Harnessing rooftop solar for leased commercial buildings

The force was with the St Vincent de Paul Society Victoria two years ago when it signed up to a 10-year Power Purchase Agreement (PPA) with AGL Energy, based on solar power produced on the charity’s own rooftops. The deal has insulated Vinnies from a subsequent 25% rise in energy prices in Victoria.

Vinnies now has rooftop solar panels fitted over all but a few of its 79 Victorian op shops. The cost was borne by AGL Energy, which also installed the panels. Vinnies will pay off the systems over 10 years in a hire-purchase agreement. At the end of 10 years, the charity will own the systems.

Partnership delivers significant savings

Gavin Dufty, Manager of Policy and Research at Vinnies, says power bills for the stores are now typically half of what they were pre-solar. Add in the solar lease payment, and Vinnies is still paying about 75% of what it used to in electricity costs, and that’s based on 2021 prices.

“We’ve got 1.4MW which will save us hundreds of thousands over the lifetime of the project in avoided costs,” he says.

“The PPA we struck in 2021 has fixed costs but energy costs have risen so sharply in that time that we are doing even better than we expected.”

According to AGL, the solar panel installation will generate an estimated 1947 MWh each year across the Vinnies sites. This is estimated to help the charity save up to $1.26 million in energy costs over the next 10 years.

AGL General Manager Commercial and Industrial Customers Ryan Warburton says Vinnies Victoria works every day to positively impact the lives of disadvantaged people in Australia.

“As part of our commitment to help decarbonise the way our customers live, move and work, we are thrilled to help Vinnies keep doing what they do best and direct resources to those who need them most,” he says.

“Through the installation of solar systems across Vinnies’ Victoria properties, AGL is proud to be playing a role in reducing everyday operating costs for the organisation and for the much-needed funds to be redirected back into the community.”

Besides saving money, the solar partnership with AGL is an important plank in St Vincent de Paul’s sustainability drive under the federal government’s Climate Active program, which requires member businesses to offset their carbon footprint and become carbon-neutral. It also gives them the option of moving to an electric vehicle fleet and using their own power to stay charged up.

With its massive combined roof space, Vinnies makes an attractive partner for an energy company such as AGL. The charity uses power during standard business hours, when there is an over-supply and power is cheap – or sometimes even has a negative value. Vinnies continues to produce power after business hours on late summer afternoons, when workers return home and air conditioners and televisions are turned on all over the eastern states.  

How PPAs can overcome solar barriers for business tenants

The charity is a first mover in the often complex world of solar power production for small to medium businesses in leased premises.

There’s little perceived benefit for landlords to install solar panels, since it’s the tenant who benefits from lower power bills. There’s also the risk of a landlord inheriting a liability when the tenant vacates.

Meanwhile small to medium businesses are reluctant to pay the upfront cost of solar panels in rented premises, because they don’t know how long they’re going to be there and whether they will get the desired payback in that time.

Overcoming this disconnect could help to stabilise the grid and reduce costs for everyone: energy companies and consumers.

Gavin Dufty reckons both sides are being over-cautious.

“It’s new so people haven’t had time to process it. We just turned our heads slightly and conceptualised it differently,” he says.

“People think solar is different but it’s just a chattel. Every time we go into a commercial lease, we fit out the building. The asset risk is the same risk you would take for any other fit out.

“If we leave the property, we would ask the landlord or new tenant if they wanted to take over the lease. Or we could simply pack up the panels and put them on another store, and the PPA would be unaffected.”

Negotiation key to a smooth process

With 79 individual op shops, it certainly helped that AGL Energy lawyers handled negotiations with St Vincent de Paul’s many landlords. Most were happy to sign up straight away, since they know Vinnies as a reliable tenant.

While Vinnies had assistance and attracted a level of goodwill, it’s not just charities that can benefit from such partnerships. Whether it’s a charity or a commercial business, the principle is the same. Gavin Dufty says a small to medium business could simply negotiate directly with their landlord.

And he says landlords and real estate managers need to start thinking differently about solar panels. Offering access to solar power savings and green energy would be a powerful point of different for leasing commercial premises, especially to tenants looking to reach zero emissions.