Given Recurrent Energy's focus on industrial REITs, we've gotten to know the team at ProLogis over the last year. We knew they had been talking to SCE--so we weren't too surprised to see the announcements SCE and ProLogis made this morning. According to the releases, SCE will install up to 250MW of solar over the next 5 years, starting with a 607,000 sq ft roof in Southern California from ProLogis.
In no particular order, below are a handful of thoughts from my perspective on the program:
Doesn’t Serve ProLogis’ Tenants or Green their Buildings – This sounds like a great deal for SCE and ProLogis—but it doesn’t allow ProLogis to make any green claims about their properties and it provides no benefits for their tenants. From what we can see, all the green benefits go to SCE and ProLogis just gets some roof rent.
Solar as a Service is a Better Solution for Leased Properties – Solar as a Service provides property owners with all of the same economic benefits as the SCE program, plus it enables owners to deliver green power directly to their tenants - not to the utility as SCE does.
Validates Recurrent Energy's Market Focus and Customer Demand – The announcement is a validation of Recurrent Energy's focus on REIT and institutionally owned industrial rooftops as a vast, untapped solar resource. Now that SCE and ProLogis have taken this step publicly, our customers will face enhanced urgency to roll out programs of their own. We’re the best positioned company to help them do it.
Increases ITC Confidence – Given the scale and timeline of the SCE project, we’re glad to see the governor, SCE, and CPUC share our belief that the ITC will be renewed soon.
SCE is not a Broad Competitive Threat – We don’t see this as a competitive threat on a broad basis because SCE is limited by their utility footprint to the Los Angeles area and we are addressing the national market.
Big Regulatory Hurdles – Today’s announcement serves as proposal for SCE’s roll-out plans. However, the program still requires regulators to approve the funding and the biggest hurdle is that their approach will stick the cost to ratepayers. As of now, it’s not clear what the actual costs will be and it’s difficult to assess whether the program will be approved by the CPUC.
Reason to Question the Numbers – While exciting, we have to recognize that this is yet another big solar announcement by SCE. Previous experience suggest we should watch what SCE does, not what they announce to the press – where’s the 900MW Stirling Energy Systems deal that was announced two years ago?