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For many properties, on-site solar offers attractive financial returns while mitigating key property risks (e.g., emerging building performance standards). Unlocking these benefits depends on the right financing structure, including one that aligns to each asset’s investment strategy, hold period, and tenant lease. Informed by data from thousands of commercial properties already evaluated through our platform, we’re sharing the three most common financing pathways for solar that we see in the market today.
1. Community solar (Rooftop lease model)
Key Points: Long-term, steady lease income; energy exported off-site; typically no tenant involvement; USD 0 CapEx from building owner.
Rather than installing solar for energy consumption on-site, property owners can lease unused rooftop space to a third-party solar developer who builds and operates a community solar system. The clean energy is delivered to off-site “subscribers”—often local residents, small businesses, or even tenants of the building—while the property owner receives fixed yearly lease payments over 15–25 years from the solar developer.
Benefits:
- No upfront cost or ongoing system ownership responsibilities
- Long-term passive income with minimal disruption to building operations
- Tenant and house loads can be subscribed to the array for additional energy savings and GRESB credit
Case Study:
A national investment manager with 13 unused industrial rooftops in Illinois launched a competitive bid process through Lumen that uncovered lease price variability of up to 270% between developer bids. After reviewing bids from five qualified developers, the asset manager selected the high bidder, a leader in the Illinois market, for the properties. The transactions unlocked USD 1.7 million per year in new lease income—or USD 33 million over 20 years.
2. Power purchase agreement (PPA)
Key Points: Savings applied to on-site power bill; tenant generally involved; USD0 CapEx from building owner.
Power Purchase Agreements are contracts to purchase solar energy from an on-site solar system developed by a third party who takes on the risk of developing, operating, and constructing the system. The solar energy is typically sold under the contract at a rate lower than existing utility rates, creating savings from day one of system operation.
Benefits:
- No upfront cost or system ownership responsibilities; savings typically available from day one
- Hedge against rising utility rates with a long-term contract to purchase clean power at a set price schedule
- Available in markets where community solar enabling legislation is not yet in place
Case Study:
An aerospace manufacturer sought financing offers for a 1.33 MW DC solar carport system with integrated EV chargers to offset a high power bill from intensive manufacturing. Given the firm did not have the upfront capital to invest in a system,
Lumen guided them to a USD 0-CapEx Power Purchase Agreement (PPA). Lumen solicited bids from its network of leading developers, with PPA bids ranging from USD 10/kWh to USD 17/kWh. By incorporating post-solar tariff optimization and precise load projections, the solution will create substantial savings in reducing the site’s USD 1 million+ annual energy expense while adding a new employee amenity through EV chargers.
3. Cash purchase
Key Points: All benefits and costs associated with the project are retained by the building owner; savings are applied to the on-site power bill.
For owners with available capital, purchasing a solar system outright can potentially deliver the highest long-term ROI. A cash investment in a solar project requires either taking on or delegating asset construction, maintenance, and operational responsibility.
The investment tax credit, depreciation, and other incentive benefits accrue to the project owner.
Benefits:
- Retain all energy savings, tax, depreciation, and other incentives
- Retain environmental attributes (e.g., SRECs)
- No contracts need to be assumed by future buyers of the buildings
Case Study:
A top multi-family developer (managing a USD 50billion+ portfolio across 200+ markets) used Lumen Energy’s marketplace to deploy solar at a new North Carolina development.
With occupancy expected in 2026, the goal was to maximize financial returns and meet decarbonization targets. Lumen’s platform revealed a USD 100K bid range on a ~USD 300K project. Lumen designed a 60 kW system optimized to offset the house account, delivering strong NOI.
Conclusion
Financing is not one-size-fits-all. Portfolio geography, ownership, and capital strategy all inform which solar path makes the most sense. By evaluating tradeoffs and understanding what’s working in the field, CRE owners can unlock decarbonization opportunities that greatly improve the bottom line while also meeting sustainability objectives.
This article was written by Katya Mizin, GTM at Lumen Energy. Learn more about Lumen energy here.