Top 10 Rooftop Solar FAQs from Commercial Real Estate Owners
December 12, 2024
Content
- What are the financial benefits of installing rooftop solar on my property?
- What are current rooftop lease rates and what affects lease pricing?
- What is the standard lease term offered for rooftop solar?
- What is the investment for commercial real estate owners to host a rooftop solar array?
- How will rooftop solar impact my property value?
- What are the permitting and regulatory requirements for rooftop solar?
- Does the rooftop solar installation affect my tenant’s operations?
- How will rooftop solar affect my roof’s warranty and maintenance?
- How long does it take after the lease is signed for the project to become operational?
- Is there a limit to the number of rooftop solar projects the grid can support?
Solar Landscape is trusted by the biggest names in real estate including Prologis, Principal, PGIM, and more. Connect with us today for an initial site assessment.
Introduction
As commercial real estate owners increasingly consider the benefits of rooftop solar installations, understanding solar can raise many questions. While there are several approaches, many CRE owners are choosing to lease their rooftops for solar given its scalability, ease of implementation, and profitability. In this blog post, we address the top 10 frequently asked questions from commercial real estate owners considering rooftop solar, particularly related to leasing rooftops to host a front-of-the-meter FTM) installation. From financial benefits and lease rates to permitting requirements and impacts on property value, we provide essential insights to help owners make informed decisions. Whether you’re new to solar or looking to deepen your understanding, this FAQ will provide valuable insight as you explore rooftop solar opportunities.
1. What are the financial benefits of installing rooftop solar on my property?
A: Reliable revenue.
For FTM rooftop solar, commercial real estate owners benefit from lease payments from Solar Landscape, turning untapped rooftop space into a revenue-generating asset. Solar Landscape installs, owns, and operates the solar installation, sending all the power back to the grid. As the host, the property owner receives a long-term, predictable income stream through annual lease payments, typically over a 20–year term, regardless of tenant usage. This model applies even to vacant buildings, which can generate rental income via a solar roof “tenant”. Onsite solar can also enhance property values and appeal to tenants seeking energy savings or looking to meet ESG goals, potentially boosting occupancy rates. Solar Landscape manages all operational and maintenance responsibilities, minimizing risks for property owners.
2. What are current rooftop lease rates and what affects lease pricing?
A: Typical lease rates for rooftop space ranges from 25 cents to 85 cents per square foot per year.
Lease rates for rooftop solar projects range widely and are influenced by factors such as the size and capacity of the installation, local energy prices, and federal and state incentives. Solar Landscape’s vertical integration allows us to control costs more effectively, enabling us to offer competitive lease rates. Unlike other solar developers, Solar Landscape ensures commercial real estate owners benefit from stable lease rates without the risk of re-trading or significant changes as the project progresses. We are committed to owning and operating projects for their entire lifecycle, providing consistency and reliability to our partners.
3. What is the standard lease term offered for rooftop solar?
A: 20 years.
The standard lease term for rooftop solar projects is typically 20 years, providing a stable revenue stream for commercial real estate owners. This duration aligns well with the FTM solar model, which is known for its scalability and financial benefits. The term ensures property owners can maximize their benefits, ensure consistent income from lease payments, and capitalize on the growing demand for renewable energy solutions.
4. What is the financial investment for commercial real estate owners to host a rooftop solar array?
A: Zero CapEx. It’s revenue without investment.
In the FTM solar model, the property owner leases the rooftop to Solar Landscape, which finances, builds, owns, and operates the system for its lifetime. We provide regular lease payments to the owner, boosting the property’s NOI and enhancing its long-term value—without requiring any capital investment from the property owner
5. How will rooftop solar impact my property value?
A: Rooftop solar enhances the property’s marketability and future value.
A rooftop solar lease boosts your property’s NOI through regular lease payments, making the asset more attractive to investors. This added appeal can lead to higher resale values, as potential buyers recognize the long-term financial benefits and the ease of transferring roof leases during a property sale. In fact, one of our clients sold their property for a more than 4% premium, directly attributable to the additional rooftop lease revenue from our agreement. Overall, rooftop solar not only improves immediate income but also enhances the property’s marketability and future value.
6. What are the permitting and regulatory requirements for rooftop solar?
A: Solar Landscape handles all building and zoning permits, and we’re the experts at it.
