Released on May 7, 2024
Submitted by CBRE Group, Inc.
Provided by: CBRE
CBRE
America's solar surge
As the U.S. invests in renewable energy, solar power continues to gain momentum, with installations growing 22% annually over the past decade and expected to grow 51% in 2023 alone.2 According to the Solar Energy Industries Association, this growth is driven by the following factors:
The decline in the cost of solar photovoltaic (PV) installations, growing demand for sustainable electricity from both the public and private sectors, and federal policies such as the Solar Investment Tax Credit (ITC) and, more recently, the Inflation Reduction Act (IRA) have
As of the end of 2023, more than 179 gigawatts (GW) of solar capacity will be installed nationwide, enough to power approximately 33 million homes.3 The U.S. Energy Information Administration projects that a record 36.4 GW of solar capacity will be added to the energy grid in 2024.4
Figure 1: U.S. community solar cumulative installations and forecasts. Source: SEIA, Wood Mackenzie, 2023. Courtesy of CBRE
While rooftop solar continues to be a game changer for many property owners, it’s not always an option for others, especially renters and low-to-moderate income (LMI) households. Because LMI households are often renters, it can be difficult to convince property owners to install on-site solar. To overcome these obstacles, the concept of community solar emerged in 2010, allowing customers to access solar energy without having to install PV panels. Over the past decade, community solar has recorded an average annual growth rate of 80%, reaching approximately 6.49 GW by the end of 2023.5 Looking ahead, community solar is projected to double by 2028,6 reaching 14 GW.
This Perspective aims to highlight the benefits and opportunities of community solar for commercial property owners, particularly in urban areas where demand for renewable energy is high but properties capable of installing on-site solar are limited.
1, 3, 5https://www.seia.org/solar-industry-research-data
2https://www.seia.org/us-solar-market-insight
4https://www.eia.gov/todayinenergy/detail.php?id=61424
6https://pv-magazine-usa.com/2024/02/20/us-community-solar-installations-expected-to-more-than-double-by-2028/
Provided by: CBRE
What is community solar?
According to Altus Power, a full-service solar company providing unique commercial, industrial and community solar customer-centric solutions across the U.S., community solar gives local businesses and residents shared access to renewable energy and its benefits by remotely accessing existing solar installations. By subscribing to a community solar project, property owners can reduce their carbon emissions and electric bills without making any changes to their rooftops or homes. This innovative business model is designed to promote cleaner energy in communities and provide access to renewable energy to people who may not be able to install solar panels due to factors such as limited rooftop space, shading, outdated electrical systems, high costs, or not owning a building. 7
Essentially, community solar participants are members of a shared solar project at a larger off-site location, such as a large utility-scale solar facility, a solar farm, or a nearby industrial or retail property. Each member pays a portion of the energy produced by the community solar array. In exchange, members receive credits on their electric bill for the energy produced by their share. Community solar not only reduces carbon emissions, but it also often reduces rising operational costs for property owners.
7https://www.altuspower.com/community-solar-faq
Provided by: CBRE
How does community solar relate to commercial real estate?
Incorporating community solar into your commercial real estate strategy can align with both environmental goals and business interests. The intersection of community solar and commercial real estate occurs when a property owner chooses to host a community solar project. In this type of partnership, a commercial property owner often leases rooftop or land space to house a solar installation. Community solar installations allow solar developers and property owners to generally maximize the size of their PV systems, further increasing economic opportunities for the property owner. Community solar allows these property owners to generate renewable energy while simultaneously generating an additional revenue stream from underutilized space. Community solar not only strengthens the resiliency and reliability of the electric grid, it also helps stabilize energy costs and demonstrate a commitment to sustainability.
Business Opportunities and Community Impact
For commercial property owners with rooftops capable of installing solar panels, revenue opportunities arise from two options: i) “behind the meter” solar serving tenants, and ii) community solar. The first option provides clean power for tenants and on-site operations, reducing utility bills and helping to achieve sustainability goals. With community solar, the clean power generated is fed into the power grid and multiple community members can purchase the energy, often at a discount, with no on-site management required. Community solar projects promote sustainability by increasing the adoption of renewable energy, reducing greenhouse gas (GHG) emissions, and reducing reliance on fossil fuels, the primary cause of climate change.
