Dr. Richard Lu’s LinkedIn
PowerBank’s Website
PowerBank’s LinkedIn

Note: This transcript was auto-generated and may contain minor errors. 

Sean Swentek: Hello everyone. Thanks for tuning in to The Future of CRE Sustainability. Today I am speaking with Dr. Richard Lu, President and CEO at SolarBank Corporation. Dr. Lu, thanks so much for joining me today.

Richard Lu: Thank you so much, Sean, and glad to be here.

Sean Swentek: You have delivered over 100 megawatts of solar projects and have a gigawatt plus pipeline. What has you excited right now about the future of our industry?

Richard Lu: The future is bright. Every day I’m looking forward to getting up, opening the curtain and seeing the light is there. Sean, I tell you, the future is truly bright. The thing is that we convert light into electricity. There’s no substitute for electricity and we don’t pay for the fuel to produce electricity. So the future is certainly bright. Not only bright, it’s good for SolarBank.

Sean Swentek: What do you think is the biggest misconception commercial real estate owners and operators still might have about solar and how it might cost them money versus being beneficial?

Richard Lu: I think three things come to mind. As you know, we had done hundreds of rooftops with great property owners like Home Depot and Fiori and so on and so forth. Those are the people already see the benefit. But I think first thing they say, oh, it’s an encumbrance of my building. Well, encumbrance of what? You have a piece of a liability over your head, which is roof. You have to pay for it and no one’s paying for it. We can actually turn that liability into asset. Secondly is that, oh, that thing is so expensive, who’s going to want it? No, solar is already at grid parity. Actually it’s cheaper than retail price. In New York, for example, we’re selling solar power at a 10% discount to their retail price. If you do it behind the meter, it certainly costs you less. And the third, certainly they say, well, you’re going to ruin my roof and cause leaks. Well, if you do it yourself or if you have the fly-by-night people do it, it could happen because it’s a membrane system, there are certain procedures you can do and so forth. We have about 100 rooftops under management. Roof is the least thing we hear.

Sean Swentek: I love it. Why don’t you quickly, for any listeners at home who don’t know about SolarBank, can you tell us a little bit about why the company exists today and what your goals are for the future?

Richard Lu: Yeah. So SolarBank is a developer and owner of renewable clean energy assets. We are a Canadian and a U.S. company and we list on NASDAQ. So what we do is the development, permitting, construction, operation and ownership of those assets. At the end of the day, we are here to deliver power to keep your lights on and to keep you connected.

Sean Swentek: I love it. What do you think is driving the shift that you recently mentioned? A lot of folks are embracing solar. What do you think is driving that shift for owner operators viewing solar as a cost center to actually seeing it as a value-add investment?

Richard Lu: Sean, if you look at this one, as I mentioned, solar is a necessity. Electricity is a necessity in life. You need electricity. Electricity is getting more expensive because the tariff increases the cost. The utility simply passes through the cost to the ratepayers. I’m a ratepayer myself. So when you look at all of those ones, you say, first of all, how do I reduce my power cost? Solar is at grid parity. When you have this piece of glass and the sun for 35 years, it always produces as long as there’s light. So that’s number one. Number two, when you look at the other technologies and so on and so forth, it becomes acceptable, it becomes available. So that’s another reason that people say, oh, I can do this, I can do that. And thirdly, obviously is the broader acceptance. Solar has been around for, my first solar project started in 2003. I’ve been in this for 22 years already. Over the time, when people look at it, it’s cheap, it’s available, it’s reliable, and let’s have it.

Sean Swentek: That’s winning in a lot of different ways. So in addition to solar, we’re seeing quite a bit of growth behind battery storage. How do you see that enhancing energy resilience for commercial property owners, especially during things like grid outages, which seem to be increasingly happening?

