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Landlords are expanding their participation in New Jersey’s Community Solar Energy Program — which allows property owners to lease their rooftops to solar developers — as the state transitions from a pilot phase to a permanent model.
By Joshua Burd
Greek Real Estate Partners is no stranger to having rooftop solar panels on its warehouses, a step it took roughly a decade ago with four properties in its portfolio.
But the process was by no means simple, requiring the firm to work out separate agreements with a solar installer and its tenants, while hoping that the power generated would match the needs of the occupiers. That’s not to mention the need to maintain the rooftop panels.
It’s only added to the appeal of a more recent option — the state’s newly enshrined Community Solar Energy Program — which allows landlords to lease out their roofs to solar firms that sell directly to the grid, rather than those inside the building.
“It’s really catapulted the model of roof rental for solar,” said Matt Schlindwein, a principal with East Brunswick-based Greek Real Estate Partners. “If they’re able to get the projects into the community solar program, we don’t have to worry anymore about the issues involved in tenant, landlord and solar provider relative to those power purchase agreements, which were kind of holding back some decision making.”
New Jersey’s nation-leading community solar program, which began nearly five years ago, is entering a new phase as the state transitions from a pilot period to a permanent model. That has many landlords racing to expand their participation after kicking the tires during the earliest phase, fueling a surge in applications from solar developers on behalf of building owners.
Part of Gov. Phil Murphy’s clean energy platform, the program requires that at least 51 percent of the power generated goes to low- and moderate- income customers, providing discounted energy while creating new revenue streams for the businesses involved. In the process, it has renewed the interest of commercial landlords who recall the volatility of past solar incentive programs, which were prone to price fluctuations based on supply and demand.
“Adoption is becoming much more mainstream,” said Shaun Keegan, co-founder and CEO of Solar Landscape, an Asbury Park-based developer and owner of solar panel systems. Many landlords took part in the Board of Public Utilities’ pilot program with only a handful of buildings, he said, but are now filing applications for larger portfolios with the new framework in place and expanded capacity available.
“The concept is being proven out and there is a gigawatt-plus of potential,” he added. “There are so many uncovered roofs out there.”
As Keegan noted, the 50 megawatts approved under the pilot program’ first round translates to about 5 million square feet of rooftop space. A second round called for another 150 million megawatts, or 15 million square feet, before the BPU announced last August that the program would become permanent. At the time, the agency said it would allow for another 225 megawatts by June 1, 2024, creating a spike in demand from landlords and solar companies.
The BPU said in early December that it had received more than 300 applications for community solar equating to more than 300 megawatts of new capacity. But a law signed by Murphy earlier this year allows the state to conditionally register another 275 megawatts by June 1 if qualified applications exceed 225 megawatts, while also allowing for additional capacity in subsequent years.
“The programs are going to continue to fill up and continue to be competitive,” said Keegan, whose firm has been awarded more than 50 percent of all New Jersey community solar projects to date. Capacity under what’s known as Energy Year 2024 amounts to some 50 million square feet, he added, equating to roughly $25 million in annual lease revenue for New Jersey landlords or $500 million over the course of a 20-year lease.
Greek, for its part, had its first taste of Community Solar as the property manager for a 68,439-square-foot building in Secaucus, working on behalf of Principal Asset Management. The firm has now agreed to lease some 1.3 million square feet of its own rooftop space across 15 buildings to Solar Landscape, which has secured approvals for 150 megawatts of capacity under the BPU program.
“It was a huge win and found revenue for us,” said David Weissman, a managing partner with Greek and head of its Greek Management Division. “And working with a capable partner who can drive it made a lot of sense to us.”
Solar Landscape has seen a host of other local and regional developers follow a similar path after dipping their toe in the water during the pilot period, Keegan said, including The Sudler Cos., J.G. Petrucci Co. Inc., Endurance Real Estate Group and Treetop Development.
The firm is also partnering with Prologis Inc. to install community solar on roughly 5 million square feet of the industrial giant’s buildings in New Jersey, while interest grows among other publicly traded companies and institutional players.
“In the pilot, we saw a lot of ‘Let’s do one building’ or ‘Let’s do a few and see how it goes,’” Keegan said. “And now we’re seeing more of ‘This worked — let’s do the portfolio.’”
Not every warehouse is a candidate for solar panels, Schlindwein said, noting that Greek has avoided buildings with older roofs or those that may need to be replaced during the lease term of the solar installation. The firm has also steered away from properties with manufacturing tenants or others that may require additional roof space, as well as new speculative buildings that don’t yet have a tenant in hand.
But adoption by Greek and other companies could be even more widespread as new buildings come online. The state now requires that developers make at least 40 percent of their rooftop solar-ready for warehouses of at least 100,000 square feet, but Schlindwein said the firm has been ahead of the curve. Namely, the firm in recent years has designed its buildings so that the entire roof can support a solar array.
What’s more, community solar provides a potential benefit to host municipalities that landlords can tout during the development process, provided the BPU accepts the application, thanks to the role of firms like Solar Landscape and other installers.
“That’s something that we’re doing a little bit different now — as we’re talking more about it up front, we’re planning it, we’re designing for it up front,” Schlindwein said.
It all figures to drive ongoing demand as the BPU continues to streamline the program. The agency has been noticeably faster in deciding on applications since the launch of the permanent framework, Keegan said, which is critical as it looks ahead to future years.
“Now the program is going to be more systematic, where every year there is going to be a new solicitation,” he said. “That was the real change from pilot to permanent. It’s much more programmatic now.”
All the while, it’s a chance for commercial real estate owners to participate in the social benefits that state officials envisioned when they launched the Community Solar Energy Program. That figures to go a long way with tenants that are conscious of their own carbon footprint and of so-called ESG or environmental, social and governance goals.
“It’s an indirect benefit to them,” Weissman said. “The fact that they’re checking the boxes in terms of complying with ESG initiatives and so forth is a great marketing tool for them, and it really speaks to their commitment to ESG overall.”
That’s not to mention the program’s support of the low- and moderate-income households that are receiving clean energy at a discount.
“BPU set this program up and is leading the nation in LMI community solar,” Keegan said. “That’s a feather in their cap.”
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