Navigating Power Control, Cost Savings, and Sustainability for Building Owners

Introduction to John Lim and His Dual Perspective

Drew: Welcome back to the Peak Property Performance Podcast. I am your host, Drew Hall, and of course with me here, Bill Douglas. Welcome, Bill.

Bill: Thanks, Drew. Glad to be here, everybody.

Drew: Today's guest is John Lim. John, say hello before I introduce you.

John Lim: Hi, everyone. Thanks for having me.

Drew: John, where are you hailing from today?

John Lim: New York City, our headquarters office.

Drew: New York City. Love it. As I said, today we're joined by John Lim, a long-time real estate operator turned energy executive who brings a rare dual perspective to this conversation. John's career spans acquisitions, development, lending, data strategy, and now more than 15 years in commercial-scale solar. He's currently with Aspen Power, where he focuses on helping commercial owners take a more active role in how they're building their business.

John Lim: Thanks for having me. Thanks for having me.

Drew: John, where are you hailing from today?

John Lim: New York City, our headquarters office.

Drew: New York City. Love it. As I said, today we're joined by John Lim, a long-time real estate operator turned energy executive. He's currently with Aspen Power, where he focuses on helping commercial owners take a more active role in how they're building their business. Can influence CAM, pass-throughs, and tenant experience, and what it means to build forward-looking power strategy, instead of relying on the utility by default. As we mentioned, I have years of experience in utility, so I'm excited about this conversation. John, thanks for joining us. Glad to have you.

John Lim: Yeah, I'm happy to be here. Yeah, I like the work here.

Evolution of Power Control in Commercial Real Estate

Drew: Well, okay, John, let's get started by thinking about how utility, the power, has changed so much over the years, whereas it used to just be a pass-through. Commercial real estate owners would just see it as such. But now, that mindset has changed. Where do you see owners gaining real control over power costs today, versus five years ago?

John Lim: Give real estate owners more control over power at the site, whereas then you touched on this, where it was just taken for granted. The utility sent you your bill, you pass that through to tenants, you don't really think too much about it. I think what's changed over the last, I think, a number of years, we'll say five, is there's been a pretty strong ramp in utility costs, both on the generation side, but also on the transmission distribution, and your fixed charges on your bill. But yeah, this is where I think the conversation has been born out of originally, around sustainability. That was kind of the buzzword 10 years ago.

Drew: Yes.

John Lim: And from that...

Drew: It's still is.

John Lim: It's still is. You're right. And it is there, because we are a renewable energy source. But also more focused on, wow, I'm really seeing some pretty strong increases in my power prices. How do I take more control out of this? And it goes both ways, both from tenants wanting that, as well as landlords or property owners wanting to take more control over power usage, power costs at their site. And it affects both parties.

Sustainability and Cost Management in Real Estate

Drew: Well, so yeah, I mean, you mentioned that, right? Sustainability being a buzzword, a current buzzword, for good reason. Is the environment that we're in today, is it still a sustainability-first environment? And then how are those financial and operational outcomes influencing the CRE owner's decisions?

John Lim: How it's been affecting property owners and investors is they see that cost line item increasing, and or the tenants are seeing their pass-through costs as it relates to power increasing. And both parties are asking, okay, what can we do to control this cost line item? What type of steps are we taking now? Because it's risen to the point of awareness. Look at that as a way to decrease our operating costs, decrease our tenants' occupancy costs, look at ways in which we can make the site more attractive to tenants' renewal, new tenants that are either looking for renewable energy or sustainability initiatives, but also at a lower cost of occupancy than maybe a building that doesn't have a power plant.

Drew: For instance, does on-site generation change the long-term cost structure and possibly even the risk profile?

John Lim: Yeah, both of those things. As far as predictability, when we sign a PPA, for example, or a power purchase agreement with a building owner, we're setting at a rate that's below the current utility rate, so at a discount. And there's an escalator involved that's below the historical power or electricity inflation rate, right? Markets have been seeing 3-5% increases over time. And so it's acting both as an immediate cost reduction strategy, but also a hedge against future power price increase. Fundamentally, we all have to believe when we talk about power, we talk about solar and renewables and long-term contracts, that power prices will increase over time. It might have an inflow a little bit, but if you look at even a 5- or a 10-year time horizon, look back at one, you will see pretty significant increases in power costs on both sides, both on the variable and on the fixed charges.

