JLL - Shedding light on PV - 22.10.2014

Solar PV: Shedding light on
the opportunities
Commercial roof solar PV valuation methodology and property asset performance
October 2014

Solar PV: Shedding light on the opportunities | 3
Contents
1. Executive summary................................................................................................................................. 5
2. Solar PV overview.................................................................................................................................... 6
2.1 Introduction...................................................................................................................................... 6
2.2 How solar works.............................................................................................................................. 6
2.3 Types of PV technology................................................................................................................... 7
2.4 Reasons to install............................................................................................................................ 7
2.5 Rooftop solar PV installation process.............................................................................................. 9
2.6 Geographical implications ..............................................................................................................11
2.7 Regulatory environment................................................................................................................. 12
2.8 Planning......................................................................................................................................... 14
2.9 Legal.............................................................................................................................................. 14
3. Current market context.......................................................................................................................... 16
3.1 Global market context.................................................................................................................... 16
3.2 UK market...................................................................................................................................... 17
3.3 Current transactional evidence...................................................................................................... 17
3.4 Property owners/occupiers that have adopted PV......................................................................... 18
3.5 Rooftop solar PV asset/portfolio transactions................................................................................ 20
3.6 Parallels with large-scale ground-mounted
solar market............................................................................................................................................. 21
3.7 Implication for commercial property valuations including solar PV................................................ 21
4. Ownership structures............................................................................................................................ 22
4.1 Overview........................................................................................................................................ 22
4.2 Commercial structures................................................................................................................... 23
4.3 Commercial ownership structures................................................................................................. 24
5. Valuation methodology.......................................................................................................................... 25
5.1 Valuation methods......................................................................................................................... 25
5.2 Valuation scenarios........................................................................................................................ 25
Butcher’s Pet Care .................................................................................................................................. 26
Jaguar Land Rover .................................................................................................................................. 28
6. Key attributes and risks........................................................................................................................ 31
6.1 Introduction.................................................................................................................................... 31
6.2 Key attributes................................................................................................................................. 31
6.3 Risks.............................................................................................................................................. 32
7. Conclusions............................................................................................................................................ 33

4 | Solar PV: Shedding light on the opportunities
University of East London installed by Solarcentury

1. Executive summary
• Greater consistency and sophistication in the valuation
approach for solar PV has been established but not
commonly used. Discounted cash flow methodology
providing a net present value of income generated by
the solar PV is the most appropriate and explicit.
• Responsibility for the roof remains a key issue
during the installation of solar PV with FRI leases
being the most preferable for landlords. This
maintains the liquidity of the asset. Insurance
policies have predominantly remedied the issue.
• For multi-let estates and shopping centres,
any excess income or cost savings generated
from the solar PV installations can be used to
reduce the service charge, contribute to a sinking
fund and improve the lettability of units.
• Greater understanding is required of the impact on a
property’s asset performance. Sophisticated project
management is required to provide analysis of what
can be done and to deliver the best solution.
• Recent commercial property transactions
benefitting from solar PV have continued to trade
at premium prices demonstrating good liquidity.
• The recent surge in demand for solar PV on commercial
roofs demonstrates a step change in the positive attitude
towards this method of harnessing renewable energy.
This paper has been prepared by JLL with Solarcentury for the
purpose of considering the impact of rooftop solar photovoltaic
(PV) installations on the financial performance of commercial
property. The aim is to explain the use of solar PV in the context
of commercial property and then principally consider the
relevant valuation methodology that can be used to ascertain
the impact on property values. The paper explains how solar PV
works, the current market context, relevant valuation methods
with case studies and key attributes and risks.
We highlight key points below:-
• There has been significant expansion in the use
of solar PV due to the positive developments in
legislation, increased efficiency in technology,
tenant demand and quick payback periods.
• Commercial property offers larger roof space areas
compared to residential property in particular distribution
warehouses, factories, multi-let estates and shopping
centres. These properties will be able to host and
generate high levels of renewable energy.
• Greater understanding of how solar PV works,
its income generation possibilities, the legal
implications, and management, needed is required
within the property industry to increase the
deployment levels for commercial installations.

2. Solar PV overview
2.1 Introduction
We set out in our overview an explanation of how solar works,
the technology involved, practical installation, geographical
implications, regulatory environment, financial incentives and
legal analysis. The aim is to demystify the world of solar PV
and to provide a clear background to understanding how its
operation impacts on the property valuation methodology.
The solar panels are frames
made up of solar (PV) cells
(layers of silicon). The sun’s
radiation hits these cells and
is converted to direct current
(DC) electricity.
This DC electricity travels to
an inverter, which converts
DC into alternating current
(AC) electricity.
The AC electricity
produced is the same as
the electricity supplied by
a utility company.
Excess electricity can be
exported to the grid.
2.2 How solar works
Photovoltaics (PV) is a power generating technology
that converts sunlight into direct current electricity using
semiconducting materials that demonstrate this effect. A
photovoltaic system employs solar panels composed of silicon
cells to supply solar generated power. The solar panels can be
easily attached to a range of commercial properties in the UK
that vary in size and category. These include, but are not limited
to, offices, industrial property, hospitals, schools, hotels, retail,
farm buildings, and warehouses. Small commercial buildings
can typically accommodate PV systems between 4kWp
and 100kWp, while larger commercial buildings allow larger
arrays, the largest in the UK currently being 5.8MWp. Figure 1
illustrates the process behind the technology:
Figure 1 - How solar works
Toyota / Lexus showroom installed by Solarcentury

2.3 Types of PV technology
There are two main types of solar PV technology, these are Crystalline Panels and Thin-Film PV.
Thin film PV
• Thin film technology uses a different manufacturing
process to crystalline modules and can be
integrated with glass, plastic, fabric and metal.
• Not as efficient as other types of PV with the highest
confirmed efficiency level recorded at 20.4%.
Solar
PV
Make
the roof a
financial
asset Reduction
on CO2
emissions
Contributes
towards CSR
objectives
Help to
fight climate
changeLegislative
need to
improve EPC
rating
Increasing
energy costs
Increased
return from
asset
Reduce
on-site grid
energy used
Figure 2 - Reasons to install
2.4 Reasons to install
Solar energy is arguably the most
environmentally friendly, clean and
universally applicable form of power
generation. Solar PV is becoming
increasingly popular in the UK for both
residential and commercial property.
We have identified the following drivers for
both landlords and tenants to install PV as
illustrated in figure 2.
A number of these drivers are mentioned
later in the benefits section of this paper,
however we have identified two key drivers
behind installation on commercial buildings
in the United Kingdom, these are: changes
in legislation and rising energy costs.
Crystalline panels
• Most common type of PV technology used today.
• Most productive type of panel based on output/sqft.
• There are two forms, poly and mono which
have varying efficiency ratings.
• Crystalline panels are generally more
efficient than thin film panels.

