Somewhere in every Electrify Business roadshow event, usually about 20 minutes in, someone puts their hand up and says a version of the same thing: “This all sounds great, but we lease. We’re not putting solar on someone else's roof.”
It’s a fair objection. Most New Zealand businesses lease their premises. So I went looking for what actually works.
My investigations led to two simple questions to help business owners decide whether or not to invest in electric assets:
1. Is the asset moveable?
Chattels move. Fixtures stay with the building. Electric vehicles, portable batteries and some EV chargers walk out the door with you when you change office. Rooftop solar, switchboard upgrades and hot water cylinders do not.
2. How much lease term is left compared to the payback?
If the remaining lease term is longer than the payback term, it’s best to own the asset yourself. If it’s shorter, either someone else should own it or you agree on the exit value now.
Once you’ve asked yourself these questions, it will become clearer whether or not it’s worth purchasing electric assets yourself, leaving it to your landlord or entering a power purchase agreement.
Tenants can make progress towards electrification without the landlord being involved at all
You can change your electricity supply. From 1 July this year, large retailers have to offer time of use (TOU) pricing plans, and the Electricity Authority has been explicit that small businesses should have access to at least one. Shifting your chillers, chargers and hot water off peak costs nothing and needs no consent.
You can also contract for renewable generation that sits nowhere near your roof. When Ingham’s partnered with Lodestone Energy, they got the same outcome as building their own rooftop solar, without the upfront capital cost or the ongoing maintenance. No roof required, no landlord conversation and the energy follows you when you move.
And you can electrify everything on wheels. Carbn and Zilch will give you a shared EV subscription without the need to buy a vehicle. Long term forklift hire in New Zealand already runs on a fixed monthly fee including maintenance. This means switching a diesel forklift fleet to electric is a procurement decision, not a capital decision at all.
Prepare a proposal when you need your landlord’s agreement
Some forms of electrification, such as rooftop solar, do need your landlord’s involvement. In that case, prepare a proposal with modelled savings, a named provider, a cost recovery structure and the upside to them in valuation, rating and re-lettability terms.
The Performance Leasing Guide and Model Clauses, produced by NZ Green Building Council with EECA and DLA Piper, has clauses into a standard Deed of Lease.
Three structures work in practice:
You can buy an electric asset and sell it to your landlord when you leave. The pricing should be agreed from the start, anchored to the IRD depreciation schedule.
Your landlord can buy an electric asset and increase your rent by less than you save, fixed off the model rather than reconciled against actual bills, so nobody is punished for becoming more efficient.
A third party owns the electric asset.
Third party markets are growing
That last option has quietly matured. COG Power, PCG Oceania, Future Energy, Sunergise and SUPA Energy will all fund, own and maintain the energy system on your site and sell you the output at a discount to your grid rate. No Capex needed. PCG Oceania even builds in a repurchase option at a preferred rate, which is the tenant exit mechanism bolted onto a third party deal.
Landlords already electrifying their premises
PMG Funds partnered with Sunergise to roll solar out across its commercial funds, with design, installation and maintenance at no cost to PMG, its tenants or its investors.
Auckland Airport went further at Mānawa Bay, building in a 2.3 megawatt array of solar panels designed to cover more than 80 percent of the centre's power, with no gas on site at all. Over 100 retailers moved into an energy efficient building without having to negotiate for solar power.
Neither of them did it for the emissions line alone. Read their own words and the drivers are tenant retention, NABERSNZ and Green Star ratings, and asset value.
Where we still have a hole
As far as I am aware, Heat as a Service (where customers pay for heat rather than buying and maintaining their own heating equipment) does exist in Aotearoa New Zealand. Tuwharetoa Geothermal Kawerau has been selling industrial process heat for decades and when it increased supply to Oji Fibre Solutions the mill retired a wood and coal fired boiler and cut around 10,000 tonnes of CO2 equivalent a year. Pioneer Energy, through the old Energy For Industry business, has owned and run boiler houses on customer sites since 2002. Te Whatu Ora Southern is now completely off coal on the back of that kind of partnership.
But nobody has brought that model down to the scale of a leased warehouse, office or hospitality site. I have not come across an equivalent of a solar Power Purchase Agreement (PPA) for a heat pump.
Current policy pushes the same way. The new Gas Transition Loan Guarantee Scheme, which opened at the end of July with an 80 per cent Crown guarantee behind up to $1.2 billion of bank lending, subsidises borrowing to buy the plant. Excellent if you own your building. Of no use to a tenant who cannot capitalise a heat pump against premises they will leave in three years.
That is a gap in the market and a gap in the policy.
Where to start
Read your lease first. Check out the term remaining, renewal rights, the alterations clause, the make good clause and who holds the Installation Control Point (ICP) number. Then do the things that move with you or pay back inside the term. Then change your supplier. Finally, go and see your landlord.
Christopher Burman is Network Engagement Manager at the Sustainable Business Network and leads Electrify Business, delivered in partnership with EECA, Schneider, Daikin and Rewiring Aotearoa.