Aligning Profitability with Sustainability
For businesses in logistics and industrial sectors, solar PV is no longer just an environmental initiative, it’s a strategic financial advantage. By leveraging solar energy, landlords, developers, and investors can unlock significant cost savings, enhance asset value, and contribute to decarbonisation goals.
Our latest Instant Insight is based on our recent Solar Solutions research, delves into the financial opportunities of solar PV for energy-intensive occupiers. From understanding the impact of building size and energy consumption to exploring innovative monetization models, this article provides a roadmap to maximise returns.
Why Size and Consumption Matter
The financial viability of solar PV installations is directly influenced by two critical factors: building size and energy intensity of the occupier. Larger buildings with high energy demands yield shorter payback periods and higher initial rates of return (IRR). For example:
- Small buildings (20,000 sq ft): IRR of 4%, payback period of 15 years.
- Large facilities (200,000 sq ft): IRR of up to 18%, payback period as short as 5.5 years.
Energy-intensive occupiers, such as cold storage operators or manufacturers, can consume a significant portion of on-site solar energy, maximising operational savings and accelerating ROI.
Monetisation Models: Turning Sunshine into Revenue
Once a solar array is installed, structuring the financial arrangement between landlords and tenants becomes crucial. Here are four primary models:
- Power Purchase Agreement (PPA): Tenants purchase electricity at a discounted rate, providing predictable energy costs and steady income for landlords.
- Fixed Additional Rent: A straightforward approach where tenants pay a fixed rent for solar usage.
- Third-Party Funded PPA: A third party owns and operates the system, reducing upfront costs for landlords.
- Tenant Incentive: Offering free energy as a tenant attraction or retention strategy.
Leading by Example
Major corporations are already reaping the benefits of solar PV:
- Amazon: Over 100 renewable energy projects in Europe, including solar installations on UK fulfilment centres.
- Tesco: Solar panels on 187 sites, covering 335,000 square meters.
- Aldi: 96,000+ solar panels installed across UK operations.
- DHL: Integrating solar into logistics hubs as part of its "GoGreen" strategy.
Your Path to a Profitable, Sustainable Future
For landlords and developers, the journey begins with a strategic assessment of portfolios to identify properties with high potential for solar PV. By embracing solar, you can position your assets at the forefront of the industry transformation, achieving both financial and environmental goals.
Explore the full Solar Solutions report to learn more about the financial models, policy recommendations, and actionable strategies to unlock the potential of solar energy in logistics and industrial real estate.