In July 2013, the coalition government announced that by 2019 all new non-domestic properties must be zero
carbon. This piece of legislation along with other rulings which are already or set to come into effect will mean
sustainability and renewable energy will become important considerations for property owners. Below we set
out key sustainability legislation rulings affecting commercial properties:
7
9
11
Residential high p/kWh
Residential low p/kWh
Industrial high p/kWh
Industrial low p/kWh
13
15
17
19
p/kWh
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
21
23
25
Rising energy prices will also be a factor behind
the growth of PV in the UK. In the graph we have
detailed the highest and lowest projected real
price of electricity up to the year 2030 based on
figures from a report published by DECC in 2014.
The price for residential and industrial uses
rises sharply from 2014 with residential
prices reaching 23.3p per kWh in 2024 which
represents an increase of 40% from the 2014
level of 16.6p. Industrial prices are forecast to
increase by an even larger percentage over
the next 10 years with prices projected to reach
15.9p per kWh which is a 60% increase on the
2014 level of 10p.
In contrast, the cost of solar continues to
decrease. The levelised cost of solar electricity
for commercial and industrial installations is
already at 10p per kWh.
2016 Energy Act
Requires landlords to accept
reasonable requests for
efficiency improvements
2013
Changes to Building
Regulations L
2018 – Energy Act
Illegal to rent out residential
or business premises below
minimum energy efficiency
rating of EPC ‘E’
2020
EU requires new buildings to
be ‘nearly zero energy’ (UK has
2019 ‘zero carbon’ requirement
for commercial buildings).
2020
34% reduction in
UK CO² emissions.
2020
15% of UK energy
consumption to come from
renewable resources.
2050
80% reduction in
UK CO² emissions.
2050
Emissions from all
buildings to be as near
to zero as possible.
Figure 3 - Key upcoming legislation regarding sustainability.
Figure 4 - Projected price of electricity. Data: Department of Energy and Climate Change

2.5 Rooftop solar PV installation process
The process behind the installation of a rooftop solar PV system is as follows:
We believe it is crucial when looking to install solar PV on the roof of a commercial property that this is
undertaken with a reputable company with a high level of expertise and an established track record.
Quote and
Design
Planning
checks and
DNO liason
The
installation
Feed-in Tariff
application
Implement
operation &
maintenance
strategy
Survey
Survey – Prior to going ahead with a solar PV installation, a survey must be undertaken to assess the
suitability for installing PV on the building. The buildings orientation, roof pitch, structural integrity and
potential capacity will be assessed and signed off.
Quote and design – Upon completion of the survey, the solar expert will design a rooftop solar PV system for
the property in question. The design is crucial in order to optimise energy production.
Planning checks & DNO liaison – After the system has been designed, it must be checked to see whether
the system will require planning permission or not. If it does, the planning application must be submitted
and permission granted prior to installation. In addition, permission must be sought from the relevant District
Network Operator (DNO) to connect a commercial PV system to the National Grid. This permission will be
granted following the submission of a G59 ENA application form to the DNO, accompanied by a Letter of
Authority.
Installation – Depending on the size of the system, installation can be completed in 2 - 3 months.
Feed in Tariff application – This step should be completed as soon as possible in order to secure the best rate
available. It is also possible to pre-accredit the project up to 6 months prior to commissioning if all permits are
in place.
Implement operation and maintenance strategy (O&M) – This can be undertaken by either the installation
owner or a third party (such as Solarcentury) via remote telemetry. Having a comprehensive operations and
maintenance strategy in place, will minimise down time and optimise system performance.

2.5.1 Installation methods
There are a number of ways that PV can be mounted to the rooftop depending
on the material it is made of. We have summarised these as follows:-
Standing seam Concrete Asbestos fibre cement
• Quick and simple to
design and install
• Non-penetrative as fixings
clamp over the seam
• Reasonable on price, depending
on roof manufacturer
• Upstand design installed
onto concrete
• Requires strong design
and installation skills due
to high wind loads
• Elevated install costs due to design
• Possible to fix PV to this type
of roof using careful
install procedures
• Fragile roof requires strong
design and installation skills
• Elevated cost due to install
and design requirements
Single ply membrane
Composite panel profiled metal/
Trapezoidal metal roof
Concrete with
bituminous membrane
• Common on new builds and
re-roofed developments
• Roofs are often lightweight which
can be problematic for PV
• PV often ballasted to roof;
structural sign off is essential
• Possible to penetrate and fix to
roof if high wind load is an issue
• Light weight and simple design
• PV mounting can be
penetrative or non-penetrative,
depending on roof type
• Very common
• Mounting structure is simple in
design and weighted using ballast
• Build up on roof must be
investigated to sign off design

2.6 Geographical implications
One of the factors that makes solar attractive as a long-term,
low risk investment is the reliability of irradiance modelling.
Whilst that might seem counter-intuitive when you experience
British weather day in and day out, the data is clear. Solar is
highly predictable.
The yield of solar systems very much depends on the
geographic location and the orientation of the panels. The
highest yielding geography in the UK is the south west.
Figure 5 shows the different irradiation levels in the UK.
Solar systems work in the UK despite cloudy days as the
technology responds to daylight. More electricity is generated
when there is no cloud cover, but the system continues to work
despite any cloud cover.
Orientation is just as important as location. The more south
facing the roof is the better and the pitch of the modules will
also significantly affect the amount of electricity generated.
The chart below shows the percentage drop off from optimum
as the system is pointed away from south or at more or less
than 30 degrees pitch.
1200
1100
1000
900
Percentage of maximum output potential achievable with different orientation and tilt angles
Orientation – Compass bearing (°) measures from North
Tilt(°)fromHorizontal
Horizontal West SW South SE East
270° 255° 240° 225° 210° 195° 180° 165° 150° 135° 120° 105° 90°
0° 90 90 90 90 90 90 90 90 90 90 90 90 90
10° 89 91 92 94 95 95 96 95 95 94 93 91 90
20° 87 90 93 96 97 98 98 98 97 96 94 91 88
30° 86 89 93 96 98 99 100 100 98 96 94 90 86
40° 82 86 90 95 97 99 100 99 98 96 92 88 84
50° 78 84 88 92 95 96 97 97 96 93 89 85 80
60° 74 79 84 87 90 91 93 93 92 89 86 81 76
70° 69 74 78 82 85 86 87 87 86 84 80 76 70
80° 63 68 72 75 77 79 80 80 79 77 74 69 65
90° 56 60 64 67 69 71 71 71 71 69 65 62 58
Figure 6. Source: Solarpv.co.uk – Note: This chart is indicative and should not be used for the calculation of performance estimates.
Figure 5 - Irradiance levels in the UK: Annual total solar
irradiation (kWm/m2) across the UK

