Solar is no longer just about ESG—it’s a strategic investment that boosts NOI, increases property valuations, and hedges against rising energy costs.
Over the past two decades, it has become clear that clean energy adoption is most successful when evaluated through a financial lens—just like real estate. And as the energy sector undergoes radical transformation and growth, the relationship between both sectors is no longer merely philosophical.
For example, in the solar sector, early solar development efforts involved selling solar farms to traditional farmers by comparing energy yield directly to crop yield. As adoption expanded into commercial real estate, Net Operating Income (NOI) emerged as a critical metric. In the early days of CRE solar, the NOI impact was limited, while its ESG benefits were more commonly touted by developers. But today, the dynamics have fundamentally shifted. Solar is increasingly a no-brainer—not just for enhancing NOI, but for boosting valuation multiples and mitigating growing risks tied to grid instability and rising energy costs.
Many real estate owners still view solar primarily as an ESG initiative—not an NOI opportunity. And while that narrative may resonate with some, it often misses the true business value of deploying solar—typically on underutilized rooftops, parking lots, or open land. Leading property owners such as Prologis, Walmart, and Lineage Logistics have built significant solar and energy platforms not for the optics, but for the economics.
This article extends the financial case for clean energy—and solar in particular—as a strategic lever for financial resilience and value creation. And yes, the ESG benefits come along for the ride, whether you prioritize them or not.
TAX INCENTIVES THAT SUPERCHARGE RETURNS
Let’s start by walking through the economics of a solar project. The financials are compelling on their own—but today’s tax incentives make them even stronger.
The 30% Investment Tax Credit (ITC) allows investors to deduct 30% of the cost of a solar system directly from their federal tax liability. On a $1 million system that could power approximately 90 to 125 homes or a 30,000-125,000 square foot commercial building, that’s a $300,000 tax credit.
In addition, 100% bonus depreciation allows the remaining cost of the system to be fully depreciated in the first year—creating a substantial write-off that can offset other taxable income. Depending on the investor’s tax position, this can reduce the effective net cost of the system by another 20–30%.
Together, these incentives can reduce the true out-of-pocket cost of a system by 50% or more, dramatically improving payback periods and return on investment—even before a single kilowatt-hour is generated.
The ability to monetize these incentives depends on the investor’s structure. Private equity owners can typically use both the ITC and bonus depreciation directly to reduce taxable income. REITs, on the other hand, often need to partner with tax equity investors or use a taxable REIT subsidiary to unlock the value of those benefits. Either way, the bottom line is the same: with the right structure, the incentives are real—and material.
BRIDGING THE GAP BETWEEN EVALUATION AND EXECUTION
For many commercial property owners, the interest in solar is there, but the path from idea to implementation is unclear. Evaluating a building’s solar potential, identifying the right system size and design, soliciting provider proposals, comparing those proposals, and aligning on financial terms can be daunting. This is all compounded by the complexity of local incentives and electricity bills, a fragmented network of providers who execute projects, and a traditionally manual process. This friction often delays or derails promising projects, and in some cases, prevents them from happening.
In many respects, the path from evaluation to execution has not really changed. It’s still largely manual, iterative, slow, and expensive. This is the gap that Station A was created to solve with software and process innovation. By combining building-level energy analysis with a curated marketplace of qualified solar providers, Station A enables commercial real estate owners to quickly assess financial viability of transactions and efficiently source competitive proposals for execution. Whether managing a single asset or nationwide portfolio, owners can use these insights to treat solar like any other capital improvement project – one backed by data, efficiency, and NOI.
CASE STUDY: TURNING SOLAR INTO PROPERTY VALUE
Now let’s apply this to a specific project, anonymized here for the sake of discussion. A commercial real estate owner we’ll call “Sunny Haven,” located in California, purchased a rooftop solar system for approximately $1 million through the Station A marketplace in 2022.
The system was initially estimated to generate $110,000 in annual electricity savings, delivering an 11% return on cost before applying the ITC or bonus depreciation. But as utility rates rose, actual savings in the first year reached nearly $250,000—a 25% return on cost. With rates continuing to climb, those savings will only grow and compound over time.
The real inflection point came when the property was refinanced in 2023. At a 6.2% cap rate, the solar-driven increase in NOI translated into $4.1 million in additional property value. The owner was able to refinance and pull out more than the full cost of the system, while still increasing net cash flow.
The takeaway is clear: solar increased operating income, which increased the value of the property. It wasn’t treated as a sunk cost or an ESG initiative—it was treated like any other income-generating investment. Clean energy became a strategic asset.
The other key component of this case is the impact of rising electricity rates. Since Sunny Haven’s system was commissioned, the property’s cost of electricity has nearly doubled. As a result, the project’s simple payback period was cut in half—from over four years to just over two.
This isn’t unique. We’re seeing utility rate hikes across the country, and that trend shows no sign of slowing. Which means the economics of solar—already strong—are only getting better.
SO WHY AREN’T MORE COMPANIES DOING THIS?
