Maximizing Your Business with Solar Energy: Pros and Cons
Table of Contents
What is C&I Solar?
The solar industry is split into three primary sectors: utility scale and community solar that power an entire area’s homes and businesses; residential solar projects that power a single home; and commercial and industrial (C&I) solar projects that provide clean, reliable electricity to businesses of all shapes and sizes.
Commissioned by your local electric provider, utility scale solar projects are the largest in terms of the amount of electricity generated. These large ground mounted “solar farms” generate at least 1 megawatt (MW) and often range into the hundreds of megawatts.
On the opposite end of the spectrum are projects for the residential solar sector, where installations range between 3 and 20 kilowatts (kW), depending on the size and energy needs of the home.
Nestled right in the middle is the C&I sector. C&I solar customers include large corporations like Apple, Target, and Amazon, as well as a growing number of local businesses, non-profits, schools and universities, religious institutions, local government agencies, and municipalities. The C&I solar sector is the focus of this article.
Types Of C&I Solar Projects
Commercial and industrial solar projects are flexible because they have to be – every business has unique goals when it comes to managing the cost of energy, and because of that no two solar installations are the same.
That’s why it’s critical that you work with a provider that specializes in commercial solar, like Velo Solar. You want to partner with a company that will custom design a solar system that meets your specific energy needs and goals.
Commercial solar arrays are most typically installed on the roof of your building, but your provider will design your project to take advantage of the unique features of your location. Factories, car dealerships, and even office buildings often have a lot of open real estate on the roof, making a rooftop array an excellent option.
If you have open land, your solar partner may recommend a ground mounted array. If you have a large parking lot, perhaps carports would be the best way to generate clean power, while also providing covered parking for your customers and employees.
It’s also possible that a combination of two or three types of solar installations may best suit your needs.
The most common barriers to commercial solar
Designing and installing solar for such a diverse group of end users means that commercial projects can be more complex than those created for the utility scale and residential sectors. The solar industry and the federal government have worked to reduce some of the most common barriers to solar adoption cited by business owners and as a result, the sector has seen significant growth in recent years.
Here’s a look at what’s being done to make commercial solar more attractive to business owners.
The Price Of Entry
When considering the cost of solar, you should also understand what it would cost you to if you didn’t invest in renewable energy.
Levelized Cost Of Energy (LCOE)
When you invest in renewable energy for your business, what you’re really purchasing is a hedge against future energy costs. To understand the real value of solar, you have to compare how much your utility-generated electricity costs will escalate over time, as compared to the more fixed price provided by your solar panels and battery storage system. This is your levelized cost of energy.
The price of grid electricity typically goes up 2-5% per year (or more if inflation rates are higher). If you have a solar system powering your business, even partially, you own all the energy it makes and that means that once the system is paid for, your business has protection from rising energy costs.
The new tax credits in the Inflation Reduction Act will help you capitalize even faster.
The IRA Lowers Your Initial Investment
The recently passed Inflation Reduction Act (IRA), is expected to drive significant growth in the commercial solar sector. Most businesses purchasing a solar system with cash or a loan are eligible for the Solar Investment Tax Credit, also known as the Solar ITC. The Solar ITC is designed to reduce the cost of commercial solar projects by reducing your tax liability with both a tax credit and an accelerated depreciation schedule.
The IRA established a 30% tax credit through 2032 for qualifying purchases of solar and battery storage systems. The tax credit can save you thousands of dollars on your solar installation.
Other Financing Options
For some businesses, cash flow may be such that taking on the upfront costs associated with a direct purchase of solar doesn’t make financial sense. In such cases, many hospitals, municipalities, and business owners have established a power purchase agreement (PPA) with a solar developer.
With a PPA, the developer pays for, installs, and maintains a solar system on your property. In return, they agree to sell you electricity at a fixed, reduced cost per kilowatt hour (kWh) used. These agreements are usually in place for 10-25 years and may include a provision for your business to purchase the system at various points during or at the end of the contract.
