Savvy business owners know how to generate additional revenue from their commercial assets. Some examples include leasing the roof space for billboards or cellular antennas, providing additional paid services to tenants or renting unused space, and providing premium parking spaces.
Now there is another option available to commercial property owners in Massachusetts: the rooftop solar lease. This new revenue stream can add significant value, and because most of the customers of solar explore ownership models, a hosting arrangement is often overlooked. However, for interested building owners seeking to unlock additional value from their properties, it is worth serious consideration.
Businesses that own property in the Commonwealth can monetize their roof by becoming a solar hosting site through the Solar Massachusetts Renewable Target (SMART) program. Signed into law by Governor Charles Baker in 2016 and officially enacted in 2018, the program’s latest goal is to add 3,200 megawatts (MW) to the Massachusetts solar market. The result is a strengthened market for local, clean energy, and job creation.
The Massachusetts SMART program hopes to do this by adopting a model known in the industry as a “feed-in-tariff.” The state provides residential and commercial customers with a per kilowatt-hour (kWh) financial incentive to install solar. If you are a commercial property owner within National Grid, Unitil, or Eversource utility territory, you can benefit from this program without actually procuring solar energy by renting your roof (or any unutilized space, such as a parking lot or field) to a third-party energy developer, like Pivot Energy. The developer will install the system, pay for all associated costs, and earn the SMART program credits. In exchange, the developer will provide you with a guaranteed fixed income for up to 20 years, which on average can range between $25,000 to $75,000 per year, depending on roof suitability, size, and other factors. The result is a new income stream for your business that is low-risk, passive, and predictable.
Becoming a solar host site through the SMART program has numerous financial benefits for your business. In addition to immediately increasing your net operating income by unlocking a new revenue stream, you can increase your property’s brand value and better attract potential tenants, driving up future revenue.
The long-term financial benefits of hosting solar are also considerable. As the business owner, you would not be the solar array owner, so you would not incur extra maintenance or operational costs. Instead, you get paid to put solar on your roof by collecting lease payments from the solar developer.
The SMART program incentivizes larger solar projects – so the bigger you go, the more money you make. With traditional “behind the meter” solar, the energy produced goes back into the building. However, with the SMART program, the energy produced by the solar arrays is fed directly into the electricity grid. This means the solar energy system installed on your roof does not need to be sized according to your building’s historical energy consumption requirements. Instead, it can be designed to maximize the revenue you receive.
SMART also offers compensation rate “adders” that can increase the solar value on your roof. To put it simply, if your project meets certain elective criteria under the program, the annual payout to the system owner will be more generous. This translates to considerably more revenue that you receive for hosting solar. Compensation rate adders are available for low-income and public entity projects and projects co-located with energy storage or solar tracking. These adders address some of SMART goals, which include expanding access to solar’s benefits or making the energy from these systems more beneficial to the grid.
As a declining Block Program, it is important to note that the incentives will not be around forever. Incentive levels will continue to decrease once certain capacity thresholds are met in each utility territory. Therefore, the revenue you earn is determined by your system’s size and your utility service territory, potential adders, and how quickly you enter the program. Simply put, the longer you wait to participate, the more likely that your income for leasing your roof will be lower.
Navigating all the SMART program features and understanding how to design a system that will maximize your business’ revenue can be challenging. Our team at Pivot Energy has experience working with various clients through the program, and we continue to offer hosted solar opportunities for small, medium, and large businesses across Massachusetts.
Call us today, so you can take the SMART route by making money off your unused roof space.