2.7 Regulatory environment
Financial incentives
There are two key incentive schemes used for commercial properties: the Feed-in-
Tariff (FiT) and the Renewable Obligation (RO). The FiT is typically used for systems
up to 1MWp. The RO is typically used for large systems ranging from 1MWp to 5MWp.
The Renewable Obligation
The RO is the main support mechanism for large-scale
renewable energy in the UK. Introduced in 2002, the RO
requires electricity suppliers to deliver an annual proportion of
electricity from renewable sources, or pay a fine. ROCs are
traded separately to the actual electricity itself and work as a
bonus premium on top of the price paid for the unit.
Renewables Obligation Certificates (ROCs) are green
certificates issued to operators of accredited renewable
generating stations for the eligible renewable electricity they
generate. Operators can trade ROCs with other parties. ROCs
are ultimately used by suppliers to demonstrate that they have
met their obligation.
The financial model is based on:
• Renewable Obligation Certificates – issued
to generators and supplied to consumers
under the Renewables Obligation.
• Levy Exemption Certificates (LECs) – sold to suppliers from
Climate Change Levy exempt generators and then sold on
to consumers not subject to Climate Change Agreements.
• Renewable Energy Guarantees of Origin (REGOs)
– certificates which demonstrate that electricity
has been produced from renewable sources.
• A Power Purchase Agreement (PPA) for the power supplied.
It is possible to accredit PV systems as small as 250 kWp under
the RO but the FIT is a simpler process.
The Feed-in-Tariff
The FiT is a government programme introduced in 2010 to
encourage the uptake of renewable energy in the UK. It rewards
you for any energy you generate from a solar installation,
regardless of whether you use the electricity or not.
The income is guaranteed for 20 years and is index-linked. If
electricity prices go up more than inflation – which they have for
the past decade – your savings would grow even quicker.
The financial model is based on:
• An inflation-linked payment for every
kwh of electricity generated
• An inflation-linked payment for electricity that is exported
• Savings in payments of electricity for power that is
consumed from the system rather than the grid.
• Levy Exemption Certificates (LECs) – sold to suppliers from
Climate Change Levy exempt generators and then sold on
to consumers not subject to Climate Change Agreements.
The FiT for new systems degresses in line with take up and is
reviewed every three months.

Description
2014/2015
For eligible installations with an eligibility
date on or after 1 July 2014 and before 1
October 2014 (p/kWh)
For eligible installations with an eligibility
date on or after 1 October 2014 and
before 1 December 2014 (p/kWh)
Solar PV (other than stand-alone) with
total installed capacity greater than
50kW but not exceeding 100kW
Higher Rate 10.34 Higher Rate 10.34
Middle Rate 9.31 Middle Rate 9.31
Lower Rate 6.38 Lower Rate 6.38
250kW
6.38 6.38
Stand-alone (autonomous) solar
photovoltaic (not wired to provide
electricity to a building)
6.38 6.38
Export Tariff 4.77 4.77
Currently the solar PV Feed-in-Tariffs are as follows:-
The buyout rate for an RO Certificate is £43.30. A commercial rooftop is eligible for 1.6
RO Certificates for every MWh of electricity generated. This is equivalent to 7.4p/kWh.

2.7.1 Power Purchase Agreement
A Power Purchase Agreement (PPA) is a contract between
a generator and a PPA provider. The PPA defines all of the
commercial terms for the sale of electricity between the
two parties, including the schedule for delivery of electricity,
penalties for under delivery, payment terms, and termination.
Commercial terms in the PPA will typically refer to the sale
price of electricity, and any associated items of value including:
embedded benefits, triad benefits, Levy Exemption Certificates
(LECs) and any future new benefits.
The generator can enter into a PPA with a PPA provider to sell
power exported to the grid at market rates. In addition where
applicable the generator may be able to enter into a private
wire direct PPA with an onsite energy user to sell power at a
preferential rate.
2.7.2 Levy Exemption Certificates
Levy Exemption Certificates (LECs) are used to provide
exemption for business customers from the Climate Change
Levy (CCL). The CCL is a charge placed on the use of fossil
fuels by energy intensive users and is designed to encourage
efficiency and use of renewable technologies. The value of
the LEC is related to the level of the CCL rate is set at. The
CCL rate for electricity as at 1 April 2014 is 0.541p/kWh. PPA
providers will typically offer generators 80% of the LEC value in
a PPA.
Other embedded benefits refer to any benefit that accrues to
a generator and/or a licensed electricity supplier as a result of
the portfolio being connected to the local distribution network.
These benefits include the avoidance of distribution and
transmissions losses and are built into the export rate offered to
the generator.
2.8 Planning
It was previously announced that from April 6th
2012, planning
permission would not be required to install solar PV on non-
domestic buildings, subject to meeting the following conditions:
• The solar PV array must not protrude further than
200mm from the surface that it is on, unless it is on
a flat roof where the PV must not exceed 1 metre
in height above the highest part of the roof.
• The solar PV array must be more than 1
metre away from the edge of the roof.
Historically solar PV installations with a capacity of greater than
50kWp required planning permission. However, in a ‘technical
consultation on planning’ document which was published in July
2014, it was suggested that this planning regulation should be
relaxed and the permitted development right to install solar PV
on non-domestic buildings without the need for planning was
extended to one megawatt installed capacity.
As with all other types of property, planning permission is
required for the installation of PV on a listed property.
2.9 Legal
One of the most important aspects regarding solar PV
on commercial roofs will relate to the legal aspects of the
installation. The situation will vary depending on the ownership
of lease structure in place with either a third party provider or
standard landlord and tenant relationship.
There are two types of lease that are commonly granted in the
property market, these are FRI (Full Repair and Insuring) and
IRI (Internal Repair and Insuring). The main difference between
these two types of lease is an FRI lease requires the tenant in
question to bear the responsibility for the repair and insurance
of the whole property. In the case of IRI, the tenant in question
is only responsible for the repair and insurance of only the
internal accommodation.

The type of lease is also relevant when installing PV on a property as it details the party who is responsible
for the upkeep of the roof after the solar PV array has been installed. This is detailed below:
Lease type Responsibility for the roof Favourable for Remedies
FRI Tenant Landlord
IRI Landlord Tenant
Landlord will take out additional insurance
to realign the lease to an FRI basis
From a number of discussions with property landlords, we understand that their preference lies with letting
the property on an FRI lease meaning the tenant would retain the FRI liability for the roof space.
However, should the tenant not wish to accept the liability for the rooftop upon installation of solar PV,
it is possible to change the lease type with a Deed of Variation. This is a legal requirement for the lease
agreement between a landlord and a tenant to be altered. In most cases, the tenant will pay the legal costs
for both parties.
IRI leases, which are less common in the UK, but dominant across the rest of Europe, can have a
detrimental effect on the liquidity of the asset as the landlord has to account for the cost of maintaining the
roof. We have established this is usually mitigated by solar PV owners taking out insurance to realign the
lease to a FRI basis.
Eden project installed by Solarcentury

