Pantheon Properties

NJBIZ
SOUTH KEARNY—In a drive to create more environmentally friendly buildings, a handful of industrial developers in New Jersey are looking at solar power as a way to reduce energy costs and enhance the marketability of their warehouse and distribution facilities. These companies are still a minority among developers who, for the most part, remain convinced that solar installations may be more problematic than beneficial.

Industrial buildings tend to be a good fit for solar-panel installations, says Anthony Marchetta, vice president and principal at LCOR, a Berwin, Pa.-based developer that builds extensively in New Jersey. “Because they’re just one story, they have these massive roofs,” Marchetta says. And since many warehouse and distribution facilities have limited electrical requirements, putting solar panels on the roofs of these buildings can produce more energy than they use. “They can actually be an electricity generator,” he says.

The economic benefits of solar energy have led some developers to install rooftop systems. “You’re creating power with this one-time investment for at least the next 25 years,” says Robert Neu, vice president of River Terminal Development (RTD), a Kearny-based industrial and office developer.

In 2006, RTD installed one of the state’s largest single-building rooftop solar power systems on a 77,300-square-foot building at the company’s 100 Central Ave. industrial complex in South Kearny. During its first full year of operation in 2007, the system generated 713,000 kilowatt hours of electricity, which accounted for nearly 7 percent of the power supply for the 10-building, 2.4 million-square-foot complex. This has saved the company about $100,000 in electric costs a year, says Neu.

He says RTD earned renewable energy credits for the solar power that its system generated, and sold the credits to utility companies for $178,000. “We anticipate that we will be able to maintain those benefits for many years to come,” he says. “We’re able to model the costs at a fixed number and avoid fluctuations in price due to market conditions in electricity prices,” he adds.

RTD is considering raising the solar capacity of the complex from 7 percent to as much as 30 or 40 percent of the total power supply. This would mean installing solar-power systems on three new buildings that are being designed for the 150-acre site. Neu says the panels would likely be installed on the buildings, which would encompass 500,000 square feet, sometime in 2009.

Tenant demand has led other developers to move ahead with solar power. New York City-based Pantheon Properties is in talks with a solar-panel company to install a system on its 150,000-square-foot warehouse at 59 Hook Road in Bayonne. Imperial Bag & Paper Co. Inc., which fully occupies the property, had requested the solar-power system as a way to cut energy costs, says Zach Hitchcock, Pantheon vice president.

“This will be a test run, our first venture into solar paneling,” says Hitchcock, noting that the system would make good on the company’s 2007 pledge to make all its buildings as “green,” or environmentally friendly, as possible. Pantheon owns about 2 million square feet of industrial space in the state. “Moving forward, we would absolutely love to do something like this for the rest of our buildings,” says Hitchcock.

Some developers are considering solar installations as a way to attract tenants. With solar-power systems, “our operating costs are going to be much more competitive, and therefore our buildings will be more marketable,” says Richard Johnson, senior vice president of Matrix Development in Cranbury.

“It’s going to be cheaper for a tenant to occupy space in one of our buildings than [leasing from] one of our competitors,” says Johnson, adding that solar power is part of Matrix’s green initiative for its warehouses. The company has already installed green features, such as energyefficient lighting fixtures and storm-water management systems, at its New Jersey facilities.

Johnson says most installations range between 300 kilowatts to 1 megawatt, and can produce a 15- to 20 percent savings per kilowatt hour. He says Matrix plans to begin several pilot projects involving solar installations this spring or summer.

Despite its advantages, solar power has not caught on with many. “Other developers I know haven’t been doing this,” says Hitchcock. He says other companies have committed to making their buildings more environmentally friendly, but have not adopted solar power as a way to meet that goal.

“The technology still isn’t at the point where it needs to be,” says Hitchcock. With a solar-power system, he says, a user generally still needs to get much of its power from a utility. Moreover, some developers worry the solar panel installation might damage a roof or impede access to the roof if a building needs repairs, he says.

Financing a solar installation is also a deterrent. “I know of several developers and operators who have run the numbers on rooftop solar installations and decided that the business case does not quite make sense,” says Jennifer Senick, executive director of the Rutgers Center for Green Building in New Brunswick.

An industrial solar-power system can be a hefty expenditure, costing many millions of dollars on large warehouses, says Johnson. “The challenge when you own a system is that the landlord has to pay for it and then the tenant gets all the benefits of the operating cost savings,” he says. A less costly option, he says, is a power purchase agreement, whereby the solar-power provider would own and install a system at no cost to the developer, and the tenant would still get a reduced or predictable electric rate.

But under this scenario a developer would not qualify for renewable energy credits, since it wouldn’t own the system, says Neu. RTD opted to pay $4 million for its South Kearny rooftop installation in order to obtain the credits. In addition, RTD received a 45 percent rebate from the state when the system was completed. “We’re happy with the economics and thought they worked out,” says Neu.

Early adopters like RTD could help to change the minds of industrial developers who are skeptical about solar power, says Ed Seliga, vice president of Advanced Solar Products in East Amwell. “The developers are waiting to see a track record, and they want to see how the initial projects turn out,” says Seliga.