If you’re serious about making your commercial property greener, it’s not enough to simply install solar panels.
Consider investing in energy storage systems (called BESS or Battery Energy Storage Systems) to store excess solar power for later use.
This can unlock even bigger savings and improve your bottom line in the long term because your building doesn’t have to rely on the grid when the sun goes down. You can tap into your own clean, stored energy to keep everything humming.
Notably, more CRE investors—including developers, property owners, and REITS—are putting money into clean technology because of financial incentives from the 2022 Inflation Reduction Act, which incentivizes solar photovoltaic (PV) systems and commercial battery storage. Should you join the bandwagon?
We’ll cover all the basics you need to know to decide if it’s the right move for your projects.
The basics of solar PV and battery storage
Batteries are essential in renewable energy supply due to the inconsistency of solar and wind energy compared to fossil fuels. With a high-quality storage system, you can gain more flexible control over your building’s energy management.
There are several ways to use solar storage to save on energy:
- Use stored energy to reduce your peak demand charges (which are often the most expensive).
- If your property is in an area where utility rates fluctuate throughout the day, you can store power when rates are low and use it when rates are high to maximize your savings. This strategy is called energy arbitrage.
- You can also collect excess energy during peak sunlight hours and use it in the evening. For example, you can pair a rooftop or carport solar PV system that powers your facility with emissions-free electricity during daylight hours with a battery that lets you store excess energy for use at night.
- Employ an intelligent energy management system that uses algorithms to optimize power generation and consumption to further enhance these savings.
Why Choose Solar + Storage?
Solar panels with batteries are particularly suited to commercial properties in urban areas because they work quietly and are easy to maintain.
The panels can be installed so that they are quickly accessible for the rare occasions when maintenance is necessary.
Constructed with non-corrosive aluminum frames and tempered glass, solar panels are built to withstand various weather conditions and environmental hazards, too, so you can count on them to deliver under diverse conditions without frequent maintenance.
If you are worried about the longevity of these systems, don’t be. High-quality panels last for decades because of their simplicity and lack of moving parts.
In fact, most panels come with warranties guaranteeing optimal productivity for 25 to 30 years.
While efficiency might decrease slightly (about 10% to 20%) after 30 years, premium solar panels continue to function effectively.
How does solar + storage benefit CRE investors and property owners?
1. Higher rent, less vacancy
Studies on sustainable CRE indicate that green offices command a rent premium and are also less likely to remain vacant. In the UK, buildings that have achieved a BREEAM rating of “Very Good” or better commanded an 8% rent premium.
Even more impressive, properties with top energy efficiency ratings (A or B on their EPCs) enjoyed a rent increase of 10%.
2. Enhance your CRE property’s resale value.
Solar + storage can also increase your property’s value because it cuts energy costs. In the US, LEED-certified commercial property assets sold for 21.4% higher per square foot than non-certified buildings.
Why? Simply because energy-efficient buildings cost less to operate, making them more appealing to stakeholders.
Potential buyers and investors recognize the many benefits of clean energy. They understand that a green property is not only cheaper to run but is also a hedge against future increases in energy costs.
3. Deliver on your ESG commitments
Installing solar systems combined with battery storage is a straightforward way to reduce your building’s carbon footprint and fulfill your ESG goals.
While carbon reduction efforts don’t directly yield higher investment returns, they help maintain your asset’s value in an age where occupiers increasingly prefer CRE properties with superior environmental performance.
4. Keep pace with green building regulations
Laws are changing, with building regulations increasingly favoring clean energy as the green movement grows nationwide. For instance, New York is banning natural gas from heating and cooking for some new construction projects to reduce carbon emissions.
Properties equipped with solar-plus-storage are already ahead of these regulatory changes. It’s a great way to position your CRE asset to meet future requirements and maintain its value for years.
5. Enjoy a high-yield, long-term investment
Solar panel systems pay for themselves multiple times over their decades-long lifespan.
Did you know that European solar purchasers see an average return on investment of 20% or more?
The average ROI for commercial property solar panels in the US is around 16.2%.
These figures are competitive with many traditional investment forms, making solar energy a financially sound choice. However, remember that these numbers vary based on factors like the installation’s location and size and the local cost of electricity.
6. Show your commitment to sustainability
Beyond financial gains, solar energy also delivers substantial environmental benefits. A typical solar panel system can eliminate three to four tons of carbon emissions annually—that’s equivalent to planting over 100 trees each year.
If you want to build a sustainable image for your brand, switching to solar power is a clear way to demonstrate your commitment to our planet.
This commitment can boost employee morale and attract top-quality tenants who prefer to engage with environmentally responsible companies. It ultimately enhances your property’s perceived value.
7. Earn environmental certifications
Installing solar energy and storage systems can help your business achieve environmental certifications like ISO 14001 and enhance your reputation among environmentally conscious customers and partners.
These certifications demonstrate your dedication to environmental management and sustainability and help you meet regulatory requirements and avoid potential fines or penalties.
8. Protect your CRE investment against potential headwinds
When you invest in energy storage, you are safeguarding your CRE property against the volatility of fossil fuel prices. You’re stockpiling clean energy when it’s plentiful and using it when it’s more expensive, giving you more control over your operating expenses.
Is now a good time to invest in solar energy and storage for your commercial real estate property?
Renewable energy costs continue to drop, so the economics of energy storage are becoming even more favorable.
Federal and state financial incentives are also making these investments even more sensible. Suppose you’re a CRE property owner in the US.
In that case, you can use the government’s generous tax credit of 30% of the total system cost to significantly reduce your upfront investment.
Using the Modified Accelerated Cost Recovery System, you can also depreciate the system over just 5 years. This means you can claim a larger tax deduction in the early years, lowering your overall cost.
State incentives further enhance your savings with options like renewable energy credits, rebates, and financing programs that can cover 45% to 80% of your solar system’s cost. These incentives make it financially feasible to adopt solar technology even for smaller commercial buildings.
Additionally, solar panels are now much more affordable. Prices have decreased dramatically over the past decade, dropping by more than 70% in many parts of the world.
Combine this reduction with the Solar Investment Tax Credit, cash rebates, and state tax credits and you will see that the barrier to installing solar on your commercial property is lower than ever.
How do you implement a solar-plus-storage solution?
Installing solar PV and battery storage systems requires expertise, so be sure to work with a provider that specializes in this type of clean technology.
It’s usually more prudent to work with a turnkey provider who can oversee the entire project—from design through installation to system operation.
These providers not only help install solar-plus-storage systems but also optimize them using intelligent management software for greater energy efficiency.
Choose a provider that works closely with their clients to construct a system that meets current energy needs but is also scalable to accommodate future expansions. You want to make sure that your investment is tailored to your commercial property’s specific requirements and growth objectives.
And if you need funding to upgrade your building with solar and storage systems, don’t hesitate to contact our team here at Private Capital Investors.
As direct private lenders and advisors who have a deep, real-world understanding of the commercial property market, we offer different loan types to help CRE owners and investors add value to their assets. Tell us about your green energy plans for your building and we can customize a financing solution for your project.
