This Company Wants to Turn Industrial Rooftops Into Solar Power Plants

For real estate investors and developers of all stripes, improving the energy efficiency of their buildings is fast becoming a mainstream concern. And as regulatory environments across the United States evolve, the push toward net zero operational carbon is also making more and more financial sense.

That’s what motivated Taurus Investment Holdings to launch its decarbonization-focused subsidiary RENU Communities in 2019. The company combines best-in-class technology and real estate expertise to overhaul existing properties and transform dated buildings into high-value, carbon-neutral assets.

Taurus’ latest acquisition is an industrial portfolio that comprises five 3-star buildings, totaling 339,136 square feet in the South New Jersey/Philadelphia market. Under the New Jersey Community Solar Program, RENU will oversee the installation of rooftop solar panels on four of the existing buildings as well as on a new property proposed for an adjacent parking site. RENU anticipates that the solar installation will offset the portfolio’s annual carbon emissions by over 300%, rendering it carbon-negative.

In this Q&A, LoopNet spoke to RENU Chief Technology Officer Chris Gray about the company’s retrofit strategy, the role solar panels play and why everyone should follow its example.

What is RENU Communities?

We’re a team of engineers and construction managers with a background in energy efficiency and energy analysis, and we work as an internal energy services consultant for Taurus Investment Holdings. So, any asset that Taurus is looking to acquire runs through my team and we do a bespoke energy analysis for that building or portfolio of buildings. Then we create a plan to decarbonize that asset and map out what needs to be done to ensure that it's not obsolete from an energy perspective and that it will remain an institutional quality asset in the future. We do the engineering analysis to determine what the benefits of the upgrades will be, and we also manage the implementation and monitoring of those upgrades to ensure sound installation and validate the results on the back end.

What is the financial logic behind doing these kinds of energy-efficiency retrofits?

It's a balance between how much you invest now versus how much you plan on investing in the future to create that long-term energy roadmap for a property. If we had an unlimited budget, we could make most buildings net zero. But we don't have an unlimited budget, so we have to make sure that we're being good fiduciaries to our investors and that we're not reducing their overall return. And in an ideal case, we are providing enhanced returns.

We do a parametric analysis of a lot of different trade-off options and different iterations of technology mixes, and we can identify cutoff lines where it’s no longer accretive. But just because it's not accretive now doesn't mean it won't be accretive in the future, so we also create long-term energy plans in which we might not want to replace all the mechanical systems right now, but five years from now we do.

How much of your work happens before an asset is acquired?

We work in a phased process along the due diligence timeline of property acquisition, so we must ensure that we're creating clear lines of communication with our asset management and acquisitions teams to understand what's going to be needed for a particular building.

First, we try to baseline the energy consumption of the asset as is, trying to understand what systems are in place and what the overall energy consumption of that building is. But because we have limited information, we have to make assumptions about a building before we ever get to put eyes on it. Then when we have a chance to go into the building, we do a full energy audit to validate our assumptions and understand the systems that are in place so that we can create a more robust plan before we acquire the property. Then, once we close on a property, we already know what we're going to do and when we're going to do it.

What does the implementation of an energy-efficiency retrofit look like, and how does rooftop solar fit into that process?

It's driven by what type of asset you’re working with and what you can control as an owner. As a landlord, we can't control the operations inside the building. But what we can control is the envelope, the building systems and the roof line. So, we can make sure that the roof line is used to the highest and best use for overall decarbonization. In most circumstances, you don't have enough roof area to offset all of your energy consumption, so you have to reduce the base energy load. Then you can apply rooftop renewables.

We tend to start with the envelope and improve it to the extent possible. Sometimes that means just caulking to seal penetrations in an envelope. Other times it means replacing windows, replacing doors and improving the thermal insulation of a building.

Then we go indoors and start replacing mechanical systems. You can sometimes downsize the mechanical equipment when you have a good envelope. And then once we have a good envelope, good mechanical systems and we've improved the low-hanging fruit like lighting and water consumption, we can look at renewable energies on the outside.

Tell us about RENU’s upcoming project in New Jersey.

A key component of our industrial strategy is deploying solar across that portfolio to offset — and then even more than offset — the energy consumption of those buildings.

For our latest project, we’re moving forward on a 340,000-square-foot portfolio in southern New Jersey. New Jersey has very attractive solar programs right now, so we were able to partner with one of our national [solar power] developers to forecast a business plan for solar on every one of the buildings in the portfolio. We found that we're able to put in about three megawatts of solar, which vastly outweighs the energy consumption of that particular portfolio. So, that excess energy goes back into the grid. That means that we're offsetting more than just the energy footprint of our building; we're making that entire utility load zone lower carbon. That's pretty exciting to be able to take industrial rooftops and make them productive. They’re no longer there just to store goods. They can be energy generators at the same time.

What role do utility companies play in your retrofit strategy?

You must understand the nuances of each utility at the municipal or state level. You have to understand their feed-in tariffs so that you can accurately model what the benefit is for the tenants, for the landlord and for the utility itself.

We go through and do a deep dive on every utility company to understand what their goals are, what their interconnection rules are, whether they allow net metering and whether they give full retail offset for any energy that you push back or whether it's a reduced rate.

Every utility is a little bit different. Every load zone is different and every utility customer base is different. And the needs are different for different areas, whether you have an industrial pocket or a purely residential pocket. Different public utilities commissions have different goals that they're trying to achieve, so you must understand how renewables fit into that strategy.

The program in New Jersey allows for what's called community solar. Our tenants can be offtakers [purchasers of renewable energy in a solar development project] of that energy and the surrounding community utility customers can be offtakers of that energy as well. So, it's the financial incentive enabled by the local utility that makes it great for everyone.

If energy-efficient retrofits of CRE assets make financial sense, why isn’t everyone doing it? Is it just too hard?

It's not so much that it’s hard, but it takes a dedicated team that understands all these nuances. Taurus’ CEO Peter Merrigan made a commitment and a dedicated effort to build that team because of the opportunity that real estate represents in the fight against climate change.

[Some owners] are trying to understand what they need to do to make their buildings carbon-compliant, but they don't have a team specifically focused on it. They are relying on outside engineering firms and outside consultants to hand them their energy plan. But once you have a plan, you need to find someone else to implement it, and you lose a little bit of fidelity and a little bit of the intent along the way. You’ve got to find ways that each can speak each other's language and work toward a common goal.

I think some of the larger industrial owners have followed our example, and they are taking that on and seeing the opportunity there. What we need is not just for industrial owners to take that strategy, but for all building owners to take that same approach, especially owners that have large portfolios of buildings. With those large portfolios come the economies of scale and the interest from developers to put solar systems on all of those buildings, not just one at a time.

This interview has been edited for brevity and clarity.