A Tenant That Helps Pay the Bills: Solar for Self Storage

Households and businesses across the United States are increasingly adopting solar energy to reduce utility costs and meet sustainability goals. While solar can certainly help the bottom line at home or a place of work, another place also stands to benefit – self storage facilities.

More people than ever are renting self storage units to keep their extra stuff or temporarily store their wares during a move. In fact, about 13 million households and nearly 1.5 million businesses rent from self storage units, according to a recent report from the Self Storage Association. These self storage customers may pay monthly or annual rent, but they likely do not pay the electricity bill. That is where solar energy is increasingly able to help self storage operators reduce operating costs.

Why solar, and why now?

Like self storage, solar is a growth industry. Over the last decade, the solar industry experienced an average annual growth rate of 49 percent. This growth is due to a combination of lower costs to install solar as well as strong federal and state policies in support of renewable energy sources. Costs have dropped by more than 70 percent since 2010.

Because of low costs and nationwide incentives, solar makes sense in markets across the country. The best places for solar are within states and utility service territories that have a combination of high electricity rates, net metering policies, and solar incentives.

Net metering is important because it allows solar energy customers to seamlessly send and receive electricity with the electric grid. When solar is producing more energy than is needed, your account is credited for each kilowatt-hour that is sent to the grid. Likewise, you can still pull electricity when you need it – such as at night when the sun is no longer shining. Good net metering policies allow for this credit to occur at the full retail rate of electricity.

Nearly half of U.S. states have net metering policies in place, including most states in the northeast, west coast, and several across the Midwest.

“We’ve seen a flurry of activity on the East Coast because of high electricity rates,” said Erik Bruner, business development manager of Denver, Colorado-based Pivot Energy. He cited New York, Pennsylvania, Washington, D.C., and Massachusetts as examples, as well as southern states like Florida, Georgia, North Carolina, and South Carolina, plus Texas and Colorado farther west.

“Those are the states that have developed favorable solar policies that – when combined with high rates and sometimes robust incentives – create a good financial picture,” he said.

A good fit for self storage operators

Solar represents a unique opportunity for self storage operators due to several factors that make it especially favorable. The first is that most self storage units have a common electricity load that is served by the self storage operator, making it relatively easy to offset costs. The second is that self storage properties often have a wealth of available rooftop space for solar.

The result is that some self storage properties are experiencing as much as a 95 percent reduction in utility costs from on-site solar energy, especially those that have heating and cooling costs on top of lights and plugs. That means more operating budget available for other, more important, expenses to help serve tenants and upgrade facilities.

Installing solar at a self storage unit is also a seamless process that will not impact your rentable area or your tenants’ ability to use their space. The system consists of solar panels on the roof, or as a parking canopy structure, and the solar-generated electricity is sent to an inverter that converts it from direct current (DC) to alternating current (AC). Solar panels typically have 25-year warranties while inverters have at least 10-year warranties.

As a result of this unique market situation, leading self storage brands like Extra Space Storage are starting to adopt solar en masse. By the beginning of 2021, Pivot Energy will have completed more than 80 rooftop solar energy installations for Extra Space Storage across seven states.

“Solar is now a big part of our corporate sustainability program, and part of our ongoing effort to be good corporate citizens,” said Joe Margolis, Chief Executive Officer of Extra Space Storage. “Generating rooftop solar energy production in lieu of using energy from carbon-emitting sources furthers this commitment and leverages a previously unused asset within our portfolio – our rooftops – and provides cost savings from reduced utility expense.”

Smaller self storage businesses also stand to benefit, just like the larger players. The important part is to do the due diligence to select a trusted contractor with a good track record.

Getting started with solar

Interested businesses can start by contacting a solar energy provider like Pivot Energy. An initial solar proposal should include pricing, a production estimate, and other details like environmental offsets.

It is important to note that different financing options and payment plans are available. One common solar industry standard is the power purchase agreement, also known as the PPA. This framework allows businesses to adopt solar by simply paying a per kilowatt-hour rate to the solar energy provider. In return, the solar provider owns the system and “monetizes” the federal and state incentives. This results in a low price for electricity that is much lower than grid power in many states.