Commercial property
Sustainability
Commercialising low-carbon tech Low-carbon technologies are not only essential to meeting climate goals – they can provide valuable income streams for asset owners
Jamie Baxter and Cecile Bousquet
Decarbonising buildings is key to achieving the UK’s ambitious goals to mitigate climate change. Over the next few years, landlords and tenants will need to install more low-carbon technologies and meet sustainable building standards. However, these investments should not be seen as dead costs, but rather as opportunities to add value to a building and create new income streams. In this article, we discuss the relevant technologies, the possible benefits and the future developments that will affect this area. Low-carbon technologies offer landlords the opportunity for several wins. Starting with the obvious, concerns about the environment are no longer the preserve of just a few engaged citizens, and the green agenda has started to make inroads with many companies and institutions such as pension funds. Meeting sustainability targets has become a key performance indicator for many asset managers, and low-carbon technologies offer a tangible way of achieving this goal. Sustainability is also an increasing concern for tenants, given rising awareness by staff and customers. Solar photovoltaics (PV) is the most established of the renewable energy technologies installed on properties. More than 14GW of peak capacity has been installed in the UK since 2010, during which time the cost of doing so on a commercial scale has fallen by 75 per cent. It is one of the cheapest renewable technologies in the UK, with close to 30,000 installations on commercial 54 Journal May/June 2020
Concerns about the environment are no longer the preserve of just a few engaged citizens, and the green agenda has started to make inroads with many companies properties between April 2010 and December 2019 according to a recent Ofgem report (bit.ly/OfgemDec). Straightforward to install, PV systems are connected to a building’s distribution board and the electricity generated is used on site before any excess is exported to the grid, which can therefore greatly reduce the occupier’s grid electricity consumption. Solar PV also has practical advantages that make it a good option for landlords. ••Low-disruption installations: PV can be installed on existing buildings with minimal disturbance during construction and operation, using roof space that would otherwise remain empty. ••Low-risk investment: PV outputs can be accurately forecast over the course of a year, and investor returns are generally reliable if systems are properly maintained. ••Simplified landlord–tenant agreements: As projects have become more common, agreements for landlords to supply electricity from low-carbon sources to tenants have been standardised.
Although less common due to planning restrictions, onshore wind can be installed near major commercial properties, such as large industrial estates with high energy usage. This is currently the cheapest renewable technology and can generate strong returns. Being both predictable over its 25-year lifetime and reliable if well maintained, onshore wind offers similar commercial possibilities to solar PV. However, while the market in Scotland continues to grow, England and Wales are still waiting for planning policy to catch up. Figure 1 shows the deployment of both technologies in the UK in the past decade. Commercial opportunities In addition to being more environmentally conscious, landlords and property managers should also view low-carbon technologies as commercial opportunities. Solar PV has a long-term levelised cost of less than 5p to generate 1kWh (bit.ly/Solar5p), whereas grid electricity costs are now generally more than 12p/kWh (bit.ly/GasElecnds). PV and