In the Money: Finding a Future-Proof Strategy for CRE Solar Investment

by | Jul 21, 2022

Dave Riess, CEO and Co-Founder of Wunder, a leading provider of solar solutions for Commercial and Industrial properties, walked us through the strategies available to commercial real estate (CRE) owners to build a financially viable energy platform within their portfolio that increases property value, increases tenant retention and unlocks new revenue streams.

 

Financial viability seems to be the biggest hurdle to CRE owners adopting solar. How do we address that concern?

It’s important to take a customer-centric perspective when structuring programs and realize that different firms have different objectives. Some CRE owners are concerned with maximizing NOI, others are focused on tenant experience and retention, and many firms value ESG impacts associated with deploying energy systems. In terms of maximizing financial viability – the essential factor is controlling the cost of deployment. Controlling these costs requires a proven partner who can execute on a methodical and programmatic deployment strategy. CRE owners are best served by aligning themselves with a provider who has a strong track record and strong references, and by demanding pricing transparency as part of the transaction. Furthermore, there are providers who will cover all of the costs of a commercial solar installation, in addition to paying rent for roof space. It is possible for CRE owners to gain tenant satisfaction and rental income benefits of solar with no out-of-pocket cost.

 

Are there certain regions that have better markets for solar?

Specific regions of the country generate stronger returns on solar investment. While “days of sunshine” play a role, the most important factor is the alternative cost of power. Solar delivers strong economic returns in markets where the commercial cost of power is at or above the national average. Due to rising energy rates, the portion of the country that is “in the money” is rapidly increasing making it an advantageous time to pursue a solar strategy. As CRE owners evaluate solar potential within their portfolio, we recommend focusing on minimizing external dependencies and pursuing internally controllable strategies. Internally controllable strategies scale well and don’t require awards or approvals from program administrators. These strategies most often revolve around generating power on-site to be consumed on-site by building tenants. Some state level programs, such as California’s VNEM, fit nicely with this approach because these programs enable CRE owners to take advantage of valuable regulatory constructs without impeding project execution.

 

Are there any other strategies that CRE owners should have their sights on? What trends would you recommend CRE owners pay attention to?  

Leveraging solar to increase NOI is just the starting point – CRE owners should be thinking about how value streams derived from on premise energy assets can increase the value of their properties to both shareholders and tenants. The most sophisticated CRE owners realize that as the energy transition continues to unfold, CRE will continue to play an increasingly important role. These portfolios of commercial properties represent significant concentrations of energy consumption and significant opportunities for property owners to participate in that value stream. Today, the center of attention is on solar, but very soon on-premise technologies like energy storage and electric vehicle charging will become increasingly viable. Whether you are focused on tenant retention or simply capturing additional revenue streams, there is huge potential for this market.

 

Shifting focus a little, why solar as opposed to wind energy or one of these other sustainable energy technologies?

That’s a great question. Solar is special because it scales down. Wind doesn’t scale down. Wind gets more cost effective as it gets bigger — hence seeing huge turbines in the middle of nowhere. Solar is modular. The solar modules used on rooftops are the same product used at giant solar installations in the middle of the desert. That’s significant because large utility scale solar installations have served to drive the cost down for on-premise applications. You can scale your system up or down to generate power, and you’re not paying those transmission and distribution costs — It can be adjusted to the sizing needs of the  commercial property owner.

 

Tell us more about Wunder – Who are you? What makes you stand out?  

Wunder was founded in 2014— since the beginning our mission has been to unlock the massive economic potential that exists within the commercial segment of the solar market. We take a customer-first approach to deploying energy assets at commercial properties, and our ability to deliver a seamless experience for our clients is backed by our ability to deliver cost effective financing and manage every aspect of what it takes to bring systems online. Our process starts with a holistic evaluation of our client’s portfolio and their priorities. From there, we identify a pilot set of opportunities to pursue and get started with permitting, scoping and engineering. Wunder provides 100% of the capital necessary to bring these assets online. Once energized, Wunder delivers value from these systems in the form of roof lease revenue or opex reduction. We allow commercial real estate owners to maximize their value capture from on-premise energy assets without having to burden their operating teams, disturb their tenants, or become energy experts.

 

What drives you to do this work? What’s the long-term goal? 

Wunder is driven to deliver the most exciting future that we can. We are fundamentally optimistic about the future, and historically, economic growth and prosperity has been tightly coupled with energy intensity. We believe that a prosperous future is one that is increasingly energy intense.. We need a sustainable way to serve that demand, and with the energy transition that is in process today, we are on the precipice of a step function change that will lead to a future world that is fundamentally cooler and more sustainable than the one that exists today. Our view is that the most exciting future has us doing more with more, not more with less.  —- Wunder is a solar provider which specializes in enabling commercial and industrial (C&I) real estate owners to capture value from on-premise energy assets. Wunder delivers turn-key systems and eliminates the financial and bureaucratic hurdles that often exist for solar projects within the C&I market. Learn more at www.wundercapital.com.