Rooftop Leasing for Solar: Extra Income or Added Risk?
Commercial rooftop solar – opportunity for Moving & Storage companies to save on energy costs
As the demand for clean and renewable energy increases, rooftop solar generation in the U.S. has seen a 10x increase in the last decade. Commercial solar – on the sites of businesses, warehouses and distribution centers – currently lags far behind residential. This presents a significant opportunity for commercial businesses, especially Moving & Storage operations that own large warehouses and buildings, to reduce their carbon footprints and energy costs. Rooftop solar can save companies up to 95% on electric bills and reduce their reliance on electricity from the grid by as much as 80%.
Rooftop leasing: generating energy and income
In addition to lowering energy costs, rooftop solar can be a profit center by generating additional income through rooftop leasing, which has been growing steadily in popularity. With rooftop leasing, a third-party solar energy developer rents the rooftop from the building owner, installs the system, and sells the energy generated to a public utility company. The building owner will receive rental income and discounted electricity through a power purchase agreement.
Is the extra income worth the extra risk?
While this situation looks like a win-win for all parties, there are some considerations to keep in mind:
Roof condition – suitability for solar panel installation:
- Is it aging, large enough for solar panels and does it get adequate sun exposure?
- Will the solar installation void any roof warranty if it penetrates the roofing system? Consider alternative installations that do not penetrate the roofing.
- Who will be responsible for the roof inspection and for how long?
Construction, operation and maintenance:
- Are the energy company and contractor adequately experienced and insured? Who is responsible for any hazardous materials or environmental compliance?
- Will the building owner be named as an Additional Insured with proper Waivers of Subrogation for the installation and ongoing maintenance and service?
- Who is responsible for the maintenance of the solar system and needed repairs?
Tax issues:
- Are there property tax implications?
- Who pays any increases in taxes due to the increases in value?
- Who owns the various credits including tax credits, renewable credits?
Ownership issues:
- Who owns the system during the lease?
- When the lease term ends, can the building owner purchase the system?
- Who is responsible for the removal of the system? Solar panels have a specific life so this is an important consideration.
This is by no means a comprehensive list of considerations before entering into a rooftop leasing agreement. Moving & Storage companies should make sure to consult an experienced attorney, who will help assess the risk vs. reward relationship, to determine if their rooftop could be an untapped source of additional revenue.
Sources
Terri Moran
Insurance industry veteran Terri Moran leads the underwriting and operational strategies for the MOVER’S CHOICE program. Throughout her career, Terri has held roles in leadership, underwriting and marketing with national insurers. A staunch industry advocate, she has served as a member of the WSIA Internship Committee, working to attract young professionals to career opportunities.
In her spare time, in addition to enjoying her family, she is a Member and past Chair of the Board of Directors for the Surplus Lines Association of California.