In addition to this, it was reported that in 2013, large scale PV
installations grew by 600% year on year. Considering that at
the end of 2009, installed PV in the UK was just a mere 0.3% of
that installed in Germany, the UK PV market has shown strong
growth and we anticipate that this growth will continue.
Outside of Europe, China leads the non-European top three in
terms of total cumulative capacity over Japan and the USA. It
is expected that due to the nature of the PV business and its
reliance on legislative reforms, markets in developing regions
will see greater growth than a number of markets in Europe,
where PV have been available for a number of years.
3. Current market context
3.1 Global market context
It was reported in May 2014 that the UK is set to lead the
European solar market for the first time, overtaking Germany,
which was the leading country from 1995 to 2013 with the
exception of 2008. This forecast was based on a number of
factors including a plethora of MW-plus installations completed
this year across the solar farm and large rooftop markets, and
healthy demand in the residential and sub-50kW PV market.
Thailand 1%
Others 3%
China 43%
Total cumulative
capacity outside of
Europe 27,377 MW
Japan 25%
USA 18%
India 4%
Australia 3%
Canada 2%
Korea 1%
Figure 7: PV Market share outside of Europe in 2013 (Data: EPIA)
Bodyshop HQ installed by Solarcentury

3.2 UK market
The commercial and industrial rooftop sector is commonly
associated with 50kWp – 5MWp installations. As illustrated in
the figure 8, the total number of commercial rooftop PV units
installed to date in the UK remains small, and therefore both
commercial property transactions involving solar PV and rooftop
solar PV asset/portfolio transactions are limited.
3.3 Current transactional evidence
3.3.1 Investment transactions
The amount of comparable data in the UK is quite limited. We
are aware of the sale of the following properties which have
solar PV installed or are in the process of being installed by the
tenant:
In July 2014 the Sainsbury’s Distribution Centre on Fleming
Road, Waltham Abbey comprising a large modern cross-docked
distribution warehouse extending to 704,780sq ft. was sold.
The property was fully let to Sainsbury’s Supermarkets Ltd
until February 2030 which provided a term certain of 15.75
years. We understand that Sainsbury’s Supermarkets Ltd
have significantly progressed in the installation of an extensive
PV system which is incorporated into the roof. The property
reportedly transacted above the asking price at approximately
£107million which reflected a net initial yield of approximately
4.75% assuming purchasers costs of 5.8%.
In May 2014, Standard Life acquired Hollywood House in
Woking which comprised 43,440 sq ft of Grade A office
accommodation across the ground and five upper floors. The
property was recently refurbished by one of the tenants –
Skanska - to include sustainable elements including rooftop
solar PV and rain water harvesting which earned a LEED
Platinum rating for Commercial Interiors. The property was
purchased for £15.02 million which reflects a Net Initial Yield
of 6.44% and equating to a capital value of £365 per sq ft
assuming purchasers costs of 5.8%.
1,589.1
388.8
71.5
46.3
26.5
27.0
207.0
171.3
101.4
<=4kw
4-10kW
>10-50kW
>50-100kW
>100-150kW
>150-250kW
>250-5MW
Standalones
Figure 8: UK cumulative installed FiT solar PV capacity as at 31 July 2014 (MW)

From the two transactions that we have identified, we understand that the installation of solar PV technology
did not impact the liquidity of the assets and competitive bidding resulted in keen prices being achieved.
The purchase price reflected the strong covenants present in both properties, the location of the asset and
the weighted unexpired term across all tenants and the positive influence of the use of renewable energy
sources. We anticipate that the use of solar PV on commercial buildings will become much more mainstream
and as a result examples will become more common.
3.4 Property owners/occupiers that have adopted PV
The number of corporate occupiers that are implementing PV is quite small at the moment, but we anticipate
this will grow as solar PV become more mainstream.
Segro has started to implement solar PV on a number of their
industrial properties around the country. We understand that
one of the latest properties to have this installed is at X2 in
Hatton Cross, Heathrow. We believe the solar PV system was
installed by Segro for the tenant, with all responsibility for the
property being retained by the tenant.
Sainsbury’s has been installing solar PV on a large proportion
of their portfolio including stores and distribution centres. In
addition, it was reported by edieEnergy that in July 2013,
Sainsbury’s had successfully installed 100,000 PV panels
across 210 stores, making them the largest multi-roof solar
panel operator in Europe.
Skanska has also begun to install solar PV on their UK
properties. We have seen evidence of this in the transaction
for Hollywood House, Woking (3.3.1), but they have also
installed solar PV on office properties in Bristol and works have
started on a new development in the City of London called ‘The
Monument Building’ which will also incorporate solar PV.

The Kingfisher group has installed solar PV in both Europe on
their Brico Dépôt stores and in the UK on their B&Q stores.
Notable examples in the UK include the installation of a 50kWp
solar PV array on the roof of B&Q Taunton and the 168kWp solar
PV array on the roof of B&Q Farnborough. B&Q are also now
analysing the feasibility of installing PV on its freehold stores.
Ikea has completed the installation of solar PV on all of their
18 stores in the United Kingdom. In addition to this, Ikea has
started to sell residential solar PV systems for homeowners in
their stores.
Greggs the bakers has installed 10 solar PV arrays on their
manufacturing sites across the UK to help meet their ambition
of reducing its carbon footprint by 35% by 2015. In total Greggs
installed 1.28MWp of PV.
50 Hanover Square installed by Solarcentury

3.5 Rooftop solar PV asset/portfolio transactions
To date we are aware of the sale of 24 rooftop solar PV assets in the global marketplace since 2011 as
detailed in the table below. 19 of the 24 transactions (101 MWp) were for solar PV on commercial and
industrial buildings while the remaining 5 transactions (56 MWp) involve solar PV on residential buildings.
Country No. of transactions Installed capacity (MWp)
Belgium 2 6.12
Canada 1 0.85
China 1 12.41
France 3 45.30
Germany 4 12.14
Italy 2 6.20
Spain 1 1.50
Switzerland 1 0.41
UK 5 63.26
USA 4 8.91
Total 24 157.10
Transactions involving the sale of solar PV on commercial and industrial buildings include a variety of building
types including: shopping centres, automobile manufacturers, cold storage warehouses, parking lots, and
other commercial and industrial buildings.
The five notable UK FiT rooftop solar transactions include:
• Aviva’s c.£22m acquisition of an 11.4MWp UK residential solar
PV portfolio from Zouk Capital in August 2014.
• Oxford Capital Partner’s c.£16m acquisition of an 8MWp UK residential
solar PV portfolio from Kingspan in May 2014.
• Aviva’s c. £25m acquisition of an 8.6MWp UK commercial solar
PV portfolio from Zouk Capital in July 2013.
• Aviva’s £100m acquisition of a 23MWp UK residential solar PV portfolio from Homesun in August 2012.
• Aviva’s £51m acquisition of a 12.3MWp UK residential solar PV
portfolio from Ecovision Renewable Energy in July 2013.

