Aging infrastructure, increased demand from AI data centers and building electrification, and ongoing shifts in global energy markets are putting America’s energy supply under serious strain. Demand for electricity is projected to grow 16% over the next five years—that’s triple the rate of growth over the past two decades! As electricity demand grows and pressure on the grid increases, facilities managers are seeking out ways to reduce energy costs while protecting against blackouts and grid instability.
Despite shifting policy support, solar is growing faster than any other energy source in history, according to Goldman Sachs. Because rates for conventional electricity from the grid fluctuate daily and typically trend upwards over time, facilities are often handcuffed when it comes to making long-term plans involving the cost of power, resulting in a major expense. Solar, however, not only reduces facility energy costs through long-term, predictable, discounted electricity rates, but it also empowers energy resilience that’s crucial to maintain facility operations.
When adding solar, facilities managers have options around the type of energy procurement agreements. As we’ll see later in this article, “community solar” can maximize site revenue with a stable, long-term solar tenant while “power purchase agreements” (PPAs) pass significant energy bill savings off to tenants while supporting renewable energy and environmental sustainability. Facilities that stand to benefit the most from these types of solar programs are midsize buildings that require 1-5 megawatts (MW) of energy.
Before deciding on the energy agreement structure, initial solar installation will require some added responsibilities from facilities managers but should be limited to coordinating site access and confirming construction and maintenance schedules. A solar provider will be responsible for the long-term maintenance of the system, but facilities managers play a key role in representing the needs and schedule of the building and its tenants.
Smart Site Evaluation
When evaluating a roof for solar potential, facilities managers should be on-hand to support solar developers as they analyze for irradiance, roof and ground conditions, shading, utility rate structures, and permitting complexity. Getting the initial site evaluation right matters: Proper site selection can improve energy output by up to 25%
Solar can work for a wide range of commercial settings—from industrial roofs to office parks, parking lots and decks, even available ground applications. Each comes with its own structural, permitting, and interconnection challenges. About 30% of commercial solar projects face delays due to permitting or grid access, but solar developers should be able to work with a facilities manager to plan for and mitigate these risks early through detailed planning and flexible design.
Community Solar vs. PPAs: What’s Right for Your Facility?
Once it’s been determined if and how solar can be installed at your site, facilities managers will want to understand the different types of energy procurement agreements.
Community solar offers commercial building owners an opportunity to lease their rooftops to developers who will install solar panels before connecting the system directly to the local electricity grid. This allows multiple participants to share the benefits of solar energy, especially if they are unable to install solar panels on their own property. The host facility also has the opportunity to participate in the community solar project as an anchor subscriber, ultimately reducing energy costs while also making money via roof rents. By sending electricity back to the grid, a facility that installs panels for community solar is maximizing the amount of space rented out when compared to conventional solar projects, which require all the power produced to be used on-site, potentially limiting the scale of the project, sometimes considerably.
Comparatively, while community solar has been a popular choice for facilities with ample roof space, PPAs are regaining popularity. Much the same as community solar, as part of a PPA, the solar developer would finance and install the solar system at the facility, at its cost. In turn, the electricity produced, used, and purchased by the host facility would be at a fixed rate that is lower than what the utility offers, and an annual escalator that is lower than historical and projected inflation
This option can be particularly valuable to those middle market owners/users that require between 1-5 MW of energy, as the lower electricity rate results in reduced operating costs. Leased buildings can also receive help from PPAs so long as the building owner and its tenants are onboard.
How Can Facilities Managers Make the Case for Solar?
So, now that you know how to evaluate your site and the differences between agreement structures, how can you get building owners and management teams to commit to solar? First, be prepared to address common concerns, including both initial risks and long-term benefits. Communicate the overarching strategy or purpose behind the solar project: Is it to save on electricity costs immediately or a combination of savings and hedge against anticipated rate increases? Is it to become a more sustainable part of the supply chain?
Project economics are typically the main criteria for solar installations. Have a clear understanding of any public incentives that may be available, especially from the local or state level—a good solar partner will help educate and alert you to any critical dates to be aware of. Facilities managers will also want to be prepared to explain the differences between community solar and PPAs. Make a recommendation about what’s the best option for your facility.
Beyond financials, there can be added environmental benefits, including expected percentage of consumption to be offset and carbon emissions avoided. If the facility is part of the global supply chain, it could be beneficial to explain how an improved ESG rating can help customer procurement.
Do your groundwork when it comes to finding preferred solar partners and prepare to present options to your organization. Seek out partners with stellar track records and strong financial backing. Assure your team you’re working with a trusted advisor who can provide solutions to energy challenges and provide the information needed and support your conversations with management.
While some policymakers may be rolling back support for solar, it’s becoming cheaper to manufacture equipment and produce solar power by the day. With grid constraints and challenges only expected to continue, solar, by way of community solar or PPAs, continues to be a practical option for facilities looking to lock in cheaper electricity rates.
Please note: To limit or avoid blackouts, installations require a solar-integrated battery solution, sometimes referred to as a microgrid, solar-plus-storage, or energy as a service. But this is a whole other concept for another article.
John Lind is the senior vice president of C&I origination at renewable energy company Aspen Power.