Reducing Operating Costs with Solar & Energy Efficiency

Hi Everyone

For your commercial properties, have you considered using solar and/or energy efficiency upgrades to reduce operating costs or to attract/retain tenants? What hurdles/challenges have you faced?

 

I could be wrong but in WA, commercial properties don't have REBS or net feed-in tariff. Which means, either use it or loose it.

 

With the low (or no) feed-in-tariffs around the country, you definitely want to size solar to maximise on site usage. Otherwise it quickly becomes unattractive financially.

That being said, if it's sized appropriately and mostly used on-site, it can usually pay for itself in under 5 years.

 

Back in 2014, there was some activity around "energy efficient upgrades" for business that incur energy costs of > $20,000 per annum, and own their own building.

Some finance brokers were quoting the 5-year payback period, based on the results of an energy audit, and were put forward to warrant the capital expenditure required.

 

HI Craig, was there much up take?

 

One of my business partner's clients invested in solar panels on their factory (owned by SMSF). I believe they were happy with the result.

My clients who have the required energy spend are leasing their premises, so there was no interest.

 

Unfortunately there is a lack of efficiency requirements for smaller commercial buildings ie anything less than 1000 m2 does not need to meet any efficiency targets or have a NABERS rating. Heating, cooling, lighting, insulation, water efficiency all suffer accordingly.

At a presentation that I attended a couple of years ago, Stocklands were pushing the benefits of their latest 6 star retail precinct citing that the costs to the tenants would be reduced as their malls were so much more efficient than other centres. What poppycock! They cut out the air conditioning and reduced the lighting in the mall areas then focussed on the tenants having brighter shopfronts so the mall could be lit by spill lighting and the air conditioning would pour out of the shops and the mall used as the return air system. Yeah! Goal achieved, lowered common areas costs, tenants lose as they don't have a closed system for their a.c.

 

There is definitely some benefit to a 'whole building' approach to energy ratings rather than separate 'base building' and 'tenancy' ratings to avoid issues like this.

 

The Vic Gov have recently announced grant funding for commercial office buildings that are looking to undertake building upgrades with energy efficiency as a focus.

To register for more information head to the link below:

Better Commercial Buildings Program - Sustainability Victoria

 

Hi Craig, Did your clients who are leasing their properties consider the upside of selling the power produced to the tenants? The way I see it you can install solar, sell the power to the tenants at a slightly discounted rate and have another form of income from an existing property not to mention keeping you tenants happy.

 

Hi,

In terms of doing this as a "value add" I have never had much interest, Tenants I have spoken to see this as a cost of business and owners want a return for it. I am in the process of investigating this on one of my properties. Some statics:

Two storey office building with 6 tenants
Usage is around 82 mega watts per annum (82,000 kwh)
Cheapest Retail energy rate is 17 cents per kwh
Also note that the Vic government provides a feed in tariff of 11 cents

So we are looking into "on selling" solar electricity to the tenants, the system should average around 160kwh per day or 58 mega watts per year so even charging the tenants 11 cents per kwh would net around $6,424 per year. The system wouldn't have any battery storage as the building operates 9-5 on weekdays. We estimate that the panels will cost around $70,000 so almost a 9% return. Obviously there are other costs such as meter upgrades and change overs so it lowers the return a little.

I should note that we would charge more than the feed in tariff rate (probably closer to 15 cents). The biggest issue at the moment is the Australian Energy Regulators "on selling" requirements. basically we might have to look at becoming an energy retailer but we are confident that we can get an exemption.

The panels come with a 25 year 80% generation guarantee. Note that the above are rough assumptions, either way it will be interesting to see how it goes

ComPropAgent

 

Both Victoria and NSW have massive incentives for swapping out metal halide high bay lights to LED.

I've recently completed several at little cost.