Richard Lu: Sean, that’s a very good question because traditionally we have the power generator that goes down the wire and goes to the ground. And if the wire’s down, you just stay in the dark. However, when battery storage technology advanced, now you can actually have it as an emergency backup. So lots of people have power walls and so on and so forth. That’s emergency backup. We are building three large scale battery storage in Ontario for the grid, basically to support the grid in times of need. More than that, people are always thinking, oh, electricity is expensive. Sean, electricity is expensive at 2 o’clock in the afternoon or 6 o’clock dinner time because everyone needs electricity. It’s very cheap at night. In Ontario, some rates are 2 cents a kilowatt hour. So you can actually charge the battery and discharge the battery during the day. So that gives you economic advantages. And I think from my perspective, I would say the grid resilience needs a combination of supply and also energy storage so that it keeps the supply meeting the needs of the society.

Sean Swentek: Love it. What do you think is the biggest barrier today preventing more commercial real estate portfolios from adopting renewable energy at scale?

Richard Lu: I think it comes down to the question we asked before. It’s really a way of looking at the future. In the past, building owners, the building owner operators, they will always depend on the grid. As the grid becomes more expensive, as the stress put on the grid is higher and higher, the reliability, the resiliency is a concern. So if that’s a concern to the owners, they will do it. Another thing is that when you look at those, one is that it’s economically driven. If you are paying for the electricity, if you can get a cheaper source of electricity, that’s a gain economically. I think it’s certainly the societal change. A lot of people now are very ESG oriented. A lot of people understand the carbon emission issues about global warming, and so on and so forth. As a building owner you want to make sure you attract top level tenants. So those are the things that are a driving force.

Sean Swentek: And now how do you think those property owners when they start to consider whether their building is ready for solar or even battery storage, what are the things they need to consider before integrating a renewable energy system?

Richard Lu: I think first of all is that look at your economics. If you are paying electricity at a cost that is of your concern, you need to look for alternatives. That’s number one. Number two, you’ve got to look at your building. For example, if you own a high rise, like very tall one in New York City, you’re not considering solar because the roof surface is very small. So it’s the construct. Having done that, now you look at, we have mechanical, structural, civil, electrical engineers on staff. So there’s engineering review about the structural and so on and so forth. Those are the things of evaluation that we actually do for a lot of property owners. When that is done, we will do a proposal for them to consider. I would say, Sean, it sounds very easy, just a piece of glass and the sun, you can just slap them on the top. Easier said than done. They are professional things. So it’s better to have a professional company like SolarBank to do it professionally so that it can last more than 35 years.

Sean Swentek: You bring up a really good point, Dr. Lu. If a building owner with what seems like a perfect large flat roof for a system, if the roof is older, it can sometimes be a great time to look at doing both a roof assessment and maybe a new roof at the same time as looking at adding solar to that site. Is that right?

Richard Lu: Well, you must know something about it. And actually most of the times a building owner will contact us and we go there, we say, how many years of your roof life is left? Perfectly will be 20, 30, 15 years is great, but if there’s still five years left, we usually look at the condition, look at the structural, and we will actually help them to redo the roof. So that way you can lessen the weight and you can pick the right type of membrane, 60 mil, 80 mil versus other types and so on, so forth. And actually it makes the project more attractive and more sustainable.

Sean Swentek: That’s nice. Full scope service you’re providing there. Now, how do you think evolving utility rates, you mentioned the costs only seeming to be going up, and the grid instability like I mentioned earlier, do those make the business case stronger for using behind the meter on-site energy generation?

Richard Lu: Yes, of course. If you think about it, let’s say everyone is using time of use rate, depends on the demand and supply. That’s the way of managing it, demand response. So with the utility cost increase, one of the ways is to put behind the meter energy sources. You could use battery, you could use solar, so that when you produce some power in the hot day and that’s where the electricity is the most expensive, your cost is lower. When you have cheaper electricity in the night and you charge it at 5 cents, 2 cents, whatever, and in the day when you get into 15, 18 cents, you can use it. So there’s actually a lot of companies that provide those services. They call it demand response. And it’s not only beneficial for the building owners, it also benefits the grid. When I was at Toronto Hydro, we were able to install certain control units on air conditioners and so forth. So when the grid is really stressed, we can slow down the air conditioning a little bit. Because at that time there’s not many technologies that can generate electricity. You can only reduce the consumption of it. But now you can do both.