Incorporating community solar into your commercial real estate strategy can align both your environmental goals and business interests.
Figure 2: U.S. Community Solar Profile: Market Share and Public Policy Support. Regions with policies that support community solar. Source: EPA, NREL. Note: The definition of community solar varies by state due to differences in laws, regulations and local circumstances. Source: CBRE
Where are the significant community solar projects?
Since the first community solar project began in Ellensburg, Washington, in 2006, various state programs have fostered rapid growth. As of 2022, there are 2,550 community solar projects nationwide, with 93% concentrated in 10 states. States with the most community solar installations include Florida (27% of total installations), New York (19%), Minnesota (14%), and Massachusetts (14%).8 However, many of these projects were implemented as part of utility-specific programs that are not available to commercial property owners.
According to Altus Power, the states where community solar is most active on large commercial buildings are Illinois, New Jersey, New York and Maryland, due to attractive state laws and large real estate supply.
Figure 3: Market Share of Community Solar and LMI Capacity in the United States. Source: NREL. Courtesy of CBRE.
Market Share of Community Solar and LMI Capacity in the United States
Community solar’s concentration in 10 states reflects the important role state policies and regulations play in stimulating adoption. Additionally, federal policies such as the ITC, which was extended as part of the Inflation Reduction Act (IRA), and state-level policies such as the Renewable Portfolio Standard (RPS), which requires utilities to generate a certain percentage of their energy from renewable sources, and net metering, which provides credits for solar energy added to the grid, have all encouraged participation and investment. Additionally, the cost of solar has fallen significantly, improving the economic feasibility of community solar. As solar installation costs continue to fall and favorable state-level policies are enacted, community solar projects will become more accessible to low-income households, enabling more individuals to participate in a low-carbon future.
Figure 4: Market Comparison Case Studies. Source: NREL, SEIA, EnergySage, CBRE Econometric Advisors. Courtesy of CBRE
CRE Case Studies
Learning from neighboring countries' solar successes
Many urban areas lack suitable land nearby for ground-mounted solar installations. Instead, it is more practical to utilize the rooftops of large industrial and retail commercial buildings. By utilizing these vast rooftop spaces, communities can make renewable energy accessible to a wider range of individuals, including low-income earners. This approach not only addresses land constraints, but also encourages collaboration between the residential and commercial sectors, fostering a mutually beneficial environment where the energy generated benefits both the local community and the commercial organizations. This promotes sustainability while maximizing the potential of existing infrastructure, ensuring that renewable energy sources become an integral part of underserved communities that are most vulnerable to the effects of fossil fuel pollution.
In the case study below, CBRE Econometric Advisors leverages proprietary commercial real estate data to compare the potential for community solar in four cities. Two markets with community solar initiatives (New York City and Chicago) are compared with cities in the same areas planning to introduce programs (Philadelphia and Detroit). The study illustrates the financial and environmental benefits that community solar initiatives can provide as regulations and programs evolve. While savings vary depending on location, project details and energy consumption, community solar subscribers could save up to 20% annually. 9 In the case study examples, subscribers in New York and Chicago could save 9-10% annually on their electricity bills.
Net Metering Law
Virtual Net Metering
Potential Savings for Subscribers
Source: NREL, SEIA, EnergySage, CBRE Econometric Advisors. 9https://www.energysage.com/community-solar/community-solar-savings/
closure
Community solar offers a cost-effective way for communities to participate in sustainable energy solutions, with benefits including increased clean energy for local communities, increased revenue opportunities for property owners, reduced reliance on fossil fuel energy sources, and compliance with government Building Performance Standards (BPS) and other climate mitigation measures.
CBRE Group Inc.
CBRE Group Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services and investment firm (based on 2013 revenue). The firm has approximately 44,000 employees (excluding affiliates) and serves real estate owners, investors and occupiers through approximately 350 offices (excluding affiliates) worldwide. CBRE provides strategic advice and execution on real estate sales, purchases and leasing, corporate services, real estate, facilities and project management, mortgage banking, appraisals and valuations, development services, investment management, and research and consulting. For more information, please visit the company's website at www.cbre.com.
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