Drew: We talk a lot on the show about commercial real estate properties being data-generating digital assets. So this conversation is going more to commercial real estate being energy infrastructure. We all know they have all these roofs, right? Not just office buildings, but it could be industrial, it could be hospitality, it could be almost any type of commercial real estate asset. I shouldn't say any, but a majority of them, let's say. They have underutilized physical surfaces that can provide value. So you were talking about onsite generation. Where does that live? Is it rooftops? Is it parking? Is it surface lots? And why? What's the most effective way to think about how to apply this?

John Lim: There is usually some roof available, although more often than not, it's not abundant. The term we use in the industry is we're roof constrained. And the way we think about that is we look at the consumption at the site and the availability of roof in this example, provide a meaningful amount of power to offset your total consumption. And that's if I don't have enough roof, that's referred to as roof constraint. The opposite of that is consumption constraint. I have a lot of roof. Think about an industrial building. I have a lot of roof, but not a lot of consumption, I'm consumption constrained on the size of the system that I can build. And so what's attractive about suburban office buildings in particular is the fact that there is usually large parking areas, right? Either parking decks or parking lots. And those are great candidates. And in fact, I'm a huge advocate of parking lot canopies or parking deck canopies, which we've done a lot of over the years. Some benefits to that, you know, we could build a bigger array if we're roof constrained, also have more power on the site, but also provide covered parking areas for EV charging since we're already bringing electric out to the parking lot. And in some cases, even advertising opportunities, which some clients have done. So there's a lot of benefits.

On-Site Generation and Tenant Experience Enhancements

Drew: Well, wouldn't covered parking be a great tenant experience and EV charging? I mean, tenant improvement, tenant experience improvement is where I'm trying to say. Sorry about that. Like improve the tenant experience. We're all about that with anything technology, but covered parking would be a big one.

John Lim: It would be. And, you know, a funny kind of side story is we were doing a parking deck canopy and they had the building owner had said no one ever parks up there because it's in the blaring sun and cars get really hot. And so as we were building the canopy and we were getting closer to completion, cars were already starting to migrate up to the top level of the deck because now it was covered. And so it really opened up a whole nother level of their parking deck because now it became more of an attractive place for tenants to park as an amenity, as well as EV charging being an amenity for electric cars.

Bill: And my younger son lives in Tucson and he said everything's covered parking. So that's a heaven for your world there. So besides the tenant improvement of covered parking, let's go back to office. Why are office assets particularly well suited for this compared to other asset classes? Or are there other asset classes that are equally as suited?

John Lim: Each asset class has its own kind of pros and cons, if you will. Why we really like the office asset class is because of the way it's metered typically. Usually there's a master meter, which we like very much. It's a very efficient way for us to interconnect our system. And then sub-metered at the tenant level. And so the landlord is paying the utility costs at the master meter and then passing it through to the tenants. So we like that model very much because it's clean. We do look for efficiencies, simplicity, things like that.

Drew: So you're saying that the owner can resell the power to the tenants at a margin?

John Lim: At a margin, yeah. This goes back to the control part of it. So landlord now being in control of your utility or your power costs, right? We completely understand that because we advocate the same thing with connectivity. We advocate the same thing with data. And some of our clients have a hard time with it and say they can't. It's nice to hear you doing it with power across the country.

Bill: Yeah. And that control piece is valuable and also not typically thought of in the realm of power at an office bill. And so being able to have that control and then kind of toggling, I might be buying power at a certain rate. Do I want to offer it to my tenants at a further discount because I want to make my space more attractive? I've already got my tenants in a long-term lease. Maybe I don't want to give them as much of a discount. If it's a landlord in control. But on the tenant side, yeah, it makes it more attractive both for sustainability, what we talked about, but also predictability into their, not just their rent, but their cost of occupancy. And I think that's powerful also on both sides for the lease, from a landlord perspective, for the leasing side of it, right? More and more tenants, especially, you know, large tenants, maybe what landlords might be considered, you know, attractive national tenants. They're very much looking for all those things and are quite knowledgeable at the national tenant level about power control and power cost.

