We need renewable energy more than ever. So what’s holding back the growth of solar power?
Solar power’s biggest problem is nothing to do with the amount of sun the UK gets. It’s a problem that few people are even aware of.
But it means the kind of solar installations that make a difference – the big ones on the roofs of industrial buildings – don’t happen as often as they should.
Most businesses put solar on the roof of their premises to get cheaper power. A company like ours funds the installation and the business gets lower electricity bills. It’s called a power purchase agreement, and it’s the bedrock of commercial solar installation.
Trouble is, most businesses do not own their premises. Around 60% of commercial buildings are leased, often on short terms; BNP Paribas’ property division puts the average at 6.3 years.
Here’s the problem. Commercial leases are holding back the growth of solar power in the UK.
For the tenant six years is not long enough to justify putting solar on the roof. Installers don’t want to take the risk involved with the upfront costs when the tenant could leave before the investment has paid for itself.
The landlord may not be interested or give consent, or they may want a cut of the profits, which can reduce income to the point where it’s not worth bothering with.
When things get complicated, deals don’t happen. And right now, things are more complicated than ever, especially for the kind of businesses we work with. When you’re struggling to pay the rent, installing solar power might not seem like a priority.
But something interesting has emerged from the pandemic. Sustainability is big business. Financial giants such as JP Morgan reckon that investment in what’s known as environmental, social and corporate governance (ESG) will increase as a result of COVID-19. ESG is the catch-all term for the good stuff that businesses do, and sustainability is a big part of it.
Investors are more likely to invest in companies with a good sustainability rating. Research from the Said Business School at Oxford University found that such companies received 15 per cent more investment than those with a low rating.
Sustainability matters, to customers, business and the planet. Recession or not, now is not the time to allow something as dry as a property lease to harm the growth of renewable energy.
So we decided to do something about it. A new kind of power purchase agreement that maximises the benefit to the business owner and minimises the risk to the installer. One that doesn’t need to involve the landlord, simplifying the deal and increasing the chances of success.
At Olympus Power we’re using this new deal on our latest projects. Because if we’re to make sustainability sustainable, this is the kind of solution we’re in need of.