Microgeneration or fuel cell technology is one of the best renewable energy sources. It is estimated that 30 - 40 % of the UK's electricity needs could be met by installing microgeneration equipment to all types of building by 2050. One type of microgeneration that is becoming increasingly popular in the UK is solar photovoltaic cells (PV cells).
Following hot on the heels of the CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment), on April 2010 the DECC launched the Feed-In-Tariffs Scheme (FITs Scheme) to encourage small businesses, homeowners and communities to invest in low carbon electricity generation (microgeneration) by guaranteeing them a cashback payment for the electricity they generate for their own use and for any excess electricity they export. The FITs Scheme sets fixed tariffs at above market rates for electricity suppliers to pay for electricity generated from renewable energy sources.
The latest generation of PV cells are freestanding and fairly thin, and therefore able to be mounted on top of, or integrated into, south facing roofs. In simple terms, they work by converting daylight (rather than sunlight) into energy which can be used to power the building on which the cells are installed and/or can be sold on to electricity suppliers via connection to the national grid. The main disadvantages of PV cells are the initial outlay costs, the weight of them and the fact that a large unshaded roof area is required to generate a worthwhile amount of electricity.
Benefits for landlords and tenants
A proposal by PV operators to install PV cells on their properties should be seen by landlords as an opportunity to improve their green credentials. Landlords will benefit directly as the presence of PVs will improve a building's energy performance rating and have a positive impact when measuring deliverables required under the CRC scheme (although only if the PV cells are installed after the property has had its initial rating, as the CRC scheme only rewards improvement rather than initial good ratings). In addition the inherent benefit of being seen to be "green" and complying with corporate social responsibility policies is that it will attract desirable tenants with strong CSR credentials.
In new build situations, it is for the developer to decide the "green" credentials of the build, in concert with the planning authorities and with a view to their target tenant.
What issues should be considered?
So what difficulties does a landlord/property owner need to consider in negotiations with a PV operator to install PV cells on an existing building?
Initial considerations should include whether the presence of the PV cells will negatively impact the capital or rental value of the property; whether planning consent will be granted (for example if the building is listed or within a conservation area particularly if the PV cells can be seen from street level); whether the cells can be installed in accordance with Building Regulations, CDM Regulations, and Fire Risk Assessment guidelines and whether the property will be insurable with the PV cells in situ. In addition if there are pre-existing telecoms licences in place and tenants' satellites dishes located on the roof these may need to be relocated at additional cost.
Single-let industrial sheds will be very attractive to PV operators given the large area available and the relative ease of only having to deal with a single tenant, albeit a financial incentive is likely to be required by the tenant especially in an FRI situation where the roof is already let to the tenant.
The main concern for landlords of multi-let properties will be the maintenance issues. Institutional lenders are likely to refuse consent to a lease which makes the PV operator liable for maintaining the roof because the potential cost implications for the landlord (and resultant impact on the lender's security) could be substantial if the PV operator fails to properly maintain the roof, causing damage to other tenants' fixtures, fittings, stock etc. The PV operator will want other issues addressed such as maintaining rights to light and rights of access for installation and maintenance of the cells and connection to the national grid.
The residential market
PV operators' interest in the residential property market is likely to be limited to large-scale new builds and existing council housing, given the requirement for large roof areas for installation. However it is clear the government wants to encourage microgeneration in domestic premises as the new Part 40 of Schedule 2 to the Town and Country Planning (General Permitted Development) Order 1995 allows the installation of microgeneration including PV cells on houses or flats subject to certain criteria.
The residential landlord's chief focus will be the negative response of tenants to the works to install, or the presence of, the PV cells. As an example, many attempts to install telecommunications apparatus on tower blocks have been thwarted by objections from residents, with local authorities and landlords often taking the view that it is preferable to pacify tenants than secure income.
Source of additional income
Overall, landlords would be well advised to consider the income generating possibilities of letting their roof space to PV operator on a turnover rent and/or with the option to use the PV cells to power their properties at reduced cost.