Sean Swentek: You mentioned some of the other spaces you’ve worked in outside solar and battery storage and I know transportation solutions and hydrogen was one of those. How do you see fleet electrification impacting those large corporates and CRE providers?

Richard Lu: I was one time looking at some studies that our civilization started with burning wood into coal, to gas, to oil and gradually became renewable, and so on and so forth. And at the end of the day, what is the lasting energy? The lasting energy is from the sun. So the sun creates wind, creates lights in all of those ones. But you’ve got to start to think about not everything can carry a solar panel around. Not everything can have wind turbines on the back and be driving vehicles, for example. You could use EVs, electric vehicles, for targeting them for the, I would say, commercial use, but lots of the long haul trucks and so on, so forth, they’re probably better suited for liquid fuels. Yes, we still have pretty abundant, I would say gasolines or diesels and so on, so forth. But as we’re moving forward, one of the forms is to produce hydrogen and the liquefied hydrogen or even gases hydrogen through fuel cell turns into electricity and electricity drives the motors and moves the car. So I would say hydrogen is certainly a mix of all forms of energy. I think it is certainly a substitute or future choice for the places where diesel and gasoline are most prevalent at this time.

Sean Swentek: Beautiful. What do you think is one renewable energy trend in commercial real estate today that maybe some leaders are unaware of or might be missing?

Richard Lu: You probably heard everyone is trying to get a LEED building which is really about the environmental energy management control and so on and so forth. So now they call them net zero buildings. So net zero buildings means that you actually can use the energy generated on site. I saw buildings that they no longer have natural gas. So what they do is they have rooftop solar, they have geothermal and they have the grid as a backup. Now more than, I would say almost they can achieve net zero. So now if you are starting to look at the building, you say, how do I actually reduce the emission? How do I reduce the cost? You would consider solar rooftop. You will consider demand response. You would consider geothermal and with EV and heat pump, all those technologies, you can actually attract more, I would say conscientious customers or tenants to the building. So this really depends on the building owner’s view. There are building owners who say, I’m just providing a box and the tenant is covering everything. So yeah, sure. But what is the sustainability? How do you actually make your property more attractive? How do you make sure your tenants are loving your building so that you can have a sustainable business? So those are the things I would say there are technologies that integration would make it very attractive.

Sean Swentek: I love that. Actually caring about the tenant experience and satisfaction is beautiful. And I mean, on top of that though, a recent guest of mine was telling me how they’d done the assessment and the buildings where they focused on adding solar energy have actually increased the value of that building when they go to sell it. And so the benefit is really two ways for these properties.

Richard Lu: Absolutely. So first of all, when you have a roof, when the UV rays beat on it, it heats up. You think about you put a box under the sun, you will test the temperature inside. The temperature will increase. The solar panels actually create two things. One, they reflect the light. B, they create a gap between the roof and the panels. So that’s insulation. So from that perspective, you’re not only providing a benefit to the tenants from a cooling, from a thermal protection perspective, you also prolong the life of the roofing system.

Sean Swentek: You mentioned some clients you have like Home Depot and others who have solar at many different properties. For any portfolio owners of multiple assets, what do they need to think about when they start scaling their renewable energy efforts across multiple buildings? What are the operational challenges they should think about?

Richard Lu: I think the first one is the overall planning and determination. Not only as a building owner, you need to consider your asset value to increase, but you also need to consider the tenants’ needs. Some tenants have a lot of rooftop equipment. So that needs to be taken care of. Some of the leases are actually, the right of the usage of the roof belongs to the tenant. So you need to make sure there’s a fair, equitable consideration of that. At the end of day when you do the implementation, the tenants are operating a normal business. Usually if they are not using the roof often and usually we access the roof from the back and so on so forth, we can quietly, construction usually takes about three months. That can coexist with the tenant operation very harmoniously. But there are times you need to coordinate. Because this is something good for the environment, good for the tenant. So communication is another important thing to make sure it’s viewed and appreciated versus, oh, it’s just something that just happened. No one knows what’s happening.

