One of the most prominent ways to implement an environmentally responsible corporate real estate strategy is to install photovoltaic solar panels on top of your building. While adding them to your properties is a major statement, it isn't going to make a significant difference in your company's bottom line, or even in your carbon footprint in most parts of the country. Here are five things that you should - and shouldn't - expect from solar panels for your business:
CAN: Reduce Occupancy Costs
CAN'T: Have Short or Middle-Term Positive ROI
Every kilowatt-hour of power that your solar panels generate lowers your cost of occupancy by a commensurate amount. However, your electric cost savings are offset by the capital investment required to install the solar generation system. In many parts of the country, payback periods for solar panels are 10 years or more, even after taking tax credits into account. As such, solar panels can be more useful as marketing tools than as implements of corporate real estate strategy.
CAN: Mitigate Rent Increases
CAN'T: Completely Mitigate Rent Increases
One strategy is to install solar panels as a way to mitigate rent increases. While reducing electric bills can offset other expenses, solar panel installations are rarely large enough to completely cancel out growth in rent or other major expense lines. Furthermore, given the long payback period and typical 25-year life of solar panels, installing them on company-owned property is usually a more financially efficient corporate real estate strategy than installing them on leased locations.
CAN: Increase Green Bona Fides
CAN'T: Change a Company's Image Overnight
Installing solar panels could get you some public attention or even a photo opportunity with local politicians. While solar panels won't get your building LEED certification, they can provide LEED credits. What they can't do is change your entire company's image. A brand that is tied to sustainability or social responsibility doesn't come from installing solar panels. If it did, Wal-Mart would have the same perception as Whole Foods Market, since both have PVs on some of their stores. Instead, it requires an ongoing commitment to changing how your company does business.
CAN: Come with Tax Credits
CAN'T: Be Built for Free
One of the most notable tax credit programs available is the federal 30% credit that offsets the cost of installing PV panels. Unfortunately, even with that credit, solar power is still expensive. While in some states, utilities and communities also offer additional credits, some parts of the country (where solar energy makes the most sense) have no additional credits. This means that adding solar power to your commercial real estate strategy is going to require a significant shift in your capital expenditure strategy - towards the red.
CAN: Harness Sun in Phoenix
CAN'T: Harness Clouds in Seattle
The efficiency of a PV system depends on where it is located. Generally, locations that are further south and further west have better performance than those in the Northeast. Weather also plays a role. This means that while a one-square meter panel in Phoenix might generate 6.5 kilowatt-hours of power, the same panel in Seattle would struggle to generate 3 kilowatt-hours. Implementing a corporate real estate strategy that decrees solar panel installation for every location in your network could end up significantly increasing your occupancy cost after the capital expenditures are factored in.
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Image credit: Georgia Tech Research Institute
