Unlock the power of front-of-the-meter and behind-the-meter models to maximize your PV profits
Author: Adam Woda, Dispatch Energy
Contributor: Alexi Makris
Transform your commercial property into a revenue-generating asset, maximizing property value, taking advantage of incentives, and making a sustainable and smart investment. Everyone is looking for ways to bring renewable energy sources online faster, smarter, and with as little red tape as possible. Several models have been used for years, some more successful than others. However, the opportunity to create positive environmental and grid impact while also reaping direct financial benefits is a no-brainer.
Many of our clients are still unsure which option best fits their site, building, and long-term goals. Here, I’d like to explain what we mean by front-of-the-meter and behind-the-meter interconnection — the point to which a system delivers electrons — and discuss some reasons why you might choose one over the other, depending on the types of buildings you own, lease, or are currently building.
When the industry talks about front-of-the-meter (FTM) interconnection, it often refers to large ground-mount energy systems and facilities that interconnect directly to the grid and provide power to the distribution or transmission network. While this development has historically been ground-mounted on sites dedicated to solar arrays, we see a state-led shift to rooftop FTM development and leasing on top of commercial buildings.
One emerging FTM model involves a developer installing solar on a rooftop, bypassing the site’s meter, and selling the power directly into the grid. In return for using the roof, the developer pays fixed lease payments to the landlord — the Roof Lease Model. For this model to be viable, the state where your building is located needs to have one of these programs:
Community solar
Virtual net metering
Feed-in tariff
With FTM systems, electricity sold directly to the grid can be purchased by the local utility, local customers, or another business. There is no need to involve the tenant; the developer takes care of the construction and operation of the facility. Property owners can take advantage of untapped and underutilized rooftop space, generating revenue via the roof lease while enabling the production of clean, renewable energy.
Leveraging the roof lease model presents opportunities to build solar in densely populated areas, get projects done faster without the need for on-the-ground siting and permits, and inject added capacity into the grid in places where it is actually needed.
Other Dispatch Energy leaders and I have completed over 40 roof lease projects across various site types, from heavy industrial to big-box retailers in many states. We’ve recently worked with clients on creative payment structures that help building owners take advantage of a roof lease while solving near-term cash flow needs.
While not every state has a policy in place to support the roof lease model, many are moving in this direction. Rooftop FTM provides the autonomy and opportunity for real estate owners to capitalize on an asset already owned, generate clean power, and help solve a huge challenge we face today around grid stability.
Maryland is a great example of a state at the forefront of making solar energy accessible to a wide range of participants, including businesses, nonprofits, and residents. The state’s Community Solar Program, bolstered by the passage of the Brighter Tomorrow Act, enables broader participation and has positioned Maryland as an emerging leader in community solar, driven by progressive policies and a growing demand for energy solutions. At the same time, enhanced incentives like 150% SREC credits and tax abatement have made community solar an appealing option for commercial and industrial real estate owners.
In the more traditional behind-the-meter (BTM) model, instead of injecting power into the grid, the solar facility delivers electrons to the site’s meter, feeding the tenant or owner-occupier’s electrical consumption. This reduces or eliminates the need to draw power from the grid. In return, the tenant or owner-occupier pays the developer for the electricity under a long-term power purchase agreement (PPA). For this model to be viable, several requirements need to be met:
A net metering policy which essentially turns back the tenant’s meter for every 1 kWh the solar generates, allowing for generation and demand to be misaligned.
A suitable rooftop that is generally flat and unshaded, a single level, and large enough to support the tenant's demand.
A long-term commitment on power purchased - either you’re offered a rate below what you pay today or the rate offered hedges against any future rate increases.
The BTM interconnection model works well for owner-occupiers because they have the flexibility to sign up for a 20-year purchase commitment and they control how long they’ll be in the space. For tenanted sites, the lease duration generally needs to be long enough to match the terms of the PPA. It also makes sense for building owners looking for opportunities to lock in pricing and potentially save money on energy costs over the long term.
Many of the prospects and clients we work with lean towards this model because they can manage production and expenses while also tracking sustainability metrics more closely, such as their Scope 1 and Scope 2 emissions. These emissions are consistently becoming necessary reporting requirements to support environmental, societal, and governance (ESG) goals. The BTM model also makes sense for heavy electricity users because system sizing correlates to energy use, meaning the solar system can be sized to the maximum available space.
The Dispatch team has worked to solve the energy transition conundrum for various industries, including last-mile logistics, big box retailers, gas refineries, paper mills, and large tech companies/data centers.
Having completed some of New York’s first community solar projects in the state, we supported Walmart’s expansion into distributed generation across 68 projects totaling over 50MW installed.
If you have warehouses that use very little power—for example, long-term storage sites without machinery or HVAC—then this PPA model may not be for you. Under net metering, the site’s low usage would constrain the solar system's size to be too small, making it unviable. In this case, the FTM model may be a clear winner.
Leaning on our team’s deep experience, we are working with dozens of clients to bring their own solar sites online. We can advise based on their current building or rooftop space, energy usage, and building ownership or tenancy models the best solution. Policy and regulations come into play in all scenarios. With our understanding of state-by-state rules, we can effectively guide you toward the best solution while facilitating the financing needed to get started.
If you’d like to learn more from our team, please contact us here.