What will it take to turn the UK’s warehouses into solar power plants?  

This blog was written by John Mushriqui, CEO & Founder of InRange.

7 November 2024

Commercial and industrial (C&I) rooftops represent a significant opportunity for the UK to reach its 2030 renewable energy goals. With 350 million square metres of warehouse space alone, turning these rooftops into distributed solar power plants presents an enormous opportunity. 

By being physically closer to the point of demand, they reduce grid congestion and minimise transmission losses and do not require complex permitting, as the roofs are largely flat and readily available. They can also be rolled out quickly. 

So, why are less than 5% of the UK’s C&I rooftops equipped with solar?  

The solar challenges of today’s warehouses 

To date, it’s been challenging to unlock this segment’s potential due to a complex mix of financial, structural, and regulatory factors: 

Uncertain and unattractive returns: The cost of solar is impacted by the building tenant’s energy demand, which is often only a small portion of the total potential of the roof—sometimes as low as 5%. Due to poor exported energy tariffs, solar developers recommend “right-sizing” installations, limiting export to under 20%. But with fixed costs, small solar installations without export can become financially unviable. When coupled with low tariffs on exports & short lease lengths, solar developers can typically only offer property owners returns below 10% IRR. Better IRRs require higher on-site tariffs, which turn off tenants. 

Grid connection challenges: Even if a solar offer does manage to include energy export, connecting excess generation to the grid can be complicated and costly. Lengthy processes and additional expenses can end in rejected or restricted applications, further impacting owner returns. These restrictions and rejections often come late in the process, after a large time and money investment, discouraging owners to move forward on another building. 

Regulatory and policy uncertainty: As the UK’s renewable energy policy landscape has been shifting, some solar investments have become less financially attractive. This leads to uncertainty and hesitation for property owners who expect predictable returns year over year to make an investment, requiring reliable payback time and returns.  

Despite these challenges, unlocking warehouse energy potential is possible when the right factors are in place.  

Cracking warehouse solar with a paradigm shift 

A paradigm shift is required to turn the UK’s warehouses into distributed power plants. In this shift, warehouse roofs are fully utilised with solar and participate in a distributed energy network. Their excess energy is aggregated and sold at guaranteed export tariffs to large energy buyers on that network.  

Let’s dig into the key elements of this shift: 

Full roof utilisation: By utilising the entire roof of a warehouse, the cost of installation per kW drops significantly, and improves the unit economics. Warehouses can export on average 70% of their energy generation, increasing the returns for the owners while keeping the on-site tariff low.  

Guaranteed long-term export tariff: For so much export to make sense, owners need a guaranteed offtaker for the excess. That’s where large buyers like data centres come in. They want cost-effective, renewable energy at scale, and are willing to enter long term PPAs that pay significantly more than dumping energy on the grid alone. This long term guaranteed export tariff locks in solid IRRs for owners. 

Participation in an energy network: Since data centres want large amounts of energy, the excess from multiple warehouses must be aggregated and delivered as a single block. For such aggregation to work, all buildings must be part of a managed, distributed energy network which automates and optimises the energy distribution to the downstream offtakers.  

Automated operational efficiency: Scale is the name of the game in making this paradigm work. De-risking and accelerating rollout through AI-based automation is instrumental. That includes remote feasibility studies at portfolio scale, advanced generation and financial models, automated grid & procurement processes, and optimised energy distribution to streamline this process for cost reduction and predictability. 

Regulatory improvements: Today’s energy network and grid connection processes can create significant hurdles for these projects. While smaller projects require shorter grid connection queue times, energy networks still have little visibility into local generation and demand behind a given supply point and are restrictive in their approvals. Acceleration and data visibility improvements will be key to unlocking warehouse potential at scale. 

The UK’s warehouses can turn into solar power plants. They must be part of a managed, distributed energy network. They must fully utilise their roofs and leverage guaranteed export tariffs from that network. Owners must have access to automation platforms for faster rollouts across portfolios for economies of scale. These elements will provide owners and tenants cost savings and meaningful returns, and warehouses will help drive the UK’s energy goals.