Development Magazine Spring 2014

Development - Ownership

From Gray to Green With an Oversized Rooftop Solar System

The oversized rooftop solar array atop this Toronto multitenant industrial building will earn its owners CA$0.713 per kilowatt-hour for the next 20 years, thanks to a contract with the Ontario Power Authority.

For as long as I can remember, thoughts of our 180,000-square-foot multi-tenant industrial building at 120 Industry St. in Toronto always evoked the color gray. Perhaps this was due to its cinder block walls; its older, squat appearance (with a 15-foot clear ceiling height) or the dust that its unsealed floors generated. Nevertheless, this “gray” building did well for us, as owners. It was blessed with a very low TMI rate (taxes, maintenance and insurance) which, of course, made it attractive to tenants. Over the years, it was typically fully occupied by three large tenants at a time.

More than three years ago, I read an article about the Ontario Power Authority (OPA) offering to buy power from building owners who installed solar panels on their roofs, under a program called “Feed-in Tariff” (FIT). As landlords of the above-mentioned building, our curiosity was piqued, so we looked into it. When it showed promise under scrutiny, we submitted an application to the OPA. Along the journey we started that day, each time we encountered a piece of good fortune, or ran into a roadblock, our approach was to reconsider whether the project still made sense. Since it always did, we pushed ahead.

headshot of Claude Boiron

Claude Boiron

In the early days, since we had no experience with rooftop solar installations, we worked hard at improving our knowledge and understanding of the industry. We interviewed more than a dozen potential system installers and, along the way, came up with a hypothesis to prove. One of our colleagues at the time had degrees in both electrical engineering and business administration, making him the perfect person to bring together the technical and financial aspects of this project. After more than a week of study, he was able to identify an opportunity in the OPA’s pricing structure from which we could benefit.

The OPA determined what it would pay system owners based on the size of the inverter, the equipment that converts AC power from solar panels to DC power, in order to feed and sell it into the power grid. A 250 kW inverter (nameplate capacity) system would earn the building owner CA$0.713 per kilowatt-hour (kWh), while a 500 kW nameplate system would earn CA$0.635/kWh. At the time, some property owners were “oversizing” their systems (installing more kilowatts in panels than the inverter size), but only by 120 percent or so. Thus a 250 kW nameplate system might have 300 kWs worth of panels installed.

Our colleague, however, proved — with a complicated set of spreadsheets and years of historical solar data — that the “sweet spot” for our roof involved dramatically oversizing a 250 kW nameplate system instead of trying to put a lot of solar panels on a 500 kW one. That meant that our system would earn CA$0.713/kWh rather than CA$0.635/kWh. Putting a lot of solar panels on a smaller inverter meant that we would reach the maximum energy output (250 kW) much earlier in the day, because more panels equal more energy captured with less sunlight. The sweet spot we calculated was to install 500 kW of panels on a 250 kW inverter, a 200 percent oversized system.

We then contracted with RESCo Energy — an engineering, procurement and construction (EPC) contractor that understood and believed in our “crazy” idea for dramatic oversizing — to design the system, procure the hardware and install it for us. One of RESCo’s owners is also Canada’s largest building envelope contractor, Flynn Canada, so it made sense to have Flynn install a new roof (with a 20-year warranty) before RESCo installed the solar panels. Both the solar system and the new roof were financed with a new first mortgage on the property with a 20-year fixed interest rate (which was almost impossible to find, because five- or 10-year fixed interest rates are the norm in Canada). The roof replacement began in April/May 2013 and the solar system installation was completed in late October of the same year. 

We now have a 20-year contract with the OPA to buy the power generated by this system. The success of the project was dependent on a number of factors:

  • Was the building’s south-facing orientation almost perfect for the solar system’s needs? Yes.
  • Was the inclination of its saw-tooth roof almost ideal for the installation of solar panels without the need for complicated racking or ballasted systems? Yes.
  • Did we get a better interest rate by financing the system with a first mortgage on the building, rather than financing it on the merits of the solar system itself? Yes.

In addition to these factors, however, reaching this successful outcome took tenacity and vision, as well as careful attention to the challenges of designing, getting approval for and building such a large solar installation. The system, which was nominated for the Canadian Solar Industries Association (CanSIA) PV System of the Year, may be the most oversized rooftop solar system in Canada and, perhaps, in North America. As a result of its construction — and that of a few other “oversizers” — the OPA has closed the loophole from which this project benefited, and has capped the level of oversizing for new projects at 120 percent.

When I think of this building now, I think of green: green for clean energy, and green for additional income.

From the Archives: Development Ownership Articles from the Previous Issue

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