While the economics of solar are improving dramatically, commercial property owners face a significant obstacle in tapping the power of the sun: the highly complex decisions involved in evaluating the business case for solar on each and every property in their portfolio.
Alta Energy, an independent solar analytics and procurement company, has just released a new report, “Making the Business Case for Solar,” which provides a clear roadmap for commercial property owners to objectively evaluate the economics of solar for each property in their portfolio and then monitor the projected return on investment (ROI) for each potential project over time. The report includes a detailed presentation internal staff can utilize to educate company decision-makers and make rational decisions about potential solar investments.
Alta Energy CEO Sam Lee explains, “Every commercial solar project has to be evaluated on its own terms, with a comprehensive model and objective data, to determine if it makes economic sense. Our goal is to make it easy for commercial property owners to identify and complete cost-effective solar projects at the right time, with the right vendors, on the best possible terms.”
Navigating the Complicated Path to Sound Solar Investment Decisions
Because each property has unique features and location-specific factors, the analytical process requires specific decisions for each property, such as appropriate ownership structure, available incentives and limitations, choice of qualified vendors, optimal technology and system design. These decisions may change as market and policy conditions change. For companies with numerous properties distributed across many states and utility service areas, this is a daunting challenge.
Alta Energy’s report is a unique resource for helping commercial property owners navigate the path to sound solar investment decisions. It provides a five-part framework for evaluating the business case for solar in a commercial real estate portfolio. Each step is briefly summarized below.
Step 1: Understand your corporate goals. The first step in making the business case for specific solar projects is to understand why your company is considering solar power. The report will help you determine what information needs to be included in your solar analysis, as well as how to present the information to your colleagues. It identifies the critical questions to ask at this stage, including a checklist of factors to consider.
Step 2: Determine your company’s criteria for a viable solar project. The process of screening potential solar projects is complicated. Beyond the minimum ROI hurdle, there are other solar-specific criteria and non-financial criteria to consider, including factors that are difficult to quantify, such as the impact of solar projects on the company’s brand image and corporate reputation.
Step 3: Understand the choices involved in commercial solar projects. In order to make sense of the solar options available – and present them coherently to company decision-makers – it’s important to develop an understanding of all aspects of the solar development process, as well as the players involved. Evaluators should review detailed information about each of the four major elements in a commercial solar project: ownership structure, government/utility incentives, technology and system design, and vendor type. Decisions regarding these elements, interrelated in complex ways, will significantly impact the economic value of potential solar projects.
Step 4: Analyze your portfolio to identify the best projects. Your own thorough, objective analysis is the cornerstone of your business case. You will need a consistent analytical framework to evaluate all of the properties in your company’s portfolio, providing an objective, systematic way to make a “go/no-go” decision on each potential property – and keep tabs on each property’s solar potential as market and policy conditions change. Alta Energy’s report defines the elements of a comprehensive, robust model and identifies some serious dangers related to potential biases in the data.
Step 5: Present your recommendations to company decision-makers. The report includes a sample presentation for educating company decision-makers about potential solar projects and providing them the information needed to make smart solar investment decisions. The presentation contains examples of the reports from Alta Energy’s solar analytics model, which commercial property owners can use to evaluate and track their portfolio.
These five steps give commercial property owners a rational, objective framework for identifying cost-effective solar projects and moving quickly when the time is right.