Drew: And those national tenants have ESG reporting requirements.

John Lim: That as well. Yeah, they do. And it's public companies have to report at that level. So that goes to being able to sell to a different level of tenant or sell to, but cater to. I think maybe overlooked is risk, right? So we looked at property level risk in a lot of different ways, historically, market dynamics, you know, tenant may.

John Lim: Tenant vacancy, these terms, and a whole host of real estate-specific things. But more and more, power is becoming a risk. Because it's been increasing, there's a risk to my NOI at my site if my cost item for power, which is not nothing, is increasing to a point at which it's really affecting my NOI and my property. So taking control and taking, instead of being passive, taking more an active participant and isolating that line item and controlling it, I think is powerful. And more and more, buyers of real estate are looking for that. What is your power? What power infrastructure do you have at your site? What's your plan for power at this location? And if it's like, oh, I'm not sure... John, we get asked what's the... Because we do monitor power quality and uptime and things like that at all our sites that we manage. We get asked a lot of times, show me the power profile. And they're looking for durability and uptime and quality. They're not necessarily monitoring the volume and looking at not being able to get it, but they want to know how many outages they have. How long is the outage? Do they have spikes or drawdowns, voltage drop or voltage spike? They want to know those kinds of things, and we can tell them all of that.

John Lim: But Drew's sitting in his car today because in Golden, Colorado, there's no power and hasn't been for about 20 hours. Perfect example of reliability. If we were in an office building that had a rooftop sufficient, then he could be in that building today versus sitting in his car during the podcast. Covered parking, so he's not sitting in his phone. Actually chose ambient light just to have it because there is covered parking just within eyesight over here. Yeah. And we're touching on some other things. So why now are we talking about this? I've been in the industry for 15 years, and I think there's a number of reasons. Costs have... And this is well-advocated. Costs for solar modules, solar inverters, solar package in totality has come down dramatically. Plus, the technology has improved. So we've also seen not only cost compression, but also improved efficiency. Also, we've seen increase in technology around batteries and also cost compression on the battery side.

John Lim: And so now we're really getting into some, I think, really interesting things when we start thinking about power as a whole, not just from solar, solar as a baseline, adding batteries in. I'm controlling power even more because I can control when I'm dispatching power. If I'm in a time of use type environment, like in California, I can do time shifting. I can do peak demand shaving, which are all added benefits added in the form of cost saving and also control. And there's also more and more ability to play in energy markets with frequency response and PGM or some of the operators, grid operators, calling on us to participate in grid stability, to just charge our batteries for compensation. So what has opened up is not only revenue line items that we're talking about here at the property level, but also potential revenue line items in their energy markets. And once you start bringing those technologies together through proper controls, through proper equipment, batteries, solar, now we're really talking about something that increases control, but also increases potential benefits in the form of revenue and then ultimately savings and or rent that gets passed through to the building owner. And I think we're getting into really exciting things.

John Lim: Now, I think just to finish that point, not quite yet, but I would say in a kind of near to mid term, we'll be talking more and more about how to bring this together for true resiliency. And that also is a buzzword that's been kind of creeping around, but I think it's going to be gaining traction around how do I keep my lights on at my building or at least critical infrastructure in my building should the grid go down and how long? And this would be a conversation to have with the building owner and your provider. It's like, how long would I want that buffer to be? And that'll dictate the type of technology that gets deployed. And as much as I'd like this... We have those resilience discussions all the time about data matters and network matters and digital infrastructure matters. So why not have it about power? And I wouldn't want to miss... Well, let's shift to some practical models. I mean, let's talk about some other things.

Ownership Models and Power Purchase Agreements

Drew: Yeah. Yeah. I mean, like ownership and operation, for instance, we've touched on these things, right? Obviously, there's the straight up ownership model. There's the PPA model. Maybe there's a partnering model. But is there a common set of criteria, like an agreed upon set of criteria where ownership can explore all of the numbers and truly understand which model is best for their particular situation? Or is it still so far from a one size fits all that it's just kind of a best effort decision? How do those metrics work?