The economics of solar development have historically been more elusive to pencil out, because there was an information gap between the solar markets and data for US commercial and industrial building stock. Our own organization began by solving how to build this bridge, starting with an analysis of more than one million buildings, conducted in 2023. The top markets, from a pure all-cash financial basis, were Texas, California, Illinois, Pennsylvania, Massachusetts, and New York.
The initial analysis indicated that at least 724,000 of these one million buildings, accounting for nearly 30 billion square feet at an average of 41,000 square feet per building, could support financially viable rooftop solar today, factoring in applicable incentives, local energy costs, and current project economics. Yet only 5% of the market is tapped. Why the gap?
So, what’s stopping broader adoption? It boils down to three things:
- Analysis paralysis: Evaluating buildings for solar at speed and scale is hard.
- Provider complexity: With thousands of providers in every market, it’s difficult to compare and choose.
- Perceived operational hassle: The process feels too complicated to even start.
In many respects, people just don’t know where to get started.
The barrier is rarely economics—it’s inertia and confusion. The good news is that software is helping lower the barrier to entry, making building evaluations simpler and more efficient for asset management, energy, facilities, and finance teams, and helping more easily connect with providers who can execute projects best.
THE REALITY IS THAT THERE IS A COST TO INACTION
The cost of inaction in mid-2025 is increasingly difficult to justify. Across the US, rising utility rates – driven by surging data center demand, and electrification accelerating across the grid – are eroding NOI and exposing commercial portfolios to escalating operational risk.
In high-cost markets like California, New York, Massachusetts, and Illinois, commercial electricity rates are increasing anywhere from 15-35%. For many buildings, this translates to hundreds of thousands of collars in avoidable annual utility costs, simply by not deploying onsite solar. In addition, in some markets such as Illinois, Pennsylvania, and Maryland, among others, there are active community solar markets where real estate owners can lease out their rooftop to a solar provider to build, operate, and maintain a community solar project. Lease rates can range from $20,000/MW/year to $80,000/MW/year, providing $100,000 to $400,000 in annual lease revenue for a 5MW project.
The market conditions are strong, the incentives are in place, and the savings or revenue are material. What’s missing, in many cases, is the infrastructure to act with speed, confidence, and scale.
The right time to act was yesterday. The second-best time is today. As one of Station A’s core values puts it: Just don’t wait.
CLEAN ENERGY IS A FINANCIAL STRATEGY
The commercial real estate industry doesn’t need another idealistic sustainability pitch—it needs investments that perform. Solar delivers exactly that. It’s an NOI enhancer, a valuation lever, and a hedge against volatility. With the right incentives, the right technology, and the right partners, solar is no longer a climate story. It’s a capital allocation story.
For commercial property portfolios, the question is no longer whether to adopt solar—but how much longer delay remains feasible. The economics are solid. The infrastructure is in place. The market is ready. Just don’t wait.
SUMMIT #18
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Note from the Publisher
Gunnar Branson | AFIRE
Sector Intersection: Exploring the Convergence of Energy and Commercial Real Estate
Benjamin van Loon | AFIRE
Powering Future Development: The Power and Players Behind Economic and Real Estate Development
Jeff Kanne + Darob Malek-Madani | National Real Estate Advisors
US Solar in 2025: What Matters in the United States for Solar Investors
David Wei | SolarKal
Decentralized Energy: Energy Systems, Decentralization, and the Built Environment
Dr. Michael Ferrari | AlphaGeo
Let’s Be Honest – It’s About NOI
Kevin Berkemeyer | Station A
Targeted Investment: Untangling the Building and the Grid
Elena Alschuler + Marisa Mendenhall + Haya El-Merheby + Brian Klinksiek + Julie Manning | LaSalle Investment Management
Faring On Adoption: How Does US Commercial Real Estate Fare on Green Energy Adoption?
Andrea Savio | Georgetown University
Powering the Future: Energy, Trade, and Climate Risks in Global Real Estate
Tanja Milosevic | Grosvenor
Root Causes: An Honest Addressing of the Climate Crisis
Asaf Rosenheim | Profimex
Grid-Interactive Multifamily: Beyond Efficiency: Multifamily Buildings as Energy Assets
Thomas Stanchak | Stoneweg
Power as a Platform: The Role of Real Estate in the Grid of the Future
Susan Uthayakumar | Prologis
Unlocking Abundance Together: How Real Estate and Energy Stakeholders Can Power Growth and Investment
Derek Kaufman + Joshua Seawell | Inclusive Abundance + Mike Kingsella | Up for Growth
Investing in Tech Adjacencies: Leveraging the National Tech Buildout Beyond Data Centers
Tom Kennedy + Luigi Cerreta | JP Morgan
Navigating the Labyrinth: The US Regulatory Landscape at the Intersection of Nuclear Energy and Data Centers
Amy Roma + Chip Cannon + Porter Wiseman | Hogan Lovells
Transmission Alley: Rural Real Estate, Railways, Renewables, and the Future of Data Infrastructure
Michael Maloff + Gary Goodman | Dentons