Sean Swentek: You’ve overseen a lot of solar deployment. Is there maybe a creative commercial real estate renewable energy project you’ve seen that you’d like to share about something unique in the way someone executed their investment?

Richard Lu: I will say there’s a street in Toronto called Alliance and there’s a building, 501 Alliance. And the gentleman owns the building and he wants to create the building to start with as a LEED building and as we were talking and so on so forth, he decided to get this building to net zero. So we installed the rooftop solar because it’s a two level building. So we installed a 300 kilowatt system on the top. And he really benefited. He looked at his electricity bill and he’s really enjoying it. As we’re going forward, he used lots of natural gas to heat it. So we also did geothermal and energy. So we looked around and we started the technology and so forth. He was able to do geothermal and he now is no longer using natural gas. So now he’s looking at this, do we see on a lower level if I could do another solar, and then I can actually truly be net zero. And also as part of the renewal of the building and that’s where he is pushing for. So the building got appreciated by the city, by the tenants and a lot of green tech companies are moving to it. I even saw Walmart. I think their advertising department is there. You can see creative people in and out there. You would never think so because the building is in a very old, odd area. Now it’s standing out.

Sean Swentek: Wow. So solar plus geothermal. That’s really cool.

Richard Lu: Heat pump and battery storage, EV charging.

Sean Swentek: You mentioned earlier considerations for the tenant. How are tenant demands on their property owners affecting the way that those owners approach energy infrastructure for their buildings?

Richard Lu: I think number one, the tenants need to consider their cost. Usually they pay the bill. So electricity cost is a major concern. So they will talk about this and so on and so forth. In the past, the landlord would say, hey, I’m not making money, it’s the grid. You can actually throw your hands in the air and say, I do. But the more aggressive landlord will say, actually we could put a rooftop solar and because of the net metering we can actually reduce the cost. That’s what Fiori is doing. We’re just finishing 1 megawatt rooftop for them at the airport in Calgary. So that’s the first thing. And the second thing, people are talking about the overall environment. Of course everyone likes a nice working environment. Everyone’s view is a little different. But however, with the generations moving forward, you can see the building is nicer, the building is a little high tech and so on so forth. That’s another thing, a feel-good factor. So now I push to the last one, which is the overall societal push for the environmental, social and the governance side of things. It matters. I think I would say proactive landlords consider those things and then make it a pleasant place for people to go. I think there are already LEED buildings, there are net zero buildings. Those are attracting certain classes of tenants to the building.

Sean Swentek: What advice can you provide building owners and operators on mistakes to avoid when they’re implementing clean energy solutions?

Richard Lu: Never ever do it because you like to make a statement. No, it’s a utility, it’s a long lasting infrastructure. Number two is that I’m sure we are all very technical, we’re all very competent. But you wouldn’t want me to be the chef when you go to the restaurant. Same with solar. I know the principle is very easy but we go through surveys, we go through engineer analysis, we actually go on site to do the layouts and so on and so forth. Those are the two pieces of advice: don’t do it because you want to have a statement and get professionals.

Sean Swentek: There’s sort of three legs of the energy stool in today’s renewable energy world of solar, battery storage and then EV charging. How are you seeing EV charging infrastructure become a competitive advantage for CRE portfolios?