John Lim: It's a great question. And if you give me 10 seconds of history here, when I started, it was all what we refer to build to sell. So our customers were self-financing the projects and owning them outright themselves, primarily because there was no financing work to be had. The banks and private equity and other sources of capital really hadn't gotten their heads around solder. Now, that's changed dramatically in the last, say, five years, where the model has switched firms like ours, fully financing a system at no cost to the building owner and having a PPA or roof lease type structure back to them, with the option for the building owner to buy back that system at some point in the future, should they want to.

John Lim: Now, how it gets determined by the customer really is for them to look at, do I want to spend my capital this way for a return on my investment? Do I think that way? Do I have the ability to monetize depreciation? And for the time being, the federal tax incentives that come with a solar project and a battery project as well. And if the answer to those questions are all yes, then that would likely be the best path for that owner. With one caveat, that that owner is now in total control of their power, because they're owning the infrastructure that has been built by a firm like ours, but they're also taking on the operations and maintenance, asset management components of that, and also the capital costs that come with any type of infrastructure improvement over time. By way of example, in year 10, the inverters typically need to be replaced, and that's a CapEx event. And so, so long as the building owner eyes wide open, checks the boxes for ownership, yes, they want to, but also understands the long-term requirements for being an asset owner, then that could be a fine law.

John Lim: What we are seeing just along those lines is, and this has kind of been typical, unfortunately, is that, sure, I want to own the asset, but the operations and maintenance, I don't know that I really want to do that, and I really don't do it very well. And then we're finding systems that are eight or 10 years old that really haven't been maintained very well. And what that results in is the system isn't producing what had been performing.

Drew: What kind of, like on that conversion that you mentioned on a PPA conversion, what kind of things is it that owners should consider in getting into that power purchase agreement? It is a long-term contract, which has its benefits in that you're locking in a power price and a fixed escalator for a long-term. That's a really great hedge, and there's a lot of benefits to that. At the same time, it is a long-term contract, and it's hard to reject out 15, 20 years. These are typically 20-year agreements, sometimes a little longer, sometimes a little shorter, but on average, they're 20 years. And so to just understand that, oh, okay, a building owner might think of in terms of five, 10 years, but they're tenant leases. Now they're thinking 20 years with an agreement. It is a bit of a shift in making sure that they understand what that means. The downside to the long-term agreement would be that if you terminate, there is a penalty to that. And the penalty is basically the delta between the return that I, as the investor, had anticipated and how far along we are on our term.

Community Solar and State-by-State Incentives

Drew: What about community solar models, like community models? Do those exist much in and around commercial real estate complexes?

John Lim: Yeah. Our whole industry has tilted community solar for the past handful of years. The advent of that has opened up the industrial asset class, which very much is consumption-constrained typically. And in an office building, speaking specifically to office, if I find that either maybe tenancy is a little bit variable, consumption is a little bit variable, or there's more room and I could build a bigger system, community solar allows for us and the building owner to sell power to the community, just like it sounds, not be used on site, and build an array that's as big as I can, either on the roof or on the ground or in the parking lot, and get the benefits of economies of scale. And so that is an avenue that, again, has been monopolizing commercial-scale solar for the past handful of years. I also think we've tilted maybe a little too far that way and been ignoring the PPA option, which I think is a very real benefit for building owners who maybe don't look at rent as being the main driver. They want to have more control over some of the things that we talked about, my power cost and how I balance that between my cost as a building operating expenses, but also what I'm passing through to my tenant.

Bill: Well, John, we do talk about all kinds of things that impact NOI, not saying that it's just rent, but there are so many levers. I mean, some revenues, some expenses, some a combination of both, and most of the time we're not talking about rent on the show, so I'm glad you brought it up in that context. But it's clear power strategy is moving from a project-by-project decision to a portfolio-level imperative. And to our audience, if you're an owner with as little as 10 or maybe 100, 150 assets in your portfolio, where do you start turning power into a portfolio strategy?

John Lim: Yeah, it's a great question. And it really starts with looking at where those assets are. As we probably know, what we can and can't do and the value created is very much state-by-state, as much as I wish it wasn't.

