Building Upgrade Finance To Support Commercial Solar In SA

Removing barriers to commercial solar uptake in South Australia | Image: Roofjockey, CC BY-SA 4.0

New regulations now in effect in South Australia could help boost the number of solar power systems installed on tenanted commercial buildings throughout the state.

Aside from the challenge of accessing capital to fund such upgrade projects, another barrier for commercial building owners has been the thorny issue of tenants benefiting from any upgrades while the owner wears the full cost, which can be significant.

The South Australian Government says Building Upgrade Finance removes barriers to property owners upgrading existing commercial buildings to reduce the carbon footprint of their properties.

Upgrades eligible for Building Upgrade Finance include those that improve energy and/or water efficiency, reduce emissions, or include renewable energy measures – such as the installation of solar panels. In an Australian-first, upgrades to heritage buildings are also included.

How Building Upgrade Finance Works

The model involves a building owner, financier and a participating council.

• A financier agrees to fund the upgrade.
• The relevant council levies a building upgrade charge against the land on which the building is situated.
• The charge is paid by the building owner with their rates.
• The council transfers the money to the financier.

The loan is tied to the property instead of the property owner and the way the charge is implemented provides a high degree of security as it is ranked above mortgages, taxes and other charges should a default scenario occur.

With  this added security, a financier is more likely to offer attractive terms. In many leasing arrangements, tenants pay local government charges, meaning the cost of Building Upgrade Finance is also shared along with the benefits of operating from a more energy efficient building.

Similar schemes are already operating successfully in New South Wales and Victoria.

The Property Council of Australia’s South Australian Executive Director Daniel Gannon said the scheme was a win-win for all.

“Under this scheme, building owners will be able to improve the environmental performance of their buildings which reduces operating costs, increases yields and attracts tenants.”

Another goal of the Building Upgrade Finance scheme is to stimulate activity in the local commercial solar sector, supporting local jobs.

“This scheme – coupled with the Government’s buy local efforts – is sending market signals that I hope will see growth for local manufacturers and suppliers of clean technologies,” said SA Climate Change Minister Ian Hunter.

The arrangement has in-principle support from the Local Government Association of South Australia and councils including the City of Adelaide and Salisbury.

Further details on Building Upgrade Finance can be found on the Department of Environment, Water and Natural Resources web site.