The limited number of transactions in the public domain, leads
us to observe that the market for rooftop solar PV remains
relatively immature and illiquid. However, we have noted that
activity in this space is increasing as new developers and
aggregators enter the market and the volume of funds raising
capital on public markets or through closed funds increases.
In addition we note a number of leading US rooftop installers
have introduced innovative new financing structures to facilitate
further deployment in the rooftop solar PV sector. The most
recent of these was SolarCity’s securitised rooftop Solar portfolio
market offering including $201.5m of asset-backed notes secured
by the cash flow generated by a pool of photovoltaic systems
owned by SolarCity. The offering includes two tranches including
$160 million of senior class notes with 4.026% interest and $41.5
million of junior notes bearing an interest of 5.45%. Both sets of
notes will mature on July 20, 2022.
Investor levels of interest vary depending on appetite for risk,
stage of asset development and level of tariff rates available
but we anticipate an increasing number of investors will seek
exposure to this asset class as installed solar PV rooftop
capacity rises and the number of aggregated rooftop solar PV
portfolios increases.
3.6 Parallels with large-scale ground-mounted
solar market
While the commercial and residential rooftop solar PV market
continue to develop, we are able to draw parallels with the
large-scale ground-mounted solar PV market, which is more
mature. Initially there were relatively few ground-mounted solar
PV transactions, often led by niche industry investors. However,
as deal volumes and market liquidity have increased, new
investors, such as private equity, tax based and infrastructure
funds have become increasingly interested in the sector. We are
also now seeing low cost capital entering the sector via direct
investments and through niche renewable yield based funds,
albeit these investments are largely into secondary purchases of
operating assets with a focus on larger portfolios.
3.7 Implication for commercial property valuations
including solar PV
In the current market context it is evident that while transaction
data for properties with solar PV installed is scarce, investors
recognise rooftop solar PV assets are valuable in their own
right and should be valued accordingly. This approach to
valuing rooftop solar PV assets is already evident in the
transaction data for rooftop solar PV assets being bought and
sold in isolation of a wider property sale. Investors purchasing
these ring fenced rooftop solar PV assets will typically adopt a
discounted cashflow valuation methodology when calculating
individual asset values.
Our view is this valuation methodology is the most appropriate
means for valuing rooftop solar PV assets when transacted
as part of a property sale. Under this approach the total value
for a property sold with an accompanying solar PV installation
owned by the seller will be the sum of a property valuation and
a separate solar PV valuation.

The weighting of the benefits flowing from the rooftop solar PV
project is largely dependent on who has financed the solar PV
project (tenant, landlord or third party) and the nature of the
commercial risks relevant to each stakeholder. In determining
a suitable commercial structure one must consider whether the
solar PV project is owned outright or third party owned.
4.1.1 Purchase of system outright
Where the solar PV system is owned outright the majority of
benefits will flow to the property/asset owner through a return
on investment without the need for a roof rental agreement. The
property/asset owner will negotiate with the electricity consumer
where relevant to agree a mutually acceptable PPA agreement.
4. Ownership structures
4.1 Overview
Rooftop solar PV projects can have a variety of different
ownership structures depending on who the landlord and tenant
are and whether the installation is owned outright or by a third
party. A typical project will involve contractual arrangements
between the electricity consumer (“tenant”), the property owner
(“landlord”) and the solar PV asset owner (“asset owner”).
The figure below illustrates a typical flow of benefits for a
rooftop solar PV project. The exact flow of benefits will depend
on the relationships between these parties and the specific
commercials relevant to the solar PV project.
Electricity
payment
Roof
rental
Solar PV
lease
Green
power
Return on
investment
Other power
revenues
Capital
investment
Property
owner
Rooftop solar PV project
Electricity
consumer
Asset
owner
Figure: Flow of benefits for a typical rooftop solar PV project
Agricultural buildings installed by Solarcentury

When purchasing the system outright, it is important to
recognise that the responsibility of the maintenance and upkeep
for the PV will be the landlord’s.
4.1.2 Third party ownership
In this scenario where the solar PV project is owned by a third
party the majority of benefits will flow to the third party asset
owner through a return on investment. However, the third party
investor will also need to secure a roof rental agreement with
the property owner or a mutually acceptable PPA agreement
with the electricity consumer.
The latter option will mean that the property owner/landlord
of the property will not have to directly invest in the solar PV
installations themselves but will also not receive any income.
Instead the landlord will benefit through a preferential electricity
tariff that can be passed on to future tenants improving the
lettability of the property through both cheaper electricity that
is available to the tenant and the opportunities for tenants to
contribute towards their CSR objectives. The responsibility of
the roof will be retained by either the Landlord or the tenant
depending on the type of lease (FRI or IRI) however the installer
will provide some form of guarantees for their installation on top
of the guarantee from the manufacturer of the PV.
This option will mean that the landlord is tied into a contract
which can potentially impact the liquidity of the property and
also day to day operations as the landlord will need to seek
permission to remove/disconnect the solar PV installation if this
were required for any particular reason.
4.2 Commercial structures
In light of the possible ownership and contractual arrangements
outlined above there are four typical commercial structures
applicable to solar PV rooftop projects.
Scenario 1: 100% client owned solar PV asset
• Purchase of system outright with all project
returns accruing to asset owner
• Simple transaction
• Long-term warranties
• Up-front capital requirement
• Significant environmental statement
• On balance sheet
• Complete certainty on electricity pricing
Scenario 2: Third party funded with roof rental agreement
• Property owner leases the roof in return for roof rental
• Standard documentation
• No up-front capital
• Rent approx £2.25 per sqm pa
• Tenant or landlord commits to market rate index linked PPA
We note that there has been very little interest in the market
place for this option due to the low returns generated for both
the landlord and the third party operator.
Scenario 3: Third party funded with direct PPA arrangement
• Property owner leases the roof in return for low-cost PPA
• Standard documentation
• No up-front capital
• Tenant and/or landlord benefits from a
below average index linked PPA
Scenario 4: Joint Venture
• Property owner co-invests in solar asset
• Asset co-owner receives either:
- free electricity in return for investment (effectively
pre- buying electricity for 20 years); or
- a percentage share of project returns
(assuming market PPA arrangement)
• Requires up-front capital input

4.3 Commercial ownership structures
We believe that there are a number of options available to a property owner
when installing solar PV. These are illustrated below:
Different options available for PV Installation
Comments
Option Landlord Tenant
Sub-lease option Acquires a sublease for the roof space in order to install the PV
Puts in place a PPA in order to sell the energy back to the tenant
at an agreed rate
Insures the PV with installer roof warranty as a backup
Retains FRI liability for the roof
Installation during
construction period
Pre-lets the property and agrees with the tenant to install the PV Pre-lets the property on
an FRI basis
Installation post-
construction
Installs the PV for the tenant
Puts a PPA in place in order to sell the energy back to the tenant
at an agreed rate
Landlord receives income from PPA and FiTs
Retains FRI responsibility as
originally agreed in the
existing lease.
We believe that the most attractive option to a landlord would be the installation of the panels during the initial property construction
period or during refurbishment (new build or retrofitting) with the occupier retaining responsibility for the roof.

