The benefits of installing a commercial PV system include:
- An additional income stream for the business
- Reduced exposure to increasing energy costs
- Reduced CO2 emissions
- Contribution to CSR objectives and associated PR benefits
- Engage employees in energy management practices
- Substantial improvement of the site’s EPC rating
- Diversified property portfolio: electricity income is separate from rental income
- Increasing the achievable return on tenanted property for landlords
- Reduced energy costs for tenants, or profit from reselling electricity to them
While income generation may be the most compelling attraction, there are a number of further benefits to be gained by installing solar PV systems, including improved sustainability and social responsibility credentials that will give a clear message of corporate responsibility to customers and other stakeholders. Title to the completed PV system, and tariff income, are defined in agreements made before the installation and, dependent on the type of agreement, can be transferred at the end of the agreed finance term.
The return on the investment has three components:
- Saving on energy bills from the supply company
- FIT payments from the FIT licensee
- Export payments from the nominated company purchasing the exported electricity
These may be treated as separate items with a meter operator appointed to take readings and relay them to an energy company. In practice, the property’s utility company, acting as FIT licensee, will administer the FIT payments and will enter into an export contract to purchase surplus electricity from the solar PV system.
An additional income stream for the business
Solar PV systems offer reduced energy costs as less electricity is purchased from utility companies. In addition, the government’s Feed-in Tariff scheme produces guaranteed, independent income from electricity generated and more from electricity exported to the grid, see page 5 for further information.
Reduced exposure to increasing energy costs
Over recent years electricity prices have risen faster than the rate of inflation, so electricity becomes more expensive in real terms each year. Whatever the future rate of increase in utility-supplied electricity costs, reducing dependence on those suppliers will protect solar PV system users from rising energy costs, while the cost of solar energy will remain fixed.
Reduced CO2 emissions
The scope of carbon reduction legislation seems likely to expand as renewable energy is a straightforward way to have an instant impact on carbon reduction reporting. As well as hedging against future energy cost rises, solar PV systems reduce an organisation’s carbon emissions, reducing exposure to current and future environmental legislation.
Solar PV-generated electricity is ‘clean’ with no CO2 emissions from the system once it has been installed. Reducing demand on conventional power stations results in less atmospheric pollution.
Contribution to meeting social responsibility (CSR) objectives and associated PR benefits
CSR is increasingly important when expressing corporate credentials, especially in competitive conditions. Given that solar energy is the most popular renewable technology with the public, there are significant PR benefits for businesses that are seen to embrace the technology.
Engage employees in energy management practices
Monitoring solar PV systems and integrating them into existing energy management programmes provides a tangible demonstration of on-site electricity generation, encouraging employees to consider the effects of their behaviour on total consumption. The popularity of on-site solar PV installations also provides a talking point for staff and emphasises the need for efficiency measures.
Substantial improvement of the site’s energy performance certificate (EPC) rating
A favourable EPC rating is increasingly important for commercial premises, especially those that are let. From 2016, tenants will be entitled to demand that energy performance improvement recommendations are implemented.
From 2018, property will be ineligible for rental unless a minimum standard of EPC grade E is achieved. The addition of a commercial PV system will result in a significant improvement without undertaking major alterations to the property.
Diversified property portfolio: electricity income is separate from rental income
Commercial-scale PV installations provide an income stream from subsidy payments such as the FIT and from the sale of exported electricity. The PV system income remains if the property is untenanted, diversifying the property portfolio.
Increasing the achievable return on tenanted property for landlords
Where there is a tenant in place, solar PV systems provide an opportunity to increase the income from leased premises, as the electricity provided by the PV system can be sold to tenants at market rates.
Reduced energy costs for tenants, or profit from reselling electricity to them
Where commercial premises are let, the PV system is purchased outright and a power purchase agreement is in place, energy cost savings can be passed on to tenants. Property will become more attractive to prospective tenants where electricity can be purchased below utility rates.
If the project has been financed by a third party and a Power Purchase Agreement is in place, a mark-up can be applied by the landlord for electricity used by tenants. Under the terms of the agreement, the third party power supplier will incur all of the installation and maintenance costs.