Stockland, GPT & AMP Capital shopping centres in sunnier outlook
Tina Perinotto and Sandra Edmunds | 5 April 2016
Shopping centres are increasingly going solar. Ambitions are growing from a nice-to-have unit on the roof to giant systems that can power almost a third of a centre. And increasingly solar is a way to boost the bottom line and offer lower outgoings to tenants.
Key drivers are the falling price of solar systems and their rapidly improving business case.
Stockland, for instance, says solar is meeting 28 per cent of its energy demands at its Shellharbour centre 100 kilometres south of Sydney. GPT says that at Casuarina Square centre the solar unit installed was last year meeting 20 per cent of demand for its base building requirements.
Another major player in the space, AMP Capital Shopping Centres, is looking at all its centres for potential solar installation, in particular the giant Pacific Fair, on the Gold Coast, where it expects solar power could meet at least 10-20 per cent of total demand in the centre.
The centre is currently in the throes of a $670 million expansion to become the biggest centre in Queensland and fourth biggest in Australia.
AMP Capital Shopping Centres managing director Bryan Hynes says the logic is straightforward.
“We are looking at a way that we can harness solar energy and utilise it through the centre to limit peak demand and obviously limit the cost and the amount of energy we draw from the grid,” he says.
According to consultant PC Thomas of Team Catalyst, the move is part of a general uplift in interest in sustainability by this sector that in the past has been known as a laggard.
“There’s a lot being done on shopping centres that people have not picked up on,” he says. “In the last couple of years a lot have been getting a NABERS rating and they’re looking to sustainability and energy efficiency.
“In a sense shopping centres are where office buildings were in the early 2000s, where the average NABERS star rating was 2.5.”
Today the office average is more than four stars, evidenced by the roughly 2000 buildings captured by the CBD disclosure program.
NABERS says there has been a “sharp increase in Energy and Water ratings for shopping centres, with ratings nearly doubling from 59 in 2013/14 to 109 in FY2014/15, fuelled both by portfolios rating for the first time and by a major player coming back on board.
According to Thomas, standout performers are companies such as Stockland, which is utilising its car parks on shopping centre roofs.
“They’ve got large parking spaces and it makes good sense to utilise this.”
Stockland confirms it’s taking its solar ambitions seriously.
National sustainability manger Greg Johnson says its Shellharbour shopping centre, with its 1.22 megawatt system, through 3991 photovoltaic panels on the roof, is producing a whopping 28 per cent of the centre’s energy. It’s being fed mostly into the embedded network.
The company has a performance-based contract with a maintenance supplier and is happy with results coming in 1-3 per cent above expectations.
The installation cost $2 million with an expected payback of about seven to eight years.
The business case at Shellharbour was also helped by the centre not being forced to install expensive “grid protection” devices, required in some cases to protect against surges from solar energy at scale.
“Obviously we’ve learned lots of lessons in Shellharbour – mostly that it’s profitable for us. It helps the business case,” Johnson says.
Energy produced there is directed through the embedded network, by which electricity is distributed to retailers. This means that the energy mix can be offered to tenants at a discount to grid prices.
“If we just connected to the base building system [to supply services] like aircon, whatever that costs us, we can only recover that from the tenant. We can’t profit on the recovery of outgoings.”
As an effective retailer of energy the owner can make “some profit”.
“At the same time we can offer it at a discount to that from the grid.”
However, retailers must always have the potential to be able to access alternatives.
The company is now running the solar ruler over its entire 40-strong portfolio for solar potential. But not all are suitable. Roofs in some cases might be not sufficiently robust, or they are cluttered with plants and equipment.
Johnson would not be drawn on final numbers that would have solar, but it would be in excess of five, he says.
One certainty will be at Green Hills at East Maitland, where the centre, which is currently being expanded, will have an additional 700kW added to the existing 67kW system.
Johnson says Shellharbour was the biggest shopping centre solar installation in Australia until GPT’s Casuarina installation came along, at a slightly greater size of 1.25MW. There’ s not much in it, Johnson quipped, revealing property industry’s competitive spirit in sustainability was firing still. He added, in jest, that Shellharbour was still the biggest in the state, and among all states, in fact, since the Northern Territory was not a state.
For AMP Capital the plan at Pacific Fair is to harness the solar panels with the energy harnessed through battery technology.
“We are actually looking at the entire centre; we won’t just isolate it to the new part of the centre,” AMP Capital Shopping Centres managing director Bryan Hynes says. “[However] our initial view is that we won’t be able to power the entire centre. Even if we can pick up 10 or 20 per cent of the consumption, it helps us enormously.”
The PV installation would benefit both the company and the tenants.
The centre has an embedded network – a small electricity distribution network that distributes and sells electricity exclusively to businesses within a specific property such as a shopping centre or apartment building. AMP Capital purchases power and on-sells it to its retail tenants at a significant reduction to the going rate.
“We could either bring that [price] down by supplementing it with solar or prevent against further future price rises. We would be looking at that as an initiative and pass on those savings to the retailers as well.”
The company is also looking at the viability of solar at its 28 other shopping centres across Australia and in New Zealand.
“If this is an initiative that we find is obviously beneficial then we look at how we roll it out across the entire portfolio.”
It’s part of a program to reduce overall ecological footprint right across the board, Hynes says.
He says retail is behind offices because the big sustainability inroads for the sector generally happen only with new major developments.
However, retail is catching up with initiatives focused on waste reduction, greywater harvesting and more.
“If we actually look at the greenhouse gas emissions during 2014 and 2015 – right across the AMP business – we reduced that by about 14.7 per cent year to year,” he says.
Hynes says Pacific Fair is a good example of a shopping centre that utilises alternative energy sources because a third of the centre is not fully enclosed or airconditioned.
“We try and use the natural climate and the sea breezes to climatise that particular centre and we put in wind tunnels to make sure that it actually works,” he says.
GPT Group has a 1.25MW solar installation at its Casuarina Square shopping centre in Darwin and another at Rouse Hill where a 35 kW system was installed last year. On other centres, the company “continues to evaluate” the company’s national manager for sustainability Bruce Precious says.
At Casuarina, Precious says it’s more efficient to use the energy in the base building rather than through the embedded network.
The big driver, he says, is the improving business case for solar. There are a couple of signals that influence the market – “the continuing decrease in the cost of the photo PV systems themselves, the general trend to solar and the flip side that’s worth commenting on – the other variables around the base case of grid electricity pricing, which is all over the shop.”
By this he means that carbon pricing has come and gone, and that network price charges are subject to variation and the networks are currently in legal proceedings with the regulators to determine what they can and can’t charge.
“And that’s an area where the business case can be undermined, where there is no certainty about the base electricity pricing.”
- See this recent article in The Mandarin on how utility providers are abusing appeals to delay unfavourable regulatory decisions and pass on costs to consumers.
“Having stability is the best outcome,” he says.
Another great way to reduce energy consumption, Precious says, is to simply to turn things off when they aren’t needed and through the application of various technology. The company uses its own analytics through the Envizi platform, he says.
Centres also use natural light and fresh air to reduce greenhouse gas emissions and energy intensity, so much so that energy intensity in GPT’s shopping centres is matching that of offices.
For a start it’s easier for shopping centres to access natural light and fresh air, options often not available to office buildings.
“Data on our website shows that from an energy intensity perspective shopping centres have about the same office intensity as buildings,” Precious says.
In general, he says, shopping centres have been on a sustainability and energy efficiency drive for 10 years.
“It’s a continuum, as different technologies take hold and energy markets transform”.
There will be a variations across the markets, but the laggards are improving, he says.