If you’re a business owner, the concept of “solar panels for businesses” might seem like a risky move in a complex and confusing market. You may have heard about major Fortune 500 companies going solar, but thought that it might not be feasible for your organization. Maybe you’re considering installing solar panels at some point in the distant future, when your organization can afford to make a major investment in something that seems like an environmental “good” rather than a strategic financial decision.
Time to shake off that old way of thinking and join the growing chorus of smart business owners that have discovered that commercial solar panels are a great fit for a small to mediums sized business. Solar isn’t just for Intel and Wal-Mart anymore. Businesses of all sizes are capitalizing on the financial opportunities of installing solar, proving that a solar energy system is a key strategic decision that virtually guarantees a solid financial return for your business.
Commercial solar panel financing
So let’s take a look at the numbers – this is a financial decision, after all.
According to EnergySage marketplace data, the average commercial property owner paid $1,950 in monthly electricity bills before going solar. After their installation, their electricity bill was reduced to approximately $500 – a 75% reduction.
So how much does it actually cost to install a commercial solar panel system? The price of buying and installing solar panels has dropped considerably in the last five years while electricity prices continue to skyrocket, making the economics of solar even more attractive.
Your system size is measured in watts, and is dependent on how much electricity you need for your business. (For your reference, an average home on EnergySage typically installs a 7 kilowatt, or 7,000 Watt, solar panel system to cover their electricity needs.) The cost of a solar panel system is usually measured in dollars per watt. On EnergySage, the average commercial system was priced at $2.95/Watt before any rebates or incentives, with most quotes ranging from $2.27/Watt to $3.63/Watt. Take a look at the table below for price information about different solar system sizes. These prices have already incorporated the solar tax credit.
Average cost of installing a commercial solar panel system on EnergySage
Expected price range
|25 kW||$51,625||$39,725 – $63,525|
|50 kW||$103,250||$79,450 – $127,050|
|100 kW||$206,500||$158,900 – $254,100|
|250 kW||$516,250||$397,250 – $635,250|
Note: this table has already deducted the value of the 30% federal income tax credit for solar.
Decreased equipment and installation costs aren’t the only reason for your business to go solar. There are other factors that can reduce your business’s out-of-pocket cost for a solar panel system, including:
- Federal Investment Tax Credit (ITC): This is the most significant financial benefit for anyone interested in using solar panels at their business or residence. Owners of newly installed solar panel systems get a federal tax credit for 30 percent of the cost of the system. (Some states also offer additional tax credits.)
(Update: On December 18, 2015, Congress extended the solar tax credit for homeowners through 2021. Learn more about the extension.)
- Accelerated depreciation: Businesses can deduct 85 percent of the value of the solar asset from their taxes, providing another significant offset to the upfront cost of a system array.
- Performance-based incentives (PBIs): PBIs, including solar renewable energy certificates, are a way for solar owners in some markets to receive payment from their utility for the solar electricity that their system generates. These incentives can be significant and greatly enhance financial returns for system owners over the life of the system.
Beyond the direct short-term financial benefits, installing solar panels can also help your business to hedge against electricity price volatility and inflation. In many states, the price of electricity can fluctuate significantly due to demand, creating a headache for business owners who are closely managing their cash flow. By installing solar, your business will be able to lock in electricity prices and reduce reliance on an unpredictable expense. Going solar makes it easier for companies to budget and plan for the future.
In total, the ITC and depreciation benefit can reduce the system price by as much as 60 percent. Add that to savings from a reduced utility bill and other incentives like PBIs, and business owners are looking at an investment that’s hard to pass up. If paying up front isn’t an option for your business, not to worry – there are many financing options available to businesses with good credit, including solar loans and solar leases/power purchase agreements (PPAs).
Lastly, let’s not forget that the financial incentives mentioned above aren’t the only things that contribute to the bottom line. There are other commercial solar benefits for business, including:
- Winning more customers: Many current and potential customers are attracted to businesses with a commitment to sustainability. Examples abound of businesses that have won large contracts due to their solar investments – buyers love products and services that are sun-powered! In addition, a solar installation is a great opportunity to promote your organization and raise awareness of your offering in the community.
- Improving employee satisfaction: Employees are increasingly looking to work for sustainability-minded companies. By demonstrating your company’s commitment to solar power, your employees will be happier, more productive, and invested in the company mission.
- Supporting the local economy: When a business contracts with a solar company, workers in the local market complete the installation. Greater demand for solar projects increases the availability of high quality, good paying jobs. Those workers could become your future customers, too.
As you can see, the numbers add up – solar panel systems are a smart capital investment for businesses. They have short payback periods, provide steady financial returns, and help business owners hedge against rising energy prices. There are lots of great resources available today that can help you evaluate whether “going” solar makes sense for your business, so be sure to do your homework! EnergySage has partnered with Chambers for Innovation and Clean Energy (CICE) to make it easier for businesses to explore their solar options. Get an instant estimate or create an account to get quotes from solar installers in your area.
If you want to learn more about commercial solar benefits for businesses:
- Check out EnergySage’s video overview of Solar Power for Businesses
- Read about commercial solar in action in EnergySage’s case studies
This post first appeared on Inc.com.