Richard Lu: Remember you were asking me what’s the best solution for an integrated building? So you have solar that produces power. When electricity is expensive, you can use it. Maybe it produces too much, you put it into the battery. So when your car is coming in, if you just charge it from the grid, you have huge demand. It increases your demand cost from the grid. So now with the integration, you’re actually not taking the power from the grid, you’re taking power from the battery. So that manages the demand response. Good for the grid, good for yourself. Now thinking another way, your battery size is only limited. But there’s a big battery in your car. There are V2X, vehicle to everything. GM cars, there’s quite a few cars, Tesla, and so on, so forth. Even I saw an advertisement that people camping can take electricity from the battery in the car. So when you integrate all of those things, you can really realize the technology advance from a cost perspective, from a convenience perspective.

Sean Swentek: I hinted at this earlier with past guests, but I would love your direct perspective on really what effect or impact does renewable energy have on property valuations? What have you seen in your time at SolarBank?

Richard Lu: We have done a couple hundred of those and at the very beginning, everyone says encumbrance, it will reduce my property value and so on, so forth. I think the jury is still out. There are surveys and sources. I can only give you our experience. We don’t do residential. So this is purely commercial. For commercial buildings, when you’re selling the building, the building comes with revenue. You either have lease revenue because we own it or that your tenant enjoys cheaper electricity so they will stay there for longer. So you’re eliminating a lot of turnover costs. So those are the ones we experience.

Sean Swentek: Now, there’s been a number of incentives in this industry for some time coming from the government and there’s also regulation. So there’s sort of a carrot and stick scenario shaping the economics of renewable energy investment. What do you think the future looks like as it relates to incentives and regulations and how will that impact development of renewable energy in commercial real estate?

Richard Lu: So at the very beginning, and because of newer technologies as well as everything, the government has certain policies, regulations to direct investment into the area. I think in the US you have the investment tax credit. In Canada you also have the flow through mechanism to direct investment into certain areas such as environment, carbon capture and a lot of things, even a long time ago in oil and gas and mineral exploration. So that’s the, I would say, regulatory side of things. On the other hand, you want to have the market have enough supply so the cost keeps reducing. If you look at solar over the last 20, 30 years, I remember when I started in 2003, I paid probably six bucks a watt. Today would be 40 cents a watt. You can see how much the price has dropped. So those incentives are actually driving down the cost so that you have a massive market acceptance. But having been in this business for more than 20, 30 years, I would say solar is at grid parity already and incentives become, I sometimes consider them as a way to distribute the social wealth rather than a necessity to have a project depend on incentives.

Sean Swentek: If your average property owner today was looking ahead five years in the future, what advice do they need to hear from you today to make sure five years down the road they’re not kicking themselves saying, why didn’t I consider this investment?

Richard Lu: I will certainly ask them to review the energy forecast from their utility, from their state, and so on and so forth. In Ontario, I saw the latest forecast that electricity will be 18 cents per kilowatt hour. Solar produces electricity probably at 10 cents a kilowatt hour and lasts for 35 years. Do you want to wait till 18 cents a kilowatt hour to do it or you want to do it now? This is about future-proofing. And secondly, as you know, energy security, resiliency has become an issue. You don’t really want to be the building that at the outage you are dark while other buildings are still operational. So it impacts your bottom line. So those are the things I would say are very real. And the thing is, Sean, it’s not difficult. Even though there are technical standard operating procedures, it is about a piece of glass on a rack sitting on the top.

Sean Swentek: Yeah, do it. And 10 cents versus 18 cents today. And do we believe that’ll be 18 cents 35 years from now? You’re protecting against those price increases in the future.

Richard Lu: Yeah, not 35, it’s 10 years.

Sean Swentek: Amazing. Dr. Lu, I’m going to switch us over to some lightning round questions. So just your quick hit on some of these thoughts. Solar, wind, battery storage, something else. What’s your bet for the fastest growing energy, renewable energy investment by say five years from now?

