Businesses globally are embracing commercial solar benefits to enhance energy efficiency and shrink their carbon footprint. If you own a business, choosing solar power is a smart move to cut costs, promote renewable energy, and boost sustainability. Companies of all sizes now adopt solar panels to establish an eco-friendly brand and achieve robust financial returns. In this article, we'll outline five ways in which commercial solar benefits your business.
Before we talk about the benefits, it's important to understand what a commercial or commercial and industrial (C&I) solar setup means. These solar systems for businesses are much bigger than the ones you might have on your house. To give you an idea, a home solar panel system is usually around 10 kilowatts (kW), while a commercial solar system can be much, much larger, from several hundred kilowatts to several megawatts (MW), depending on how much electricity your company uses.
Unlike utility-scale solar projects, commercial solar power is known as 'distributed generation.' This means we use the energy where it's generated, like on your business premises. These systems, which can be on rooftops or on the ground, are usually linked to the local power grid. This connection lets your business benefit from 'net metering,' a policy that allows you to send extra electricity back to the grid and get credits on your electricity bill.
At first, the price of a commercial solar panel system might look high, but there are incentives that make it much more affordable. The overall cost depends on the system's size (measured in kW or MW), the design (whether it's on a rooftop, in a solar carport canopy, or ground-mounted), and the incentives and rebates you can access. Today, there are several great solar incentives for businesses that can cut your system's cost by almost 70%. Here are some of the best ones:
Federal Investment Tax Credit (ITC): Whether you're a business owner or homeowner, the federal tax credit stands as the most significant financial incentive for all solar buyers. Until 2032, the ITC offers a 30% tax credit, not a deduction, which means if your solar project costs $100,000, you'll get a $30,000 reduction in what you owe to the federal government. There are additional incentives if your system uses U.S.-made equipment, is in an energy community, a low-income area, tribal land, or part of a low-income residential project or economic benefit system.
Production Tax Credit (PTC): Instead of going for the ITC, you have the option to be rewarded based on your system's electricity production (measured in dollars per kilowatt-hour, $/kWh) through the PTC. If your project generates a significant amount of electricity at a relatively low construction cost, you could potentially benefit more from the PTC than the ITC
Modified Accelerated Cost Recovery System (MACRS): MACRS provides a depreciation benefit, which helps reduce your taxable income and recover the depreciated value of your solar setup over a 5-year period. By combining MACRS with the solar tax credit, you could access tax incentives equivalent to approximately 70% of your system's total cost.
Bonus Depreciation: While akin to MACRS, bonus depreciation offers you the advantage of claiming the entire depreciation benefit in the very first year of your investment, rather than spreading it over 5 years. You'll need to decide between MACRS and bonus depreciation, making a crucial choice about your depreciation strategy.
Net Metering: Certain states and utility providers offer a valuable incentive known as net metering, which can substantially boost your long-term solar savings. With net metering, your utility company grants you credits for the surplus electricity your solar system produces and feeds into the grid. When you draw power from the grid instead of using your system, it offsets the credits you've accumulated over time. At the end of your billing period, you're only charged for the 'net' electricity you've consumed.
|System Size (k W)||Price Per Watt ($/W)||Expected Price Before Incentives||Expected Price After ITC||Expected Price After ITC + MACRS|
Note: Please be aware that these costs can vary based on factors such as your business's location, the specific equipment choices, and the type of system you decide to set up.
If you're still wondering about the financial aspects of your business's solar energy system, there's no need to fret. In most cases, businesses don't have to make an initial upfront payment for solar installations, thanks to the availability of various financing options. You have the choice to finance your system through a solar loan or explore third-party ownership solutions such as leases or power purchase agreements (PPAs). It's important to note that if you opt for a third-party ownership arrangement, you might not directly qualify for tax incentives, as you wouldn't own the system.
Commercial solar delivers significant cost savings. In 2021, the typical commercial building spent approximately $650.04 on electricity, which is comparable to what most small-to-mid-sized
businesses spend. This yearly expense adds up to around $7,800 in operating costs, resulting in a total of $156,010 spent on energy expenses over 20 years.
Let's imagine that your business decides to install a solar panel system, aiming to offset 90% of your electricity consumption. Additionally, let's assume that your system's production ratio, which measures how efficiently it generates energy based on its size, is 1.4. (Typically, in the U.S., this ratio falls between 1.3 and 1.6, depending on your location.)
Now, how do you determine the system's size? Using the data mentioned above, you can calculate it as follows:
System Size (in Watts) = Annual Consumption (569,540 kWh) * System Offset (0.9) / Production Ratio (1.4)
This calculation allows you to find the appropriate system size that aligns with your energy consumption, the desired offset, and the system's efficiency ratio.
