Anyone keeping an eye on the solar industry knows that the industry has taken off and demand is at an all-time high. This is especially true for utility companies that face mandates set by state governments requiring utilities to generate a specified percentage of their energy generation as renewable – with due dates as early as 2010. Compared to other renewables, solar is a good solution because of its high power-generation capabilities and its quick installation timeframe.
While there are still currently constraints on the supply side of the equation, that bottleneck is soon to be relieved. The cost of solar technology is on its way to becoming more economical, and many predict that president-elect Obama’s focus on renewable energy development will help bring even more incentives and rebates to the industry in the coming years.
Once supply catches up with demand (which I expect is not too far in the future), the question for utility companies regarding solar becomes: “where do we put it?”
Where: Distribution Warehouse Buildings
Many challenges remain for finding appropriate locations in which to install utility-scale rooftop solar installations. It’s best for these installations to be located near the utility’s customer base where the energy is ultimately used; however, infill areas where these customers are located are packed with existing infrastructure. Land is widely available on the cities’ perimeters; however transmission issues come into play. Plus, if purchasing land, getting the proper entitlements can be a lengthy process – and not an easy one at that.
For many reasons, this is why partnerships between utilities and commercial/industrial real estate owners make perfect sense.
Industrial warehouses, by design, are located near major populations. They are mostly occupied by consumer-related companies, like Kraft Foods and SC Johnson that need to distribute their goods locally and regionally. As such, facilities that reach these populations are connected to the local utility company’s electrical grid serving these same populations.
And, they’re big (huge, even). The average size of a distribution center in the United States in 2007 was somewhere around 312,000 square feet. To put this in perspective, a 300,000-square-foot building can hold a one-megawatt (MW) system, or enough to satisfy the energy needs of approximately 1000 houses for a year (perhaps more depending on the technology used).
The potential impact distribution warehouses enable for the solar industry is tremendous. Allow me to offer an example. My company, ProLogis, owns more than 2,898 distribution warehouses worldwide, totaling more than 540 million square feet of roof space (or, the equivalent of more than 10,000 football fields). Using the one-megawatt-per-300,000-square-feet ratio mentioned above, ProLogis currently has the ability to host 1,800 MW of solar installations on its roofs.
Why: Ideally Suited for Solar
In addition to location and size, distribution warehouses bring many added benefits for solar installations.
The design of these buildings makes them well-suited because the roofs are very flat and they sit slightly lower than the exterior walls of the warehouse, making installations unnoticeable to passersby on the street. Construction does not negatively impact the community, and security is enhanced by the location, which prevents possible vandalism or theft both during construction and over the life of the power-generating installation.
Roof space is immediately available. It is already properly entitled, and no capital needs to be spent by the utility for purchasing land. The owner of the industrial facility has existing site control as well as a long-term, vested interest in the property. Thus, power can begin to be generated on a near-term basis — in as little as 90 days in the most ideal situations.
From a technical standpoint, rooftop solar installations are also more stable at a commercial scale because utilities are able to harness the benefits of distributed generation, making the aggregate system more resilient in case of outages or other potential disruptions. In short, the power is generated in a near the users during peak usage times with minimal need to increase transmission capability.
How: Make Friends with a Real Estate Owner
There are obviously many benefits to utilizing warehouse rooftops for solar installations, but the intrinsic value to utilities comes when working with a real estate partner — an owner of several, or even thousands, of these distribution centers.
Commercial/industrial real estate owners are experienced at leasing space, as this is the most significant part of their business. Leasing roof space for solar is good for the environment, and it helps to gain additional income from an existing asset. An owner’s customers inside the building also benefit from additional insulation on the roof, which helps reduce the cost of cooling and heating.
Building owners are likely experienced in construction and are certainly familiar with their own buildings (for example, they are well aware of the structural elements of each facility and know how much load a particular roof can take). Plus, real estate owners have existing relationships with architects and contractors in the area that can best complete the project in the necessary timeframe, for the appropriate price.
Because each side wants to ensure their best interests are represented, legal requirements in the agreements between real estate partners and utilities can be quite involved. Having a real estate partner that has experience as a site host for renewables is a real benefit and will help eliminate any guesswork that may come by nature of these arrangements.
The real estate owner also brings knowledge of the best technology needed for a particular location. Choosing the wrong technology could invite possible environmental damage, but having a partner that has experience in selecting appropriate materials is paramount and ensures the investment is protected.
With a real estate partner that is active in a particular market, installations come together smoothly and swiftly because of their existing relationships. For example, maintaining relationships with government officials can help to fast-track essential permits for construction.
The best real estate partner for the utility is a company that can navigate all of the needed relationships and hurdles associated with pulling these rooftop projects together. Partnering with an experienced site host will also pay dividends throughout the construction period and operational life of the project.
The solar industry is booming and, for many reasons, large, commercial-scale solar installations are a good solution for utilities tasked with meeting renewable energy mandates. Again, I ask: where will your solar installation go?
Drew Torbin is manager of sustainability for ProLogis where he is the point person for renewable energy projects worldwide.