The self-storage industry is still in the early adopter stage when it comes to rooftop solar. But that interest is growing along with a stronger financial case for adding the renewable energy source.
Major REITs such as Extra Space Storage, CubeSmart and the non-traded Strategic Storage Trust, have all introduced rooftop solar within their portfolios. Independent operators also are following suit. For example, Denver-based Greenbox Self Storage now operates four solar-powered facilities in Colorado.
Owners are attracted to the ROI solar projects offer. Climate-controlled facilities tend to be a good candidate for solar because they use lots of electricity, says Stephen Oman, sales executive at IPS Solar.
Oman estimates that rooftop solar added to multi-story Class A facilities can offset annual electrical consumption as much as 60% to even fully “net zero” buildings with energy produced via solar that covers 100% of energy use.
Many owners and operators still think adding solar is very expensive, Oman says. However, the reality is that solar is cheaper than ever, plus property owners can access federal and state incentives.
“I think you are going to see that natural market cycle move from early adopters to mainstream, but I would still classify it as early adopters,” Oman said.
Current government incentives include a 30 percent federal tax credit, as well as any incentives offered at the state level. For example, Arizona offers a 10 percent state tax credit with a $25,000 maximum deduction. Owners also can take a tax deduction on the depreciation of the total cost of install. Due to new tax law changes, owners can take all of that depreciation in year one versus spreading it over six years.
Given the new tax deductions, the ROI for installing solar at self-storage facilities in Arizona is typically between five and eight years versus seven to 10 years in the past, according to Anthony Santana, business development manager, commercial division at Sun Valley Solar in Chandler, AZ.
“Now the return on investment looks a lot more appealing,” he said.
Those savings are occurring broadly across the United States, not just in the Sunbelt.
“The Upper Midwest has seen considerable growth in commercial and industrial rooftop solar due the continuing decline in the cost of rooftop solar, plus the attractive solar incentives currently available from the major utilities,” said Oman.
Higher energy costs states, such as California and New Jersey, also provide a strong incentive for solar energy as it provides a favorable payback for adding solar.