As a business leader what is an investment you can make to lower your fixed costs, pay fewer taxes, and reduce variability of utility costs? With a Srinergy designed commercial solar array you can accomplish all 3.
Solar is something you can invest in right now and reap long term benefits to your company. Let’s determine if solar is right for your business and help you be on your way to a successful solar investment.
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Table of Contents
Fixed Costs
In the United States small businesses spend more than $60 billion a year on energy. To reduce these costs, installing Solar with Srinergy can help small business owners and operators turn their facility into a small power plant. Small businesses that invest strategically can cut utility costs without sacrificing service, quality, style, or comfort, all while making significant contributions to a cleaner environment. Small businesses help reduce greenhouse gas emissions and improve their own financial bottom line by addressing the hard to get at Fixed Costs that are draining from your company bank account every month.
Fixed costs are the costs associated with your business’s products or services that must be paid regardless of the volume you sell. One example of a fixed cost is overhead. Overhead may include rent for the space your company occupies, such as your office space or your factory space but also your utility bills. Here are the top five fixed costs in most businesses:
- Utilities – electricity, water, and other utilities.
- Depreciation – the gradual deduction of an asset’s decline in value. A physical asset is gradually expensed over time down to a value of $0.
- Amortization – the allocation of the cost of an intangible asset over a period of time.
- Insurance – the liability insurance you hold on your business.
- Rent – the rent you pay on your office, factory, and storage space.
Reducing certain fixed costs to improve your cash flow is possible, but may require decisions like moving to a less expensive workplace or reducing the number of employees. For many businesses solar may be one of the best ways to address their fixed costs without having to significantly alter their business operations.
Let’s start with the basics.
The Basics of Commercial Solar
A commercial solar energy system consists installing solar panels on the rooftop or grounds of your commercial property. The solar panels use photovoltaic (PV) cells that convert readily available sunlight into direct current (DC) electricity. The generated electricity flows through and is converted by solar inverter, turning DC into alternating current (AC) electricity needed to power your facility.
Electricity produced from the inverters is connected to the building’s electrical system and powers your facility first. If your system produces in excess of what the facility needs, it will be sent to the utility grid, and you’ll be compensated through the DTE or Consumers Energy Distributed Generation program. Not with these utilities? No problem, almost every utility has a similar type of solar program that can benefit your business. When the solar panels produce more power than your building electric system is using, your electric meter will track the electricity flowing to and from the utility grid.
What are the Different Types of Commercial Solar Installations?
The most common installation type is a roof mount. Srinergy also specializes in both ground mounts and carports. Solar carports can cover EV charging stations, which is a popular option for the businesses we work with.
Roof mounts can be installed on many types of roofs, including shingle, corrugated metal, standing-seam metal, and flat roofs. An advantage of a flat roof is that we can often avoid making penetrations in the roof and use weighted ballast mounts to hold them on the roof. Standing seam metal roofs also allow for installations avoiding penetration using clamps that hold on to the seams.
Ground mounts and carports are great options for businesses that don’t have adequate roof space or simply don’t want solar panels on their roof.
Both roof mount and ground mount systems are still providing power to an inverter and the inverter is what will power your building, with the solar panels being the fuel.
How Does Solar Work with Your Utility?
DTE and Consumers Energy both offer a Distributed Generation program, that banks excess energy produced by the solar array that can be redeem for credits on future electric bills. It’s a billing mechanism that’s invaluable for your system’s payback.
When your solar panels are overproducing, that extra electricity is sent to the utility grid. You are given credit for that electricity that can be used to offset electricity pulled from the grid when your panels aren’t producing enough electricity to run your business.
Most states mandate that utility companies provide net metering, but states are trending away from the traditional method.
Commercial Solar Pricing & Payback
How Much Do Commercial Solar Panels Cost?
Solar is not a one-size-fits-all solution. Therefore, it’s difficult to provide an exact cost for a commercial solar system without first knowing how much electricity you use, where the panels will be installed and other important data points. Srinergy is here to develop a custom design for your system based on your needs, goals, and budget. During the development process, Srinergy will analyze your utility bill to right size the solar array for your specific facilities needs.
