Always the sun

The turbulent energy situation in Europe, together with wider pressures to increase business sustainability and mitigate climate change, are naturally leading companies to seek out new and greener energy sources. Central Europe has seen growing demand for solar panels in recent years with all the indications suggesting that this trend will continue in the years to come. It is, however, important to note that this booming demand is largely driven by households, where consumption – compared to logistics parks – is incomparably lower, and which often benefit from well-established forms of state funding.

Growing demand

Photovoltaic power plants are, however, no strangers to logistics parks. Various leading developers, including Prologis, are already installing such plants on warehouse rooftops around the world to help customers meet their own ESG targets and reduce energy costs. However, large-scale PV projects are still rare in the CE region, with several factors standing in the way. Our responsibility as a logistics real estate developer is to break down these barriers in order to create workable, cost-effective and accessible solutions for the production and distribution of solar energy.

What to do with surplus energy

One fundamental matter we must consider before installing a PV plant is surplus energy. There are different ways to use this surplus – selling it to the grid, storing it in batteries, or distributing the energy to more consumers through local distribution networks. However, a common problem we encounter in the CE region and in other European countries is insufficient capacity on the electricity grid. In practice, distributors often do not offer spare capacity for the flow of excess solar energy.

Battery storage solutions, meanwhile, have the potential to serve as a good communal energy source and possibly also to stabilise the wider electricity grid. Such projects are already up and running in the US and the UK, for example. However, in the local environment, we often encounter problems such as lengthy permitting processes and high costs.

A third potential solution for surplus solar energy is local distribution networks, which offer a number of clear advantages when properly realized and sized. There are, however, still potential pitfalls that need to be addressed.

Are local networks the future?

A common situation that has developed for years or even decades in logistics parks is a natural variation in the technical parameters of individual facilities. While the newest ones have roofs with a load-bearing capacity suitable for the installation of photovoltaic power plants, older buildings have not been adapted for these solutions. Perhaps unsurprisingly, when a customer in an older facility is considering investing in green energy sources, the additional cost of roof refurbishment will not be seen as acceptable. While a customer in an older facility would therefore be forced to opt out of photovoltaics, a neighbour in a warehouse with a higher roof load capacity may be producing surplus energy that they have no way of using. How to deal with such a situation?

Local distribution networks may be the answer. Within a closed loop in a logistics park, customers could feed unconsumed energy back into such a distribution network, from which other park customers could draw energy. Green energy would thus be shared by several companies – a solution that would undoubtedly be appreciated from a financial and reporting perspective while avoiding the creation of electricity surpluses. For logistics park customers, the existence of local distribution networks would mean better planning, more accurate financial forecasting, and the possibility to set more ambitious ESG targets or flexibly change energy supplier. In theory, such local distribution networks may seem like an ideal solution – but in practice, we face several obstacles as a developer that hinder and sometimes even halt their implementation.

What about feasibility?

In the Czech Republic and Slovakia, creating local distribution networks for various types of properties is now quite common. In Hungary, we face intense regulation making this solution less attractive, while in Poland specific legislative obstacles stand in the way. It’s important to note that, although these networks would only be used within logistic parks, they must be always run by a certified company that has obtained a licence for energy distribution from relevant authorities. Most logistics developers are, naturally, not certified, although there is now a trend towards having internal energy asset management which could also cover licensing and management of LDNs. Until this is implemented, companies must seek out a suitable partner and outsource the solution. Regardless of whether management of the solution is internal or external, operational specifics must be defined, pricing and distribution charges must be set, and risks related to variation in energy consumption must be limited.

In general, before installing PVs, the costs and benefits of the specific solution always need to be weighed up in the context of each customer’s individual situation. The same is true for local distribution networks.

As a developer and as a partner to the customers in our buildings, we feel a responsibility to help them optimize their energy costs and meet their ESG goals by providing flexible solutions for as wide a range of demands as possible. This includes the implementation of LDNs, which can help customers optimize their energy costs, as well as finding solutions to provide as much green energy to as many customers as possible. I’m very pleased to see that interest in sustainable energy sources is growing, as this demand has the potential to transform the nature of the entire logistics industry. I can imagine that when the demand for solar energy from customers in logistics parks is high enough, local distribution networks will become a necessity, as such large flows from PV plants to the regular grid will simply not be possible anymore. The question remains, however, to what extent all stakeholders – developers, their business partners and customers, as well as local authorities and governments – will actively participate in the energy transformation of our sector.

Engineering at a high level

As a director and real estate and customer experience lead at Prologis, Pavla Procházková leads a team of ten people in the Czech Republic and Slovakia. She and her team manage an almost 2 mln sqm portfolio in those countries. Pavla has been part of the Prologis team since 2010. She graduated in building structures at the faculty of civil engineering of the Czech Technical University in Prague. She also spent part of her studies in Sweden at the Chalmers University of Technology.