Why Commercial Landlords Are Installing Solar Panels
The investment case for commercial solar panel installation has shifted. What was previously viewed as a tenant amenity or a sustainability gesture is increasingly recognised as a property investment with a measurable financial return and a positive impact on asset value and lettability.
Energy Performance Certificate ratings are becoming more important to commercial tenants, particularly larger businesses with their own sustainability reporting obligations. A building generating its own renewable electricity is a materially more attractive proposition to these tenants than one fully exposed to grid tariff volatility. And where a landlord installs solar panels and supplies the generated electricity to tenants, the income stream is predictable, index-linked and long-term.
We regularly work with commercial landlords who have been approached by their tenants about solar panel installation. The tenants page on our website explains how we help tenants navigate that conversation. This page is for the landlord who wants to understand the opportunity from their own perspective.
Renewable Industry Certifications
The Commercial Landlord Solar Panel Installation Opportunity
Income From Rooftop Space
A solar panel installation generates electricity that either reduces the landlord’s own energy costs or is sold to tenants via a private wire arrangement at a rate below their grid tariff. Either way, the roof becomes a revenue-generating asset rather than a maintenance liability.
Improved Asset Value
Energy performance credentials are increasingly valued by commercial tenants, buyers and lenders. A solar panel installation improves the EPC rating of the building, reduces tenant energy exposure and signals a well-managed, future-proofed asset.
Tenant Attraction and Retention
Low Operational Involvement
How to Structure Solar Panel Installation as a Commercial Landlord
The right commercial structure depends on your property, your tenants and your investment objectives. There are three broad approaches.
A landlord-funded installation with direct benefit is the simplest. You fund the solar panel system and installation, own the asset and either benefit from reduced building energy costs (relevant where you pay building energy costs directly) or charge tenants for the generated electricity via a private wire arrangement at a rate below their grid tariff. The system improves the building’s EPC rating and transfers with the asset on any future sale.
A tenant-funded installation with landlord consent requires you to grant consent for the tenant to fund and install the system. The terms of ownership, maintenance responsibility and end-of-tenancy arrangements need to be agreed upfront. This approach requires less capital from you but also generates less direct return.
A Power Purchase Agreement involves a third-party investor funding and owning the solar panel system. Neither you nor your tenant needs to provide capital. The investor earns a return by supplying electricity to the tenant at a fixed rate. This structure is increasingly common for commercial property and can work well where neither landlord nor tenant wants to commit capital but both want the benefit.
SPI helps landlords evaluate which approach is most appropriate for their specific property and tenant situation and can advise on the commercial terms that typically apply to each structure.