but the industry assumption is approximately £100 per sqm. We
have adopted annual running costs of circa £15 per kWp and
insurance of £5 per kWp in our examples.
Following discussions with our renewable energy investment
team, we have adopted a discount rate of 9% reflecting the
return investors are demanding given the risk profile associated
with the rooftop solar PV market and the government backed
income from the FiTs and ROCs.
The other important determinant of whether installing solar
PV is viable is the payback period which typically ranges from
5-9 years depending on the level of incentive and whether
the electricity is being sold to the tenant via a power purchase
agreement or back to the national grid.
5.2 Valuation scenarios
In order to demonstrate the approach to valuation we have
considered a number of scenarios which we detail below.
5.2.1 Industrial property
The preferred model from a landlord’s perspective is to maintain
a FRI lease with the tenant remaining responsible for the
maintenance of the roof. Included within our valuation approach
is the cost of insuring the roof against disruption to business
arising from any problems from the installation which aligns the
agreement to a FRI lease.
Should the property be let on a FRI basis then the rental income
from the property is capitalised using a traditional valuation
approach and the solar panel income valued separately using
the discounted cash flow approach and added to the property
capital value to provide the total value.
We set out our examples on the following pages.
5.1 Valuation methods
Following our investigations and numerous conversations with
fund managers and valuers, there appears to be a high level of
inconsistency in the valuation approaches adopted in relation
to solar PV. This relates principally to the lack of knowledge on
the subject which results in an unsophisticated approach to the
methodology.
We consider the Discounted Cash Flow method to be the most
appropriate method of valuation as this can analyse the value
based on a number of sensitivities. We would use this method
to ascertain the value of solar, by discounting the net present
value of the projected income with relevant costs deducted at
an appropriate discount rate.
The method is advocated in the RICS Information Paper titled
“The Valuation of Renewable Energy Installations.”
The revenue consists of the FiT or ROCs (and associated
certificates), power purchase agreement and/or exporting
electricity to the grid. In our examples we adopt the relevant FiT,
the on site electricity price (cost of electricity to the tenant) and
LEC payment to arrive at the relevant revenue rate pence per
kWh. The costs are the maintenance and insurance which are
deducted to provide the net cash flow over the term. Generally
solar PV installations are not considered to have a residual value
at the end of the term. However, the system will continue to
generate and save electricity as the lifetime of the panels which is
approximately 25 - 40 years.
The term is generally considered to be 20 years in line with the
term that the FiT or ROCs are receivable. Other assumptions
adopted when appraising a solar PV array include degradation
of 0.9% in year one, followed by 0.4% per annum thereafter
which relates to how the efficiency for a panel deteriorates
over time. Installation costs vary depending on whether the
panels are installed at the time of construction or retro fitted,
5. Valuation methodology
Kings Cross Eastern Goods Yard installed by Solarcentury

Butcher’s Pet Care
Crick, Northamptonshire
Property type: Distribution Warehouse
Constructed by: Gazeley
Landlord: Legal and General
Tenant: Butcher’s Pet Food
Roof area: 260,000 sq ft
Solar PV roof coverage: 10-15%
Assumptions
Roof area ( sq ft) 260,000
PV installation system size (kWp) 249
Annual power output (kWh) 217,875
Solar PV installation costs £249,000
Power output (kWh/kWp) 875
Degradation (annual post 1st year) 0.4%
First year degradation 0.9%
Total revenue (p/kWh) 18.43
Feed in Tariff (July 2014) (p/kWh) 9.89
On site electricity price (p/kWh) 8.00
Export price (p/kWh) 4.77
Percentage consumed on site 100%
LEC (p/kWh) 0.54
LEC term 10.00
FiT term 20.00
LEC & FiT (p/kWh) 10.43
RPI 2.5%
Energy price inflation 4%
Installation costs (£ per sq m) 117
Annual running costs (£/kWp) 15
Insurance costs (£/kWp) 5
Annual gross income £40,316
Nominal gross income over 20 years £1,007,891
Annual net income £35,316
Nominal net income over 20 years £882,891
IRR 12.74%
Payback 8 years

Valuation
Floor area 260,000
Indicative rent per sq ft £5.75
FRI ? Yes
Annual rent £1,495,012
Net initial yield 5.50%
Value £25,700,000
Net income from solar £35,316
Solar income discount rate 9.00%
NPV of solar income £414,614
Solar income yield 8.00%
Solar value £417,425
Total income £1,530,327
Value £26,100,000
We have adopted the investment method for valuing the rental
income paid by the tenant which is standard market practice for
an income producing warehouse property. We have therefore
capitalised the estimated rental value at net initial yield of 5.50%
to provide a capital value of £25,700,000.
Using a discounted cashflow we have then valued the net
income and operating expenditure from the solar PV installation
at a discount rate of 9% providing a net present value of in
effect the additional net income stream of £414,614. Reflecting
the net income in the first year is £35,316, our equivalent capital
value through the standard investment method means adopting
a capitalisation rate of 8.00% for the term of the life of the solar
PV to achieve the same result. The capital value of the whole
property is approximately £26,100,000 reflecting a net initial
yield of 5.54% overall.
In summary, a modern industrial unit benefitting from 10-
15% roof coverage of solar PV provides a payback period
of 8 years and additional secure indexed income that adds
value to the property asset. In addition, in the case of this
example, the extra value created by the capital investment
is significantly greater than the cost demonstrating the
strong return on the investment.

Jaguar Land Rover
Property type: Manufacturing facility
Constructed by: Jaguar Land Rover
Roof area: 800,000 sq ft
Solar PV roof coverage: 45-50%
Potential sale and leaseback
Assumptions
Roof area (sq ft) 828,000
Connection points 2
PV installation system size (kWp) 5,800
Annual power output (kWh) 4,930,000
Solar PV installation costs £5,800,000
Power output (kWh/kWp) 850
Degradation (annual post 1st year) 0.4%
First year degradation 0.9%
Total revenue (p/kWh) 14.92
Feed in Tariff (July 2014) (p/kWh) 6.38
On site electricity price (p/kWh) 8.00
Export price (p/kWh) 4.77
Percentage consumed on site 100%
LEC (p/kWh) 0.54
LEC term 10.00
FIT Term 20.00
LEC & FiT (p/kWh) 6.92
RPI 2.5%
Energy price inflation 4%
Installation costs (£ per sq m) 100
Annual running costs (£/kWp) 15
Insurance costs (£/kWp) 5
Annual gross income £735,605
Nominal gross income over 20 years £14,712,106
Annual net income £619,605
Nominal net income over 20 years £12,392,106
IRR 11.22%
Payback 9 years
Wolverhampton, Staffordshire