Similar to a power purchase agreement, a solar lease involves a third party owner and can often be structured with no upfront investment. With a lease you’ll pay a fixed rate over the lifetime of the contract (typically 7-25 years), rather than costs being based on how much electricity you use.
A reputable commercial and industrial solar provider can help you navigate the various solar financing options available and help you determine which is best for your situation.
Location, Location, Location
As discussed above, many commercial solar arrays are built on the roof of your building – but that’s not the only option when it comes to installing commercial solar infrastructure. A partner like Velo Solar can design a system that works for your building and location.
If you have obstructions that limit the space on your rooftop, you can always consider a ground-mounted array or solar carports and canopies.
If your commercial building is older or needs to be retrofitted to support the weight of a traditional solar system, you may want to consider thin film solar panels. Roughly 350 times thinner than conventional panels, thin film panels are lightweight, flexible and ideal for buildings with thin roofs (like some metal roofs). They can also be used when space is tight, and the installation of conventional panels would more labor intensive and expensive.
Owning vs Renting Space In A Commercial Building
Often, industrial and commercial buildings are not owned by the occupants, which leads many business owners to think that solar won’t be a worthwhile investment. But a clean energy solar project can benefit both you and your landlord – you’ll reduce your energy expenditures, and their building will increase in value without an increase in property taxes. The building owner may even be willing to install solar panels in exchange for you signing a long-term lease.
Benefits of commercial solar
In any investment analysis, you must consider what you’ll be getting in return. Here are a few of the biggest benefits of investing in commercial solar for your business.
Solar Is An Investment In Your Future
Most solar power plants have a lifespan of thirty years so solar is a long-term investment that will reduce your operating expenses for decades. In addition to managing year over year price increases from your utility, your solar array can reduce the amount of electricity you need to purchase in the first place.
Most commercial utility rates are a combination of capacity (kWh-used) and demand (potential kWh you might use). Often the demand charge portion of your bill, which is electricity you purchase at peak times of the day, will be many times higher than your capacity charges.
If you have solar panels powering your business, even partially, you can save money and make your utility bills more predictable by reducing your demand during peak hours.
A battery energy storage system can provide additional cost savings, especially if your operations run 12-24 hours a day.
Solar Gives You Energy Independence
The number of severe storms and natural disasters are climbing each year, as are their intensity. Hurricanes are stronger, cold snaps are lasting longer – and without reliable backup power, your business could suffer major losses. Studies show that a single hour of downtime can cost manufacturers more than $5 million.
How much did your last power outage cost you in terms of lost business or lost revenue?
A commercial solar installation makes your business resilient, especially when it includes a battery storage system. Combining the two technologies can keep your business up and running until grid power is restored.
A solar system is a great insurance plan and could more than pay for itself during the next grid power outage.
You might not have the same reliability with a diesel generator, especially if you can’t get your next delivery of fuel because of storm damage.
Renewable Energy Is Good For The Environment And Your Business
When you install solar panels, you can reduce the amount of grid energy you use, which will reduce the carbon emissions of your business. Grid electricity is still primarily generated by the burning of fossil fuels, and while utilities are integrating renewable energy into their portfolios, our electric grid is not yet green.
Sustainable Companies Attract New Customers
In addition to reducing our carbon emissions and helping the environment, your sustainability efforts can attract new customers and grow your business.
More and more shoppers are looking to buy from companies that are reducing their carbon emissions. Nothing says you care about the environment like a solar array on your roof!
Likewise, many vendor and supplier agreements now include sustainability clauses. The carbon footprint of a product includes the impact of all stops up and down the supply chain, so corporations want to work with vendors that are reducing their own emissions.
Going solar can give you a leg up on the competition when you’re bidding for or renewing supplier contracts.
Work With A Reputable Solar Provider
Just like you wouldn’t go to a fish market to buy a steak, you don’t want a utility scale or residential solar provider designing and installing a commercial solar array for your business.
Velo Solar’s team of experts are focused exclusively on commercial and industrial solar installations. You can rest assured that their market experience will deliver a custom system that will meet your energy needs today and into the future.