John Lim: It is a very state-by-state endeavor. I've built projects in about 26 different states. Some incentives come point in time and we take advantage of that. And that's part of the benefit of having a relationship with a provider like Aspen or an IPP is that we can go into those markets quickly because we already have the relationship. With that said, looking at where your assets are, how the assets work, both from a roof and a parking and a ground standpoint and coming up with a plan, we like to make it modular so that we can get economies of scale, as I mentioned before, but also a consistency in how we're approaching the assets. But I also recognize that buildings differ one to another, so there might have to be some customization or strategy specific to that asset.

Federal vs. State Regulations in Solar Energy

Drew: I have a question. I mean, given that it's state-by-state today, is there any indication or expectation that there would be a collaboration at the federal level so that there would be some kind of consistency or is there benefit to even doing that?

John Lim: My knee-jerk reaction is I don't see a benefit in doing that.

Drew: Okay, that's fair.

John Lim: And that's driven by the history of the ITC, the federal tax credit, which I've seen fluctuate in 15 years at least half a dozen times.

Drew: Wildly, yeah.

John Lim: Yeah. Not just a little bit. I mean, it's a pendulum swing. And so that causes a lot of frustration for lack of a better word, in the industry on how to proceed. I like state programs, which are usually more, almost always more predictable and state levels have been pushing hard on not just incentives, but if I pause here for a second, by incentives, I don't necessarily mean money. I mean, incentives in streamlining the interconnection process, looking for ways to streamline the permitting process. Ways in which we can gain efficiency in the industry. Sure, if there's a rebate or a rep program, those are beneficial, clearly, but it doesn't, when we say has an incentive, it doesn't always mean like we're looking for handouts in the industry by any stretch. We're just looking for ways in which we can gain efficiency in that market and therefore lower costs and therefore better benefits for our customers.

Drew: Yeah. Why does viability vary so much by market? Is it because of state regs? Is it because some areas of the country aren't solar, for instance, or don't have wind? Is it incentives that are only at the state and not the federal, or is it federal only and not state? I mean, you mentioned interconnection, so that I understand, but why is this very so widely? If we have 50 states and you're doing projects in 26, why are the remaining ones, are they just not interested or haven't been there yet? Or what's the missing piece to see this go the scale that it could?

John Lim: And it's a little bit of what you just said, the interest to do something by something, I mean, like create a program, that allows us to deploy solar assets. Some states are very restricted. I can only build a system 50 KW, nothing big, something like that, but also utility side as well.

Drew: Is that an old rule, old law? Because 50 KW is like, that just seems like a random number. Like it could be big for half an acre. It could be tiny for a 10 acre property. Like where does 50 come from?

John Lim: We're kind of getting into the dynamics between, the utility lobbying and state. Okay, here we go. And here we go into like a whole different realm. It's probably a different podcast, but there is very much that dynamic. And yes, it's not just state, it's utility as well. Is the utility going to allow us to do certain things? And that varies across the board. As I mentioned, maybe the amount I can offset at a site could vary between 100% of the site consumption to 120% of the site consumption. And that varies by utility. And also the process by which we go through interconnection, which varies wildly in each utility. State programs, they're written differently. In that they're encouraging the deployment of solar assets and creating an environment by which we can do that.

Drew: By they, you mean 26 states.

John Lim: Yeah, there you go, yeah. But I mean, to the audience that has a national portfolio, it's quite, I mean, that's a lot of learning curve, so. And that's why you lean on a expert like an Aspen to help guide that. It's for us the shoulder, right? And so our job is to take all that heavy lifting around incentives and what can be done and can't be done and synthesize that in a way in which it's very simple for the building owner to see, okay, here are my highest value areas. Here is my second tier. And then here's the third tier. That's not actually, well, yeah, but there's policy on the books that hasn't passed legislation yet, but we think it's coming, so let's watch that. But let's create like a phase plan to say, okay, start here and we can move here. And then hopefully this third phase, if it comes to fruition, either that's further expansion. That's really where a partner comes in to advise that. And a lot of what I do actually is advisory work upfront in taking something that can be very complicated and synthesizing it in a way that's easy to understand.