Valuation
Floor area (sq ft) 828,000
Indicative rent per sq ft £4.00
FRI ? Yes
Annual rent £3,312,000
Value £56,920,000
Net income from solar £619,605
Solar income discount rate 9.00%
NPV of solar income £7,470,000
Solar income yield 7.90%
Solar value £7,410,000
Total income £3,931,605
Value £64,330,000
We again adopted the standard investment method for valuing
the income created by the lease to Jaguar Land Rover and have
applied a net initial yield to the distribution warehouse of 5.50%
to provide a capital value of £56,920,000. Using the discounted
cashflow model, we have then valued the net income and
operating expenditure from the solar PV at a discount rate of 9%
providing a net present value of £7,470,000. Reflecting the net
solar income in the first year of £619,600, using the investment
method our equivalent capital value of £7,410,000 is calculated
through adopting a capitalisation rate of 7.90% for the life of the
solar PV. The capital value of the whole property is £64,330,000
reflecting a net initial yield of 5.78% overall reflecting standard
purchaser’s costs.
In summary, this example observes a higher impact on
the overall yield due to the larger system size but provides
an increase in value reflecting the substantial additional
income provided by the revenue generated by the solar
PV. As a result the significant investment in solar PV on
this type of scale is of substantial benefit to the landlord
and the tenant.
In the previous example the solar PV installation was installed
on approximately 10 – 15% of the roof space and consequently
the proportion of total income generated by the solar PV array
was relatively small. In this example we consider the impact
of a solar PV system covering nearly 50% of the roof. This
enables a PV installation of 5.8MWp which is subject to two
electricity feeds. We have assumed for demonstration purposes
that the unit is let on sale and leaseback basis on a 15 year
lease to Jaguar Land Rover on standard FRI terms.
In this example, the property is situated further north than
our first example and therefore the irradiation level is not as
high. The feed in tariff is also lower due to the large size of the
system. This results in a lower IRR and consequently a slightly
longer payback period.

5.2.2 Multi let industrial
There are two models operated by landlords of multi let industrial estates, the first is akin to the single let model and
consequently the valuation methodology applied is the same. However, returns can be reduced as some tenants
across the estate may not be significant users of electricity. In addition surplus electricity from a low user would be
exported back to the grid at a lower rate than it could be sold directly to the tenants. Should the electricity be sold
at the reduced rate to the grid then the lower the income generated. We have also spoken with some landlords that
are willing to give the electricity away to the tenants as part of the lease negotiations.
Assuming the landlords agrees a power purchasing agreement (PPA) with the tenant, the impact of selling a
proportion of the electricity to grid at a discounted rate is illustrated below:
Consumed on site 100% 75% 50% 25% 0%
IRR 15.29% 14.84% 13.68% 12.88% 12.09%
Payback (years) 7 7 8 8 9
The above example assumes a Feed in Tariff rate of 9.89p/kWh.
The aim of the use of solar PV at multi-let industrial estates is to enhance the lettability of the units to existing and
prospective tenants through offering lower running costs. The income generated can also be used to maintain a low
service charge which is also attractive to occupiers.
5.2.3 Shopping centres
In the case of shopping centres, the installation of solar PV would not necessarily produce income through the
sale of electricity back to tenants due to the nature of the building being a high user of electricity throughout the
common parts and the number of tenants letting the space. Instead, landlords can achieve a cost saving from
the displaced electricity on the running of the common parts via the service charge. From this, the landlord can
either pass this saving on to their tenants which will improve the chances of retaining current tenants and also
potentially attract new tenants to the property or the landlord can recharge the saving via the service charge.
One example of this taking place in the market is at Gunwharf Quays in Southampton. Land Securities installed
1,070 solar PV panels covering 34,500 sq ft on the roof of this large shopping centre. The solar PV installation
was expected to generate 280,000 kWh in the first year after installation which fulfilled 7% of the energy demand
for the common parts. The total the cost savings for the first year were £28,000 and the FiT revenue totalled
£36,000. It is expected that the payback for this system will be within 8.7 years.
Assuming power output of 875kWh and a FiT rate of 9.89p/kWh and the electricity generated is not recharged
the IRR is reduced to 5.00% and the payback 13 years. Consequently landlords have to quantify whether the soft
benefits of being a greener shopping centre and providing a lower service charge will culminate in reduced void
periods and possibly a higher rental value.
In this case the revenue from the solar PV can be offset against the running costs of the shopping centre which
result in a higher net operating income than otherwise would have been achieved.

6.2 Key attributes
We have identified a number of key attributes to solar PV in the
commercial real estate market. They are as follows:
• Income – solar PV technology can provide an additional
income stream which can supplement rental income.
We have identified two ways that additional income
can be secured with solar PV. Firstly, if the panels have
been installed by the landlord and they sell the energy
to the tenant, they will receive all FiT payments. This
can be observed in the examples mentioned earlier in
this paper. Secondly, income can be generated for the
landlord through the sale of energy either to the tenant
in the form of a PPA or back to the grid at a lower rate.
• Contribution towards CSR and sustainability goals - Over
the past decade, attitudes have changed in the boardroom
and CSR has risen on the list of corporate requirements.
In 2010 it was found that 96% of occupiers asked, agreed
that sustainability is considered a factor in location
decisions, representing a 16% increase from the 2007 level.
Sainsbury’s Supermarkets Ltd is an example of a corporate
occupier in the United Kingdom who is looking to achieve
their sustainability goals with the installation of solar PV
technology. The retailer announced in July 2013 that they
had installed 100,000 PV (22 MWp) across 210 properties.
• Reduces energy costs for tenants – As mentioned earlier
in this report, electricity prices are forecasted to continue
rising over the next 15 years. As the use of solar energy
does not cost much after the initial installation cost, it is
possible for an occupier not to pay much if they have
installed the panels for their own use. If the panels
have been installed by the landlord, the occupier can
still benefit from the reduced energy costs from within
a PPA. The reduction in energy costs can be used to
the advantage of the landlord improving the chances of
retaining tenants upon the expiry of a lease or making a
property more attractive to potential tenants whilst vacant.
6. Key attributes and risks
6.1 Introduction
We have identified a number of key attributes and risks that are
associated with the installation of solar PV.
Key Attributes:-
• Income
• Contribution towards CSR
• Reduces energy costs for tenants
• Increase EPC rating of property
• Security of income
• Portfolio diversification
• Contribution to service charge saving
Risks:-
• Upkeep costs
• Potential liquidity impact
• Tenant default
• IRI leases
• Longterm future of Feed in Tariffs
• Obsolescence
Crown Place installed by Solarcentury

