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| Emre Karagozlu |
LONDON, England -- New insights from JLL reveal that more
than four in ten (43%) commercial landlords globally would like to increase solar
photovoltaic (PV) panel coverage to reach 50%-75% of their portfolio, despite
inconsistency in valuation processes creating uncertainty.
Interest in solar PV has already converted into action: three quarters
of landlords (75%) currently have between 5% and 25% of their portfolio
equipped with solar panels. With all industries under pressure to decarbonize,
the affordability and accessibility of PV offers many benefits to commercial
real estate.
As a result, PV is expected to have the highest share of future
power generating capacity, overtaking natural gas in 2026 and coal in 2027.
The sustainability, affordability and
income-generation opportunity driving PV adoption
In addition to the clear environmental benefits of reducing CO2 emissions, significant advancements in
PV technology have supported its adoption.
Between 2010 and 2020, the cost of installing PV panels fell by 90%,
driven by better manufacturing and efficiency. Alongside this, modern solar PV
installations have increased life expectancies, within the range of 25-40
years. This makes it one of the cheapest forms of energy generation.
PV panels also present a unique opportunity for extra income generation
via selling energy back to the grid or to tenants. Solar PV installation
therefore now acts as an investment into green energy – contributing to wider
ESG objectives for businesses.
Logistical challenges and valuation
complexities
Installation of PV, however, is not without its challenges. There are
logistical elements to consider, such as location and available space, that may
limit the installation and output of the panels.
For instance, a south-facing
flat roof is better suited to large-scale implementation than a north-facing or
shaded position on a roof that may need structural reinforcement to uphold the
weight of a PV system.
At the same time, income generated by installing PV panels has a
fundamentally different investment and risk profile to real estate – something
that is not yet consistently accounted for in valuations.
To date it has been common for valuers to view additional PV income as
similar to rental income and capitalise this at the same rate. PV income,
however, is a fundamentally different investment with complexities that need to
be modelled into the income stream.
This includes a variety of ownership
structures, which can impact the potential income, up front and maintenance
costs, and overall risk profile of these assets. JLL’s Value and Risk Advisory
team set out a more accurate and nuanced approach to valuing assets with Solar
PV in a new thought leadership paper: The
value of Solar PV in real estate.
Emre Karagozlu, Director of Renewable
Energy Valuation at JLL, sees a clear solution: “Although PV
solar panels can introduce complexity to valuation, this does not have to be a
barrier to widespread adoption amongst commercial and real estate landlords.
“By bringing more consistency to the valuation process, we can help
landlords to better understand the impact of installing PV panels and encourage
them to take this important step in the decarbonization process.
“The Discounted Cash Flow (DCF) approach allows greater detail to be
inputted into the valuation, creating the opportunity for a more detailed
appraisal that more accurately captures the benefits of installing PV panels.
Increasing consistency across solar panel valuations stands to benefit us all:
not just landlords, but the planet as we continue to grapple with climate
change.”
CONTACT:
Kristen Murphy
Director, Public Relations
JLL
One Post Office Square, Suite 1100
Boston, MA 02109
617-543-4873