With the calculations provided, the system size required for your business comes out to be approximately 44,704 Watts or roughly 45 kW. Referring to the previous table, a 45 kW system, when considering the Investment Tax Credit (ITC) and 5-year depreciation with Modified Accelerated Cost Recovery System (MACRS), would cost around $39,150.
This means that over the span of 20 years, your business stands to save approximately $101,259 in electricity costs with solar:
20-year savings = 20-year electricity costs ($156,010) * system offset (0.9) - upfront solar energy system cost including incentives ($39,150)
In essence, this reflects substantial long-term financial benefits that solar can offer to your business by reducing energy expenses and overall costs.
Beyond the immediate financial advantages, the installation of solar panels offers additional benefits, particularly in safeguarding your business against electricity price fluctuations and inflation. In various states, electricity prices can experience considerable swings due to shifts in demand, which can pose challenges for business owners keen on maintaining stable cash flow. Solar energy allows your business to secure fixed electricity rates, reducing dependence on the unpredictable electricity market. This, in turn, simplifies budgeting and future planning, enhancing financial stability and predictability for your business.
Today, a growing number of existing and prospective customers are drawn to businesses that prioritize sustainability. PwC's 2021 Consumer Intelligence Series survey on Environmental, Social, and Governance (ESG) matters found that 83% of consumers feel that companies should take an active role in defining ESG best practices. Research from McKinsey & Company and NielsenIQ demonstrates that consumers are not only inclined to pay extra for environmentally responsible products but also appreciate brands that align with their values.
Embracing solar energy offers a double advantage for your company. First, it lowers your business's carbon footprint, which means you're doing your part for the environment and making eco-conscious choices. This not only aligns with the growing trend of sustainability but also has the potential to grab the attention of the media for all the right reasons.
This positive attention, in turn, can do wonders for your brand. It increases how well people recognize and see your business, making your company more visible. This heightened visibility and your commitment to doing the right thing can boost your reputation. When people see that your company cares about the environment and takes action, it often leads to stronger customer loyalty. So, by going solar, you're not only making a responsible environmental choice, but you're also building a better brand and winning the hearts of your customers.
Just like customers, employees are now seeking out employers who prioritize sustainability. In that same 2021 survey by PwC, a significant 86% of employees indicated a preference for working with or for companies that share their concerns. When your business shows its dedication to solar energy, it not only demonstrates its commitment to a greener future but also has the potential to boost employee retention and draw in top-notch talent.
The advantages of this can be far-reaching. Your employees may experience higher job satisfaction, leading to greater productivity and a stronger connection to your company's mission, all thanks to the installation of a solar energy system. In essence, by embracing solar power, you're not just reducing your carbon footprint but also creating a workplace that's more attractive and fulfilling for your employees, driving their commitment to your company's goals.
When businesses collaborate with solar companies, it's typically the skilled local workforce that takes charge of the solar panel installations. This practice not onlys ensures the quality of work but also has a significant impact on the local job market. As the demand for solar projects continues to rise, so does the availability of high-quality, well-paying jobs in the area.
As of the year 2022, the solar industry had generated over 250,000 jobs across the nation. This figure represented a noteworthy 9% increase compared to the previous year, demonstrating the industry's growth and its potential to bolster local economies.
Depending on the size and complexity of your solar project, you could be a significant source of employment for multiple contractor crews over an extended period. This means your project doesn't just contribute to environmental sustainability but also plays a vital role in sustaining the livelihoods of local workers.
Moreover, there's a unique, long-term community-building aspect to this. Some of the workers involved in your solar installation may eventually become your customers. This fosters a positive, interconnected cycle where your business, supported by the local workforce, in turn, supports the local economy. It's a testament to how solar projects can offer not only immediate benefits but also have a lasting positive impact on the community.
Whether your aim is to cut down on electricity expenses or establish an eco-friendlier brand, the decision to go solar offers numerous advantages for businesses. If you're uncertain about the initial steps, Forme Solar has a dedicated concierge service designed to simplify the process of installing a solar panel system for your business.
We will provide you with an initial solar estimate. Think of it as the first step on your solar journey. This estimate shows how many solar panels can be put on your property, how much electricity they will make, and the potential savings when you use solar power. It's like a simple guide to help you understand the benefits of going solar.
By taking advantage of this service, you can proceed with your solar project with confidence and a clear understanding of its benefits, aligning your business with a more sustainable and cost-efficient future.