• Increase the EPC rating of a property – By installing solar
PV on a property, this will improve the EPC rating of the
subject property. However, it is worth noting that to be
eligible for the FiTs, the property must already have a rating
of EPC ‘D’. It should also be noted that research showed
no evidence of the EPC having an effect on market rent or
market value with only a minor effect on equivalent yields.
• Security of income – The FiT is seen as one of the safest
forms of income available and some investors would place
this income in the same risk class as UK Gilts. As previously
discussed, the FiTs are set at a fixed rate and rise with
inflation over 20 years. This means that the level of income
is protected against inflation whereas the return on Gilts can
be altered based upon the performance of the economy.
• Portfolio diversification – The solar PV cashflows
provide investors with the opportunity to further diversify
an investment portfolio as the risk is separate from
the rental income of the subject property. The FTSE,
Iboxx and Bank of England all estimate that solar
PV cashflows when combined with another asset
class would produce a correlation of near zero.
• Contribution to the service charge saving – Due
to solar power costing nothing to produce after the
initial outlay, we have recognised that landlords can
save money by producing energy and selling it to the
tenant rather than selling energy to the tenant from
the grid. This cost difference between the price for
energy from the grid and energy which is produced
on site will allow asset managers to save more
money paid back to them in the service charge.
6.3 Risks
Whilst solar PV is one of the cleanest renewable technologies
available on the market, there are still some risks attached to
this technology:
• Upkeep costs – This factor depends very much on
which party is responsible for the upkeep of the solar PV
installations. However, we understand that in situations
where the landlord is responsible for the upkeep of the
panels, there are a number of costs to be expected on an
annual basis. Firstly, there is a requirement for the panels
to be inspected once every year to ensure that they are
still in working order and that they are clean; in addition to
this, the roof underneath the solar panels also needs to be
cleaned at least once a year. As a result the landlord can be
exposed to ongoing liabilities in relation to running costs.
• Potential liquidity impact – If a property is not considered
institutional or to a certain extent quirky then often there
is a smaller pool of investors resulting in a reduction
in the liquidity of an asset. At the moment, the use of
solar PV on commercial properties is relatively new and
therefore there is a lack of knowledge within much of the
industry on how to analyse the income generated by them.
From our investigations and analysis of comparables
in recent market conditions it appears that there has
been little impact on liquidity of property assets.
• Tenant defaults – A risk for a landlord is that the tenant
occupying the property could default which would terminate
the PPA in place and mean the landlord would have
to sell all power back to the grid, reducing the level of
income received. Upon the reletting of the property, it is
possible that the landlord would not be able to achieve
the same purchase rate which was previously received.
• IRI leases – Should the landlord become responsible for
the maintenance of the roof as a result of installing solar
PV, this has both maintenance cost implications and
can have a detrimental effect on liquidity. This is usually
mitigated by solar PV asset owners by taking out insurance
to realign the lease to a FRI basis and as a result asset
managers are reluctant to let the property on an IRI basis.
• Longterm Future of Feed in Tariffs – FiTs are very much
driven by government policy and are a straight subsidy
to encourage the generation of renewable energy. As a
result they are subject to change in terms of government
policy which does create uncertainty going forward.
However, once locked into a scheme the rate is fixed
for that particular scheme and then indexed providing
a rising income. In addition, technology is advancing
very rapidly resulting in lower costs for the capital outlay
and at the same time electricity costs are increasing so
longterm it is anticipated that FiTs will continue to decline
for new schemes but that solar PV will remain profitable.
• Obsolescence – The use of solar PV reflects current
technology and the requirements of the consumer
in relation to their energy usage. As technology
develops and changes in the use of energy occurs
then in the future current systems will suffer from
obsolescence. The return on investment analysis is
therefore important in identifying the payback at the
outset with the realisation that capital expenditure will
be required in the future to update the technology.

• For multi-let estates and shopping centres, any excess
income and cost savings generated from the solar PV
installations can be used to reduce the service charge,
contribute to a sinking fund or improve the lettability of units.
• Greater understanding is required of the impact on a
property’s asset performance. Sophisticated project
management is required to provide analysis of what
can be done and to deliver the best solution.
• Recent commercial property transactions
benefitting from solar PV have continued to trade
at premium prices demonstrating good liquidity
• The recent surge in demand for solar PV on commercial
roofs demonstrates a step change in the positive attitude
towards this method of harnessing renewable energy.
7. Conclusions
• There has been significant expansion in the use
of solar PV due to the positive developments in
legislation, increased efficiency in technology,
tenant demand and quick payback periods.
• Commercial property offers larger roof space areas
compared to residential property in particular distribution
warehouses, factories, multi-let estates and shopping
centres. These properties will be able to host and
generate high levels of renewable energy.
• Greater understanding of how solar PV works,
its income generation possibilities, the legal
implications and management needed is required
within the property industry to increase the
deployment levels for commercial installations.
• Greater consistency and sophistication in the valuation
approach for solar PV has been established but not
commonly used. Discounted cash flow methodology
providing a net present value of income is the
most appropriate and explicit methodology.
• Responsibility for the roof remains a key issue
during the installation of solar PV with FRI leases
being the most preferable for landlords. This
maintains the liquidity of the asset. Insurance
policies have predominantly remedied the issue.
Rookery Business Park installed by Solarcentury

About Solarcentury
Solarcentury is one of the most respected solar companies
in the world. Founded in 1998, we have been around since
the early days of the solar industry and have been part of the
evolution that has made PV the attractive investment it is today.
We work with investors to develop, build and run solar farms.
We work with businesses to finance and install solar rooftops.
We work with retailers, utilities and social housing providers to
run solar programmes for homes. And our business is global
and growing, with offices in the UK, The Netherlands, South
Africa, Kenya, Ghana, Panama, Mexico and Chile.
We’re committed to making solar more accessible and more
attractive: We design and manufacture the award-winning C21e
tiles and slates. We’re one of the very few companies to have
built a utility-scale dual-mode solar system. We built the world’s
largest solar bridge. We’ve launched the first ever 10 year-yield
warranty.
We know solar PV can change our world for the better so we
donate 5% of our annual net profits to the charity we founded,
SolarAid, which works to eradicate dangerous kerosene lamps
in Africa by 2020.
www.solarcentury.com
Blackfriars Bridge installed by Solarcentury. Picture : Network Rail

Jones Lang LaSalle
© 2014 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to Jones Lang LaSalle and shall be used
solely for the purposes of evaluating this proposal. All such documentation and information remains the property of Jones Lang LaSalle and shall be kept
confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party
without the prior written authorization of Jones Lang LaSalle. All information contained herein is from sources deemed reliable; however, no representation
or warranty is made as to the accuracy thereof.
jll.co.uk
Chris Strathon
Director
Valuation Advisory
JLL
+44 (0)20 7399 5848
chris. strathon@eu.jll.com
Susannah Wood
Chief Marketing Officer
Solarcentury
+44 (0)20 7459 1250
susannah.wood@solarcentury.com
Suzanna Lashford
Head of Commercial Sales
Solarcentury
+44 (0)7760 338 329
suzanna.lashford@solarcentury.com
Robert Readhead
Senior Analyst
Renewable Energy
JLL
+44 (0)20 7087 5119
robert.readhead@eu.jll.com
Philip Hirst
Upstream Sustainability Services
JLL
+44 (0)20 7399 5224
philip.hirst@eu.jll.com

JLL - Shedding light on PV - 22.10.2014

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