How to Advance your ESG Goals with the Energy-as-a-Tenant Model

Commercial and industrial real estate organizations are increasingly turning to renewable energy solutions to help them achieve climate goals. Rooftop solar, for instance, appears to provide an easy and measurable means for reducing a building’s reliance on fossil fuels. The problem? Rooftop solar systems can come at a steep cost with constantly changing utility demands and rate structures. Installing solar is increasingly a commitment to run a power plant on the property—often needing battery storage and operational management either to comply with regulations or to avoid high utility time-of-use rates and demand charges.

Thankfully, an alternative model exists that helps organizations bypass upfront costs and operational responsibilities while immediately accessing the benefits of the clean energy revolution. The Energy-as-a-Tenant model, or EaaT, offers a host of advantages for organizations that can be deployed across a portfolio of properties with minimal effort.

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What are Energy-as-a-Tenant Services?

The EaaT model is a professionally managed and integrated energy solution deployed on a customer’s property. An outside party develops, finances, builds, owns, operates, and maintains renewable energy systems that are installed on unutilized or underutilized rooftop space or land in exchange for lease payments. The electricity generated from these systems is then either delivered to tenants on the property through a Power Purchase Agreement (PPA), sold into the grid, or a combination of both that may change over time.

Renewable energy systems provide reduced, predictable electricity costs over a multi-term lease (usually 20-25 years), while also serving as an additional revenue stream.

EaaT models deploy integrated renewable energy solutions, including:

• Solar Installation – Solar has become more cost-effective to produce, sell, and consume solar electricity than fossil fuels in many states. Depending on the site, an integrated energy model may use a mixture of rooftop solar, ground-mounted solar, or parking canopies with solar rooftops to capture as much electricity as possible.
• Battery Storage – A combination of solar and energy storage is essential for meeting peak demand energy needs, particularly during evening hours or cloudy days. Battery story helps control network constraints, boost resiliency, and reduce demand charges.
• EV Charging – By 2030, 60% of vehicles sold globally will be electric vehicles. Demand for EV charging is already high – integrating EV charging onto properties has been found to be a lucrative and enticing value asset for tenants, creating opportunities to reduce churn and increase rents. EV charging should be coupled with solar generation not only to provide renewable energy for transportation fuel but also to protect the property from utility demand charges, increased rates, and new higher electric vehicle tariffs.
• Smart Controls – Integrating solar, battery storage, and EV charging with smart microgrid controls maximize cost efficiencies and transforms a potential cost center into a revenue-generating amenity.

The EaaT model is especially valuable when deployed across an entire portfolio of real estate assets. Platforms like REenergyze® allow commercial and industrial real estate owners to quickly scale and optimize all of their properties to meet performance and ESG goals while uncovering hidden renewable energy value in properties to identify high-value opportunities.

Building a renewable energy system alone requires expertise on electrical systems, knowledge of an ever-changing array of state incentives programs and regulations, as well as identifying properties with the greatest potential opportunity. Partnering with an EaaT company helps real estate organizations easily navigate the complexities of integrated renewable energy systems. The process can be broken down into three phases:

• Identifying Properties with unrealized energy value, such as properties with unused rooftop space.
• Financing & Building renewable energy assets on a property that provides the opportunity to sell back power to the utility, neighbors, and grid modernization programs
• Operating & Optimizing renewable energy systems to provide an increasing revenue stream, while boosting tenant value through resiliency and access to clean energy.

In summary, the EaaT model takes out the legwork of deploying renewable energy solutions, allowing organizations to easily scale systems across a large portfolio of properties at a minimal cost while providing a host of benefits that go well beyond meeting clean energy standards.

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What are the Benefits of Renewable Energy Solutions for Tenants?

As the energy transition gains momentum, companies are recognizing the importance of investing in renewable solutions for their properties. These systems offer a slew of benefits beyond public perception. Adopting an EaaT approach to net-zero carbon emissions offers greater value to properties, increased performance, and competitive advantages compared to properties that have not adopted clean energy standards.

Value

EaaT models maximize the net operating income for each property not only at installation but over time, as the renewable energy systems are enhanced and managed to increase value. Many buildings have unutilized space that produces no value on their own, such as rooftops or untapped tracts of land. Renting out underutilized parcels of land through an EaaT model provides the dual benefit of a new predictable revenue stream and consistent energy savings.

In addition, having renewable energy installed improves property value while ensuring real estate groups receive only rents through lease payments and no disallowed revenue under REIT rules. On-site distributed energy systems are highly desirable, and PPAs can be transferred to new tenants if a property is sold. Installing EV charging stations increases a property’s desirability even further as consumer trends necessitate demand for these devices.

Performance

As the price of fossil fuels rises every year, organizations are looking for alternative ways to offset costs. Solar energy has proven to be an effective means of reducing and controlling energy costs. In 2022 alone, electricity costs rose by 14.3 percent, nearly double that of overall inflation. Renewable energy costs are controlled and predictable over time. Renewable energy systems through an EaaT model also serve to future-proof your business against future legislation around carbon emissions.

An additional benefit from these systems is increased building resiliency and efficiency. A growing trend across the globe is an increase in weather-related power outages – from 2011 to 2021, the frequency of blackouts and brownouts increased by 78% compared to the previous decade. Renewable energy systems can keep operations running even in these conditions, and as EaaT companies are financially incentivized to keep their systems running at all times, real estate owners can rely on dependable functionality. Solar process heating technologies can be used to augment building efficiencies, such as space and water heating, ventilation, and space cooling.

Competitive Advantage

Environmentally sustainable buildings outperform their competition in many metrics, especially public perception. According to American Realty Advisors, rents per square foot in LEED buildings are approximately 45% higher than in non-LEED buildings. Buildings that adopt solar command higher rents and occupancy rates than comparable properties.

Thanks to shifts in consumer practices, sustainability goals have become an increasingly popular metric for large businesses looking to show that they care about the world around them. A challenge, however, has been measuring these goals in meaningful ways.

Solar energy offers a simple and measurable way to prove commitments to sustainability through Renewable Energy Certificates, or RECs. These credits account for, track, and assign ownership to the generation and use of renewable energy from a legal perspective. ESG goals have been notoriously difficult to track historically, as behavioral changes within a company are difficult to achieve – RECs purchased through EaaT distributed energy models provide a simple solution.

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Why Use Catalyze for Renewable Energy Systems?

The Energy-as-a-Tenant model allows real estate organizations to quickly deploy renewable energy systems across properties and take advantage of measurable sustainability, enhanced performance, and greater value. With Catalyze, harnessing the power of on-site energy is easier than ever.

Catalyze’s Energy-as-a-Tenant model makes adding renewable energy solutions to new and existing infrastructure easy and profitable. We develop, finance, build, own, operate, and maintain all equipment in-house. Our team has decades of experience in CRE and renewable energy development, offering portfolio-level solutions for your properties.

Ready to get started? Reach out to our team and learn more about how Catalyze can help your organization lead the clean energy revolution today!