Drew: And easy to- We do a lot of the same thing with technology, John. So that I understand. So that wasn't a loaded question. I just, trying to figure out state regs in more than one state is a nightmare. One state's a nightmare. So especially if it's not, if you're operating commercial real estate property, anything outside of that is a nightmare. So maybe that's part of the resistance too. So that's a whole other show. That wasn't a question. We're not gonna go there for conversation.

John Lim: No, no, I appreciate that. Thank you for answering that for us.

Final Thoughts and Personal Insights from John Lim

Drew: Well, John, this really brings us to the end of our discussion, to what we call the extra floor, which is just a handful of questions, five questions in all, just gut level. First thing that comes to your mind, quick answer. And there is no wrong or right answer either, of course. So here's number one. What is a book or a podcast that has shaped how you think?

John Lim: I've been listening to podcasts, I'll stick to energy. And I think it wasn't a solar podcast. It was an energy market podcast. And I think what it really enlightened me, being that I've worked in the solar industry for a long time, is the fact that the solar industry, IPPs and us in general, have really not paid a lot of attention to energy markets and have energy market expertise. And what this podcast went into is more a little bit of what I touched on on the battery. We've always thought about it as, how am I manipulating the power consumption at the site for with a battery, for example, for their demand component and other aspects of onsite consumption. And what this enlightened me to is, well, there's energy markets that are very much mature and lots of firms trade in them that we can take advantage of.

Drew: John, what's the best piece of career or life advice you've ever received?

John Lim: Control revenue. Early on in my career, a friend of mine, or I should say a mentor, he said, John, if you want job stability, control top line.

Drew: That's perfect. That's a great- Now I'm in business development origination. Okay, number three, what's a habit or a practice that consistently makes you more effective?

John Lim: Taking time to step back and really look at what I'm doing from a higher level. It's so easy, I find, to get caught in the weeds. You know the saying, I can't see the forest through the trees. There's a lot of truth to that. And when I find myself so far in the weeds in a project or whatever it may be, if I take, it doesn't have to be long, five minutes really step back and say, does this make sense? You know, am I thinking about this correctly? You know, am I thinking about my customer's goals and objectives correctly? And am I satisfying that by what I'm doing in this example?

Drew: This one's super easy. Early bird or night owl?

John Lim: Early bird. Yeah, I love getting up early. And I don't know, I just find it at a time I can be really productive. But also some of that, what we talked about, drew around, you know, stepping back. You know, it is an opportunity to just kind of think through what I did yesterday, what I'm going to do today. And is that on the right track, just from a more holistic, maybe 30,000 foot level. And then think about the downstream activities that come from that.

Drew: Okay, well, fifth, final question. When you're not working, what do you love to do that recharges you?

John Lim: I like to travel. I like, golf is kind of my oasis, if you will. I live in New York City. Getting out on a golf course isn't the easiest thing. But we do have Chelsea Pier. They have a nice golf driving range down there. More often than not, in the morning, we'll walk down and just hit some golf balls and think about these things and hopefully get some frustration out. Maybe increase my frustration level if I'm at it in the ball. Depending, right? But I do find it just a great way to clear my head. I like walking through the city because there's always something going on that I find really entertaining. You know, people, whatever it may be. And so, you know, those things in an early morning, I think really help me keep myself energized and kind of excited.

Drew: John, we'll put all this in the show notes, but tell our listeners how they can contact you. How would you like to be contacted? Put it that way.

John Lim: Oh yeah, sure. Email's easy. It's J-Lind, L-I-N-D, at AskMenPower.com. If you're with me up on LinkedIn, John Lind, AskMenPower. Okay. Phone call. Yeah, if people are still doing phone calls. We'll put your phone number in there, too. Yeah. Yeah, it's 914-606-1915. But yeah, happy to chat. And like I said, a lot of what we do up front is just, let's talk through, build some objectives, and let me help advise, and then we'll go from there.

Drew: Right. Very good. Well, John, thank you so much for joining us here today on this episode. And as always, to our listeners, thank you so much for following us here. Be sure to do that formally. Follow us. Hit the like, hit that subscribe. We'd really appreciate that. And for now, thank you again, and we'll see you on the next episode of Peak Property Performance.

Bill: All right. Thank you, everyone.