Solar energy systems have emerged as a tool for property owners looking to boost their Net Operating Income. By harnessing the sun’s energy, commercial real estate owners can transform their unused space into sustainable revenue centers.
Deploying solar on your property not only reduces operational costs but also improves property value through income capitalization. This article explores how solar energy systems can improve your property’s financial performance and attract environmentally conscious tenants.
From assessing your property’s suitability for solar installations to understanding the impact on net operating income, we (Plankton Energy) will guide you through the process of leveraging solar energy for maximum benefit. Let’s dive in and discover how solar can deliver value to your property.
What is Solar Power’s Impact on Property Value?
Onsite solar energy generation has a positive impact on property value by improving property net operating income (NOI) and aligning values with sustainability-conscious tenants and investors. Solar energy systems allow property owners to generate their own renewable energy. The energy can be consumed onsite reducing a building’s electricity expense or sold offsite creating an additional revenue stream. Moreover, the long-term financial benefits of solar power contribute to a property’s overall value. Onsite solar energy generation can insulate the property from energy price fluctuations. This reduces risk and makes the property more attractive to potential buyers and investors who recognize the value of a sustainable asset. Capitalizing the incremental net operating income and the reduction of energy price risk improves the value of a property.How Solar Power Can Improve Your Property Value & Net Operating Income
Implementing onsite solar energy generation presents an array of financial opportunities that improves a property’s net operating income. Either the commercial real estate owner or the solar development firm can own the solar system. When the commercial real estate owner purchases the solar system, their investment is subsidized by both federal and state financial incentives. When the solar development firm owns the system, the solar development firm funds the cost of the system at no cost to the commercial real estate owner. Under both ownership options, the commercial real estate owner realizes the benefits of onsite solar energy generation. Net operating income growth is driven by several factors:- Reduced electricity expenses: Each kilowatt hour of energy generated onsite, reduces the amount of energy purchased from the local utility. When the solar development firm owns the solar, the real estate owner realizes value by purchasing electricity at a discounted rate from the utility.
- Revenue from the sale of electricity: Various states and utility service areas have programs that allow electricity generated by solar energy systems to be sold to the grid. When the solar development firm owns the solar, the real estate owner is compensated through site lease payments.
- Revenue from the sale of Renewable Energy Certificates (RECs) and state incentive payments: The renewable energy attributes of the electricity produced can be sold creating an additional revenue stream.