There are the site-specific factors that will impact the system’s cost:
- The Installation Type – Roof, Ground or Carport
- If there are different options at your site, depending on the sire we will evaluate from a cost and production perspective of the project and present to you different scenarios.
- The Type of solar panels, inverters and other equipment
- Srinergy uses only Bloomberg listed Tier 1 solar modules, so we can guarantee your best in class equipment
- Your Energy Consumption
- The larger your electric bill the larger the potential size of the solar array. We analyze your utility bill and develop a proposal that will maximize the returns of our investment into solar.
- Your Local Weather
- Solar is dependent on access to the solar resource. Depending on your location in the country the solar array will produce more or less electricity based on your specific geography.
- Utility Connection Cost
- System sizes typically have a standard small fee associated with your solar project. System sizes about 150kW can often have additional fees associated for the utility to study the local grid and ensure that the solar array can be connected to the utility as is or there will be upgrades to grid infrastructure to the project in order for the solar array to be connected to the grid.
- The Distance from the solar to the interconnection point
- Depending on where the solar array is located and where the inverters are located compared to the connection point can impact cost. Ideally there is a straight and uncomplicated path to connect the equipment, however, very often this is not the case and additional electrical work is required to get from point A to point B.
How Does the Commercial Solar Tax Credit Work?
The commercial solar tax credit is an incredible incentive for businesses to take advantage of a solar investment.
For systems under 1 MW, the federal investment tax credit is 30%. These projects can also quality for an additional 10% adders if certain conditions are met. These adders are:
- 10% for a system built in an energy community
- 10% for meeting the domestic content requirements
- 10% if installed in a low-income area or tribal land
- The credit starts at 6% and can be increased to 70% if certain conditions are met for installations over 1 MW.
How Does Commercial Solar Depreciation Work?
Businesses can take advantage of accelerated depreciation for their solar investment. 60% of the cost basis can be depreciated in year one on your federal taxes. The remaining 40% follow the five-year MACRS schedule.
State depreciation follows the five-year MACRS schedule.
What Other Incentives Are Available For Commercial Solar?
Apart from the tax savings, two main benefits are the USDA REAP grant and Solar Renewable Energy Credits (SRECs). Certain states and utility companies also provide additional incentives for solar investments.
The USDA REAP grant is a fantastic opportunity for eligible rural businesses and farmers. This competitive grant has the potential to cover up to 50% of your installation cost, with a maximum funding amount of $1 million. In order to be eligible for the REAP grant the county your project is located in must be considered “rural” or “non-metro”.
The market for SREC’s isn’t a major determination in a solar proposal as most of these programs are being phased out. In certain areas of the country this sill may be viable for your project.
What is The Average ROI For Commercial Solar Panels?
A significant portion of the return on investment for a commercial solar project is front-loaded , with the tax credit, depreciation, and USDA grant being received the first year or two of the system being energized. This immediately provides you with extra capital to invest in other areas of your business.
The average ROI of solar panels is the U.S. is about 10%. That means you’ll make an average profit of $10 for every $100 you spend on your solar power system.
What Financing Options Are Available for Commercial Solar?
Srinergy offers several financing options for commercial solar panels. The main options are cash, solar loans, Power Purchase Agreements (PPAs), and solar leases.
Solar loans function similarly to traditional business loans and are typically most easily obtained from your bank.
By entering into a PPA, Srinergy will cover the costs of installing and maintaining a solar system on your property. In return, you will enter into an agreement with Srinergy to purchase the electricity generated by the system at a predetermined rate. These agreements typically span from 20 to 25 years and may offer options for extensions.
Solar leases are available as capital leases and operating leases. With a capital lease, the solar system will be listed as an asset on your balance sheet, and you will assume ownership responsibilities. This type of lease also allows you to take advantage of tax incentives. Operating leases are similar to rental agreements. In this arrangement, the solar system will still be listed as an asset on your balance sheet. However, the lessor will retain ownership of the system, receive the tax credit, and be responsible for maintenance duties.
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