Is Solar a Good Decision for my Business?
The answer to this question is more complicated than most might think. It’s true that rooftop solar technology, specifically photovoltaic systems, have experienced a huge drop in price over the last five years along with a steady increase in system efficiency. For instance, solar arrays were being built for up to $12/watt for a commercial system back in 2007. Today we are seeing average commercial systems built for under $2/watt – that’s a reduction in price by a factor of 6 in just the last 8 years!
This reduction in price has ultimately driven market demand in the commercial and industrial sectors with the promise of an attractive payback through substantial energy savings. Though rooftop solar can seem like an attractive investment to many companies, it’s important to understand the feasibility of a potential project before diving too deep into the development phase. There are several criteria which can make your business a good candidate for rooftop solar.
Facility Ownership Structure
First and foremost, we like to understand our customer’s ownership structure regarding their facility. The best candidate is an owner-occupied building with a single electricity meter although multiple meters are not necessarily a huge obstacle. The second-best candidate is a long term building owner with either a single or anchor tenant under a gross lease structure.
Entity Type
Typically, we discourage any business with a 501C3 nonprofit status from going solar. This is because, as a non-profit, they do not have a tax appetite necessary to monetize the federal solar tax credit or accelerated depreciation. Since the tax attributes are some of the primary ROI drivers for solar, it is necessary that the purchasing entity qualify for these incentives.
Energy Profile
Another primary driver of ROI for solar projects is the retail cost of electricity from the grid. Since your rooftop solar array is offsetting this cost on a kWh basis, the payback will be directly proportional to the retail electricity cost avoided from the grid. In today’s market, solar power can compete with retail electricity costs above $0.10/kWh at a commercial scale. The scale of the project does play a part, meaning that a larger system may be able to yield an attractive payback even against retail electricity prices below $0.10/kWh.
Rooftop Conditions
One of the more obvious concerns businesses have with rooftop solar is the impact it will have on their roof. We look for several things when it comes to an adequate roof space for solar.
- No Significant Shading from trees, equipment or adjacent buildings
- Rooftop should be less than 12 years old
- Adequate space, free of rooftop equipment including safety anchors for window washing
Solar systems are compatible with just about any type of commercial rooftop and typically do not require penetration. Your solar EPC should work directly with your roofer to maintain your roof’s warranty after the installation.
Does my utility offer net metering?
Net metering is a game changer when it comes to solar. This basically means that your utility will offer to buy back any excess energy sent back to the grid at retail cost. This is not essential to generating a good payback, however it does play a role in how your system should be sized. Georgia does not currently have a net metering policy.
What should my payback look like?
A viable commercial project should have a payback between 2- 5 years at the most. In today’s solar market, any payback over 5 years should be indicative of an incompatible business profile for rooftop solar.
Conclusion
Before you decide to take your company solar, make sure to ask yourself the following:
- Does my business have the right ownership structure of the facility?
- Can my business qualify for federal tax credits and depreciation?
- What is my cost / kWh?
- What are my rooftop conditions?
- What are my utilities policies on buying back electricity?
- What kind of payback will justify my capital expense?
If the answer to these questions points to rooftop solar as a viable option for your business, it’s time to start getting estimates from your local solar provider. If you would like to see if solar makes sense for your business, give Velo Solar a call or visit our website at www.velosolar.com for a free estimate and solar energy assessment.