Solar Landscape is an expert in navigating the complex permitting and regulatory landscape for FTM rooftop solar, having completed over 300 successful projects. As a vertically integrated company, we manage every aspect of the process to ensure the system can connect to the grid. Utilities assess whether the local grid can handle the additional electrical load and may require system upgrades. FTM rooftop solar projects also require that developers obtain state approval to confirm the system meets program requirements, which can take several months. Once these approvals are in place, we proceed with obtaining local building and zoning permits, which for rooftop systems are typically quicker and simpler than other types of solar installations (i.e. ground mounts and carports). Zoning boards usually don’t need to approve rooftop systems unless structural changes are involved, and standard building permits ensure compliance with local safety codes. In preparation for the project going live, we have an entire team dedicated to securing energy offtake agreements and enrolling subscribers to purchase the power generated, ensuring the project’s financial viability and a smooth transition to operation.
7. Does the rooftop solar installation affect my tenant’s operations?
A: No. Protecting your underroof tenant is of utmost importance.
Solar Landscape was founded 13 years ago as a commercial solar installer, and through that experience, we developed the industry best practices for rooftop installations that ensure minimal disturbance to tenant operations. During the pre-construction phase, we work with CRE owners to develop a tenant engagement and communication plan to ensure all stakeholders are informed and aligned on the construction plan. We select staging areas to minimize tenant disruption, and we do not enter the building during installation. Most importantly, with a rooftop solar lease, tenants have no obligation to purchase the power and instead have the option to purchase clean energy if they choose. Protecting your roof and under-roof tenant is our top priority, and we’ve built our business on these principles.
8. Will rooftop solar affect my roof’s warranty and maintenance?
A: No, rooftop solar does not affect your roof warranty. Solar Landscape covers the cost of removing panels for maintenance as outlined in the lease.
Rooftop solar does not affect your roof warranty. Roof manufacturers have an established process that includes a pre-installation inspection to confirm the roof is solar-ready, and a post-install inspection to ensure that the installation did not cause any damage. Additionally, solar panels protect the roof by shielding it from UV rays. If roof maintenance is required for any reason after the panels have been installed, Solar Landscape will cover the cost of removing the panels as outlined in the lease. As the long-term owner and operator of the solar system, we handle all aspects of system maintenance, keeping both the installation and the roof in optimal condition.
9. How long does it take after the lease is signed for the project to become operational?
A: 12-18 months.
Once the lease is signed, our team works quickly and efficiently to bring the project to life. While timelines may vary by state, the general process includes several critical phases, each essential to ensuring the project meets all regulatory requirements and industry standards:
- Utility Approval (approx. 3-6 months): In many cases, utility approval is submitted prior to the lease being signed, helping to streamline the process. Our team is skilled in navigating utility requirements, ensuring we minimize delays.
- State Approval (approx. 3 months): During this phase, we work closely with state regulators to ensure the project meets all necessary criteria for participation in the front-of-meter program. Timelines for this phase can vary depending on state-specific requirements and deadlines.
- Final Design Engineering, & Permits (approx. 3 months): Our engineering team finalizes the project design, optimizing it for both performance and regulatory compliance.
We secure the required building permits from local authorities. Thanks to our established relationships with permitting agencies, we work to expedite this process and keep everything moving forward smoothly.
- Construction (2-4 months): Once permits are in hand, crews mobilize on-site to begin construction. We closely manage the schedule to keep the project moving forward without unnecessary delays.
- Inspection & Interconnection (3-6 months): Final inspections are required by both the local municipality and utility provider before the project can be connected to the grid and begins generating energy. Our team coordinates directly with inspectors to ensure the project passes smoothly through these final checks.
10. Is there a limit to the number of rooftop solar projects the grid can support?
A: Yes, limits exist based on grid capacity and local regulations.
Electricity grids were originally designed for electricity to flow in one direction, where power is generated at central plants and delivered to consumers. With FTM solar installations, energy produced on rooftops is fed and sold back to the grid, creating a bi-directional flow. There is a limit to how much power the grid can accommodate, and solar projects must apply to connect to the grid through the interconnection process. This is the first step in securing a project’s place on the grid and interconnection is awarded on a first-come first-serve basis. Therefore, it’s essential for commercial real estate owners to apply for interconnection ASAP as available capacity diminishes over time.
Conclusion
Rooftop solar leasing for FTM solar offers commercial real estate owners a valuable opportunity to enhance their property’s revenue and marketability without any upfront investment. By understanding the financial benefits, regulatory requirements, and operational impacts discussed in this article, property owners can make informed decisions. Solar Landscape’s expertise and commitment to best practices ensures a seamless installation process – designed to protect your tenants and maintain your property’s value. Our trusted clients, including Prologis, PGIM, Heitman, and Principal, have successfully leveraged our services to maximize their solar strategies.
Ready to explore the advantages of rooftop solar? Contact us today for an initial site/portfolio assessment and start maximizing your property’s potential.
