their real estate partners, enlarging the opportunity for everyone.
2. The Highest Bidding Energy Partner Tends to be Short-Term
Develop and flip, or own and operate? Costs of solar equipment, labor, and capital components are mostly the same, and the highest bidders often have the most low-cost debt. As a result, they also usually are the ones that then transfer ownership to financial institutions after the solar project reaches commercial operations.
As a result, your highest bidder may be a short-term partner. Renewable developers seeking to be long-term independent power producers will be with you for the lease term and eager to fix issues and explore opportunities.
3. How Do Commercial Renewable Energy Companies Secure Capital for Development?
Like commercial real estate, renewable energy companies use similar sources of capital that usually have only marginal differences at any given time. However, it’s not unusual for developers to cherry-pick a cost of capital or a changing incentive program to win a bid while planning on renegotiating a deal when all the permits are in hand.
Your best partners will strive to have consistency and transparency in the partnership, even when things change. They also will have secured capital and materials in advance to have certainty of execution.
Unlike 5 to 10-year commercial leases, renewable energy assets will be there for 20-35 years. Will their owners be able to provide roof warranties that can be enforced? Do they have a strong safety record? Do they have the financial strength to enforce OEM warranties, and have the proper levels of insurance? All of these are investments that a good partner will make rather than cut corners just to get a deal.
Long-Term Partnerships Deliver Long-Term Benefits
Installing rooftop solar on your properties is an effective way to meet sustainability objectives while creating lucrative streams of income. However, careful consideration should be taken into account before forming a partnership. While high-paying tenants may initially seem ideal, these partnerships can be unreliable, short-term, and may prevent you from achieving the full value of your solar system.
Instead, consider prioritizing a long-term relationship with an Energy-as-a-Tenant company. Companies like Catalyze are focused on the lifetime value of a solar project. In doing so, we help real estate owners and operators:
- Maximize the net operating income for each property
- Increase building resiliency and efficiency
- Net higher rents and occupancy ratings
Interested in learning more? We’re here to help! Contact us today for more information about our services.
