UK – Lancashire County Pension Fund (LCPF) – one of the UK’s 10 biggest local government pension funds, with £4.6bn (€5.5bn) in assets – has invested £100,000 in a roof-top solar photovoltaic (PV) installation for a commercial office building in Basingstoke.
The installation is the first of around a dozen to be fitted on the fund’s directly held properties, at a total cost of £3.2m.
The system was installed at the V3 building, Viables Business Park, by Knight Frank Investment Management (KFIM).
It includes 306 solar PV panels with a total system size of 77kWp.
The system will generate more than 1.3m kWh of clean energy over the next 20 years, creating an income stream of around £100,000 per year.
Most of the revenue will come from the UK government, which will pay a tariff for all electricity produced, guaranteed over 20 years.
The tariff will be raised each year in line with the retail prices index, creating an asset to match the liability side of LCPF’s portfolio.
LCPF will also be able to sell electricity to the tenant at an agreed rate, with any excess sold back to the National Grid at a prescribed rate per unit.
The idea was suggested to LCPF by KFIM, which runs the fund’s property allocation, said John Styles, a partner at KFIM.
He said that, besides the direct financial returns, the installation would improve the building’s sustainability credentials.
“It also adds to the value because it creates an extra income stream that can be sold along with the property,” he said.
“Using a capitalisation rate of 7% or 8%, the extra value would be £1.2m-1.4m.”
The installation will also add to the provision of performance criteria that could be measured on a quarterly basis, he said.
“One of the easiest parameters to measure is the energy performance certificate (EPC) rating,” he said.
“We have got a programme to improve the EPC ratings in LCPF’s portfolio over time. Installing solar panels is one way of doing this.”
KFIM is also working on a similar project with a smaller pension fund client.