Richard Lu: Let’s put the policy influence aside. Over the last, I would say number of years, renewable energy is the fastest growing source of energy in the United States. I believe in the last 15 months solar was about all the new generations coming online. So given the maturity of the industry, given the maturity of the technology, given the more advanced technology, I would say the solar industry now can move forward without incentive and not only that, it benefits the property owners, the real estate property owners, but also I think there are building integrated photovoltaics. You saw the news about people installing plug and play solar systems on balconies in UK. You hear people put them on the side of the building as facade and so forth. So as energy becomes essential, as the demand of energy from AI, from crypto, from all of us increases, you only have limited supply. So as the economics become more severe there’ll be more and more adoptions, especially in the populated areas. We’re not talking about a huge, 500 acres of solar farm somewhere in the middle of nowhere. We’re not talking about taking, I would say agricultural land and so on, so forth, but distributing it behind the meter, integrated with the building. I would say in five years it will be a lot more prevalent than today.

Sean Swentek: Amazing. I hope so. Is there a property technology solution you’ve seen or used lately that just got you really excited about a unique way someone is solving a problem?

Richard Lu: So we have a request from a large pension fund owned property owner. They said, oh, we want to do fuel switching, which means that they want to switch natural gas out like 501 Alliance did. So when we looked out there, we’re looking at their needs and so on and so forth. We did their assessment and we said, okay, the grid can only give you this much electricity, that’s by design. But you have a huge roof, huge parking lot. We did some geothermal and so forth and it’s probably okay. But then we walked in the building and we looked up and there are space heaters using natural gas. The warehouse little square things. And we looked at this one, they said, well, those other ones are mainly taking natural gas, so we will need to remove them. So we said, okay, we can do some heat pumps and so on, so forth. But when we did the calculation they said, wow, that needs a lot of electricity. Of course. Yeah, because thermal needs are usually half of the energy needs of the whole building. And at the very beginning it’s shocking, but after you sit down, you say, yeah, the grid gives you half and we can create another half. So the building is happily moving forward. You can see if you’re just looking at the technology as a standalone, you will say, no, we’re not doing the fuel switching, we’re not going to decarbonize because it can cost lots of electricity. Yeah, sure, but where is the electricity coming from? It’s from the sunlight. And you don’t have to burn the heater all the time because the geothermal provides a base environmental control. Really excited about some of the advanced real estate companies thinking of this.

Sean Swentek: I love it. Okay, complete this sentence. The biggest myth about green buildings is…

Richard Lu: For sure. No, the biggest myth about green buildings is for show, which is completely false. The green building comes with new standards, new design, new impact on the tenants’ happiness, on the environment and also future-proofing.

Sean Swentek: Well said. Last question. Pretend you are a huge portfolio manager investor, you’ve got unlimited capital. What is the first sustainability upgrade you would make across your portfolio?

Richard Lu: I want to see energy efficiency. But I know, Sean, if I say energy efficiency, everyone’s thinking, oh, he’s going to install energy efficiency this and so on, so forth. We human beings are not very good at controlling ourselves. We want bigger, faster, more and so on, so forth. But you can be bigger, faster, higher, taller, whatever by using the energy more efficiently, including the new generation on-site, including environmentally friendly technology, including readily available technologies. You think about the lights. In the past, 100 watt lights will truly burn 100 watts of electricity. Now same lighting, 6 watts will do. You didn’t get less light. But how much electricity did you use? You only use 6%. So that’s what I would say. If we have unlimited capital, I think we really need to look at the totality of how do we manage the energy not only at the residential commercial level, but data centers, for example, 25% of their cost is energy. Wouldn’t it be nice if we can have those energy costs under control so that my phone bills can be a little less than what it would be now.

Sean Swentek: Dr. Lu, this was such a pleasure. If people want to learn more about you or SolarBank and the great work that you’re doing, where’s the best place for them to go?

Richard Lu: So we have a website and obviously, welcome you, follow us. We welcome you to sign up for communications and Megan is the investor relations person, a wonderful person, and she’s always getting back to you.

Sean Swentek: Excellent. Excellent. Thank you again for joining me on the show. To all my listeners, thank you for tuning in. I’m your host, Sean Swentek. See you on the next episode.

Richard Lu: Thank you all.