Transition to Sustainable Energy Sources: A Trend in Real Estate Development

by Jay Khatami

The recent surge in renewable energy deployment has seen substantial growth in utility-scale solar, wind and battery storage projects, driving significant capital investments. These utility-scale projects contribute to the overall grid supply alongside traditional generators like gas and coal-fired plants. However, while utility-scale installations have soared, commercial, industrial and residential behind-the-meter deployments have not seen comparable growth. According to the Solar Energy Industries Association, utility-scale solar installations grew by 77% in 2023, while commercial solar saw only a 19% growth, mirroring trends in battery storage systems.

Behind-the-meter installations connect directly to the point of consumption, efficiently delivering power and minimizing transmission costs. They come in various configurations, including rooftop or ground-mounted solar panels and batteries installed in buildings such as homes, offices, shopping centers and more. Alongside energy-efficient building practices, behind-the-meter systems significantly reduce carbon footprints and manage energy costs. Moreover, they can enhance grid stability, particularly in regions with high generation and insufficient transmission capacity.

While decarbonization and energy transition are key themes that continue to be a major driver of deployment, market behavior will always be driven by practicality and economic viability. The suitability of behind-the-meter systems depends on various factors, including installation costs, usable solar resource, government incentives, electricity consumption profile, cost of electricity from the grid, net-metering policy, useful life, maintenance costs, financing options and management/monitoring of the system. All these factors need to be analyzed and understood to support a well-informed decision for installation. While this analysis will often support the installation of behind-the-meter systems, it is typically not well-aligned with the core competencies real estate developers, who are typically focused on more prominent aspects of their projects than energy optimization. Evaluation, deployment and management of these systems are better suited with the core competencies of energy project developers. However, energy project developers are often focused on achieving large-scale deployment, which is more easily done via utility-scale projects.

This creates a gap that can be bridged either by real estate developers acquiring expertise in behind-the-meter systems or energy developers offering competitive package solutions tailored to the real estate market. Both segments are evolving to meet market demands, with some real estate developers, like Cowley Companies, leading the way in optimizing their properties. For instance, Cowley Industrial Park in Phoenix boasts an 850,000-square-foot warehouse with a 2.4-megawatt commercial solar rooftop system installed, leveraging its sunny location for behind-the-meter energy solutions to mitigate high-energy consumption from onsite refrigeration and freezer units.

As the industry matures, customer education will be key to driving adoption. Providing resources to enhance understanding of behind-the-meter systems’ features will be crucial for widespread adoption.

Jay Khatami joined Renewa in 2023 as VP Acquisitions and Investments, where he leads the origination, structuring, and execution of the company’s investment and financing transactions. Khatami has broad experience in the energy, infrastructure, agriculture, and natural resources sectors. Prior to Renewa, Khatami was an associate director at Engie, where he was focused on the group’s M&A, development and financing activities in the U.S., covering solar, wind, storage and other energy assets. Prior to Engie, Khatami worked in various financial, commercial, and strategic roles at Itafos, First Solar and Oxbow. Throughout his career, Khatami has led or supported more than $5 billion in M&A, divestiture and financing transactions. He holds a BBA in finance from the University of Houston and an MBA from Duke University.

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