Fixing on-site renewables for commercial real estate landlords

Any fool can list the problems and I did in my last blog: “Why Multi Let Assets Are the  Energy Transition’s Blind Spot”. Renewable energy brings many challenges, and none of the solutions on offer provides a “silver bullet”—yet.

The solution isn’t an engineering problem or a need to resort to exotic technology—it’s disciplined commercial design. The objective is straightforward: enable on-site renewables in multi-let buildings while avoiding contracting directly with tenants, keeping landlords out of supplier-like roles, and avoiding contractual features that create unintended IFRS balance-sheet outcomes.

Sound challenging enough?

Start with principles (because the spreadsheet comes later)

·       Landlord hosts; specialists supply. The landlord provides access and property rights (their core business) without taking on energy-supply commitments.

·       Tenant participation must be simple and resilient. Most multi-let tenants are price takers, so value for money and transparency—on a pay-as-consumed basis—are the only way forward.

·        The landlord’s relationship with tenants is sacrosanct. Green leases that allow external suppliers to negotiate directly with a landlord’s tenants are a non-starter. If it worked, we wouldn’t be here sorting this out today.

·       Allocation and reporting must be defensible. Metering, rules, and Certification of Origin should stand up to scrutiny from tenants, investors, and auditors.

·       Risk follows reward. Construction, performance, and operational risk should sit with the party underwriting the investment and earning the return.

A practical model, built on property fundamentals

Funding renewable energy through a long-term Power Purchase Agreement (PPA), backed by an investment-grade covenant and extensive guarantees, is relatively straightforward. But for multi-let assets—where the landlord is responsible for energy procurement and settlement via a service charge or recharge—we focus on the strength of the asset and the quality of the operator. The question is simple: will the location and quality of the property attract occupiers who consume electricity over the life of the investment?

How this helps with the “IFRS blocker” (in human language)

This helps with the “IFRS blocker” primarily through role clarity and the apportionment of risks and returns. If the landlord remains a host of infrastructure (real-estate rights), rather than a counterparty to energy supply, you materially reduce the risk of creating supplier-like obligations or balance-sheet-relevant commitments. The renewable energy operator takes the market risk, mitigated by selecting high-quality assets run by best-in-class landlords. The exposure is to asset-level occupancy rather than market-rent fluctuations. As long as the asset has tenants consuming energy, the operator’s risk can be underwritten.

As always: validate the structure with legal and accounting advisers—small drafting choices can change outcomes.

Avoid: (a) landlord revenue guarantees, (b) open-ended performance obligations for the landlord, and (c) blurred responsibilities for compliance, insurance, outages, and maintenance.

Prefer: a clean property-rights agreement for the landlord (space/access with defined obligations), alongside long-term security of tenure for the renewable-energy asset holder and operator. Tenants consume certified renewable energy via the property service charge, with no more obligation than the usual service-charge undertakings in a standard commercial lease.

The outcome is an unambiguous separation of roles: the landlord hosts (for rent), the supplier/operator supplies (for a risk-adjusted return), and the tenant gets transparent clean energy—benchmarked to be cheaper than the grid tariff.

Making it work in the real world (where tenants don’t want any more liability or complexity)

To make this work operationally, design for normal multi-let behaviour (busy teams, imperfect engagement, tenant churn): keep tenant engagement light, build transparency and trust into the process, and invest early in metering/data so savings and allocations are provable rather than debated.

·       Commercial offer: transparent unit rate; clear term. We offer a fixed-tariff period of up to five years, because we can. Renewable energy isn’t subject to the same commodity price shocks, and our CapEx and funding are locked in on day one—so we can share that certainty with partners. Operational model: defined outage and maintenance responsibilities; the building manager doesn’t become a call centre. We become long-term renewable infrastructure partners, with operational and management provisions built in throughout the term.

·       Measurement: metering and data access agreed up front; reporting that supports tenant procurement and landlord disclosures, with a robust process around Certification of Origin.

What good looks like (and the two questions that keep you honest)

If the structure is right, the project becomes repeatable: landlords enable delivery without inheriting energy liabilities, with long-dated NOI that adds value to their core business; tenants get a light-touch, hassle-free, credible cost-and-carbon option; and operators have bankable rights and revenue logic grounded in strong property fundamentals.

The energy transition doesn’t stall in plant rooms; it stalls in approvals. When contracts keep roles clean and risks priced appropriately, multi-let roofs stop being a governance problem and start being a practical energy asset. The market and the industry are ready for a solution that addresses this important commercial sector.

Of course there is a little more involved in getting this done, but I have to keep some of the secret source….well secret.