The growing availability of solar panels for consumers has likewise been good news for businesses of all sizes. With higher demand has come better solar technology and a range of solar incentives, both of which make renewable energy more cost-efficient and practical for businesses.
In addition to saving a business money on energy costs, solar panels can also save money in other ways — like through good PR and government credits for renewable energy projects.
Here’s a look at how solar panels save money, so long as they have some land or roof space to spare.
1. Energy savings and selling power back to the grid
The most obvious cost savings come from the power that solar panel array –a collection of multiple solar panels – can generate.
Production capacity will vary significantly depending on how many panels a business installs, how many hours of direct sunlight the panels get, and what the average cloud cover looks like in the area.
According to market data from EnergySage, the average American business pays $557 in energy costs each month. Businesses that installed solar panels were able to cut those costs by 89% — nearly cutting out their monthly energy costs entirely. As the price of solar panels and related technology, like battery storage systems, continues to drop, those numbers may get even better.
Businesses with buildings connected to the grid can also sell excess energy back to their power company using net metering programs — potentially saving the business additional money on power costs.
For consumers, payouts for excess solar production are typically in the form of a power bill credit, meaning businesses won’t be able to turn a profit on solar energy production. This credit can, however, carry over to the next month, meaning the business may be able to effectively zero out its typical energy costs with enough production capacity.
The business can also install a battery system, allowing it to store some of the excess energy it produces. When the sun is down, or there’s less sunlight available, the business can draw on this stored power without needing to buy energy from the grid.
Average daily solar radiation — which solar panels capture for power — tends to be higher in the southern United States than in the north, especially in areas with flat terrain and low average cloud cover. However, a solar system can work anywhere in the country. Businesses in the north may be able to benefit about as much as those in the Mojave.
2. Renewable energy credits and other green energy programs
While renewable energy projects almost always pay for themselves in time, the initial cost of the investment may be too high for some businesses — especially for smaller businesses with less capital for major projects.
Renewable energy credits and similar programs can help here. Growing state and federal interest in promoting renewable energy has led to the creation of renewable energy incentives in the form of tax credits, subsidized loans, and rebates.
Both individual consumers and businesses qualify for the solar investment tax credit, or ITC. The ITC provides a federal tax credit, equal to 26% of the cost of a new solar project, minus any cash rebates.
In addition to solar panels, the credit also sometimes covers related project costs, like the cost of inverters to convert power from DC to AC, related technology like electric vehicle (EV) chargers, installation costs, and the cost of roof construction needed for the project to begin.
The ITC is, unfortunately, scheduled to begin phasing out in 2022, after Congress passed legislation extending the tax credit for an additional two years. Congress may act to extend the credit even further, and they have in the past. However, for business owners wanting to start a project in the next few years, it may be a good idea to research alternatives.
Other tax credits and federal programs can help businesses cut down on the cost of their solar panel arrays. For example, the Modified Accelerated Cost Recovery System (MACRS) allows businesses to deduct the depreciation costs of a solar array over five years.
Some states also offer subsidized solar loans. These won’t save businesses money directly, but it can help them cover the cost of a new solar project for less than it would take with non-subsidized loans.
Depending on the state, there may be a wide range of programs and incentives available. California, for example, is one of the nation’s leaders in solar energy production and provides incentives like SGIP rebates, which can offer significant savings on business equipment related to solar energy production.
For example, through the SGIP, state utility companies like SDG&E, PG&E, SCE, and SCG offer up to $400 per kilowatt-hour in rebates for individuals and businesses that install battery storage systems.
In many cases, this may be enough to almost completely cover the cost of a new battery system.
3. Good press and growing customer demand for green businesses
Consumers are increasingly demanding green products and are more likely to choose sustainable businesses over those that aren’t taking steps to protect the environment.
This is especially true among younger consumers. Studies on Gen Z’s retail habits, for example, have found that 73% of the generation is willing to pay more for goods from sustainable brands.
In addition to reducing energy bills, solar panels may also help businesses demonstrate their commitment to green and sustainable practices. In turn, this reduces the costs associated with marketing to Millennials and Gen Z — two demographics that are sometimes seen as resistant to traditional marketing techniques.
The adoption of solar technology may also help a business secure green building certifications, like the LEED certification. These certifications are a good way to demonstrate concrete steps towards sustainability and may help improve the value of the building, according to data from the U.S. Green Building Council.
How solar panels can save businesses money
A solar panel array may be a major cost-saver for businesses if they can handle the large upfront investment required. The energy produced by solar panels may be enough to completely cover a business’s typical power consumption, depending on the location of the solar array and local weather conditions.
For businesses that can’t afford the initial costs of solar array construction, there may be several renewable energy incentives that may help cover construction expenses — and, in some cases, continue to provide savings long after installation is complete.
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Cover image by Science in HD.