Key Take aways

• Charging tenants market rate for electricity increases solar revenues by 3x as compared to traditional Power Purchase Agreements, or Consumption Based Billing, which fix the price per kWh of electricity.
• The solar system paid for itself in under 4 years
• IRR: 20%

About IHA Partners and Stellar Solar

IHA Partners, Inc. (IHA) manages over 500,000 sqft of office, medical, retail, and industrial space in the county of San Diego. IHA has extensive experience in all areas of commercial property management, tenant improvements, leasing, financing and acquisitions.

Stellar Solar (Stellar) is the premiere solar installer in San Diego, having installed over 12,000 rooftops in the area and has been voted the Best Solar Company in San Diego 9 of the last 11 years by readers of Union Tribune, including 2021.

IHA BEFORE adding Energy311

9855 Erma Rd is a medical office complex that is master metered. As defined in the lease terms, the tenants agree to pay for the electricity bill using Ratio Utility Billing System (RUBS), which splits the bill based on tenant square footage. After the building owner expressed an interest in solar, Stellar began researching the best way to meet the project requirements:

1. Charge tenants for solar without triggering changes to the existing tenant leases.
2. Financing options for the project
3. Maximize tax incentives.
4. Create additional Net Operating Income (NOI).

The Challenge: How to bill energy? Why are PPAs bad?

One solution for billing energy is a power purchase agreement (PPA). Consideration was given to drafting an agreement to provide power to tenants at a fixed fee for 20 years, with a 3% per year rate escalator.

PPAs introduced risk for both tenants and IHA:

1. A binding 25 year contract would force changes to existing lease terms.
2. It’s difficult to predict energy pricing. If market price for energy increases faster than the PPA’s defined fixed rate + escalator, the building owner suffers lost profits. If energy prices increase slower than expected, tenants end up with a larger energy bill than if they had bought power directly from SDG&E.
3. It’s difficult to predict energy consumption. Higher than expected consumption reduce profit as more grid power is purchased at local utility rates, and sold to tenants at a discounted fixed rate. Lower consumption means that tenants are contractually obligated to pay for electricity they may not need.

How Does Energy311 work?

1. Energy311 Collects Meter Data:
   Energy311 measures solar production directly from the installed DC/AC SolarEdge inverter, saving IHA the cost of installing a separate meter. The existing SDG&E smart meter is read for grid consumption. 15m readings are retrieved daily from the solar production and grid meters. The summation of these 15m intervals give the building’s overall electricity usage. Billing.Energy provides automated monitoring and billing by applying the appropriate SDG&E rate schedule to the collected 15m interval data.
2. Tenants pay IHA monthly:
   Energy311 re-creates the SDG&E bill for IHA monthly, using the AL-TOU GENERAL SERVICE TIME METERED rate schedule, including updated fees, tax and time of use (TOU) charges.

IHA AFTER adding Energy311

Energy311 helped turned idle rooftop into meaningful value for all parties:

• > $60k/year in additional NOI. That’s Power with a Payback™
• ~ $1M 1st year increase in building market value with no property tax increase.
• $2.45M total new revenues from solar (after 25 years)
• No changes to lease terms for tenants.

Results: Increased Revenues and Building Value

If the property owner had decided to invest in solar, rather than financing the project:

Customer Quotes

“I’d love to go head-to-head against a competitor that is proposing a PPA; you guys give control back to the property owner” — Marie P., Stellar Solar

Interested in learning more? Check out Energy311’s Blog!