For many reasons commercial solar panels save organizations money. Solar panel engineering lowers electric bills now and insures that your organization is less vulnerable to energy rate hikes in the future. In addition to gaining energy security you can expect additional benefits such as tax incentives, increased property value, and a positive public image.
Tax Incentives for solar panel installations
The Investment Tax Credit (ITC) is a federal government tax incentive for solar panel installations. This tax incentive has been a major factor in helping annual solar installation grow for both commercial and residential systems.
According to the Solar Energy Industries Association, SEIA, “A tax credit is a dollar-for-dollar reduction in the income taxes that a person or company claiming the credit would otherwise pay the federal government.” This tax credit is worth 30% of the cost of your system and is filed as a claim on your federal tax return. That said, the ITC decreases after 2020, so don’t wait to have this conversation. In 2021, the credit goes down to 22 percent. In 2022 and beyond, the credit will exist as a 10 percent benefit for businesses only.
Accelerated depreciation refers to a solar system tax deduction. It was instituted with the Tax Cut and Jobs Act, and allows 100 percent bonus depreciation. This means that the entire cost of a solar array can be depreciated in the year the system is placed into service. Businesses can deduct 85 percent of the value of the solar asset from their taxes, providing another significant offset to the upfront cost of a system array.
Another valuable tax incentive, provided at the state level, is Solar Renewable Energy Certificates (SRECs). SRECs are a product of renewable portfolio standards (RPS). RPS require utilities to provide a specific amount of their electricity to be generated from renewable energy. For every megawatt hour (MWh) of electricity that a solar energy system produces, a corresponding SREC is created. Solar panel owners can sell their SRECs to utilities so that the utilities can meet their renewable energy quota. The amount of money a solar panel owner can earn from SRECs varies by state and the price is determined on the solar market supply and demand factors. SRECs are great incentives for organizations to dramatically improve profits and see a return on their solar panel investment.
Solar is a front-loaded investment. The tax credit, accelerated depreciation, and grants are a unique advantage over other investments because it doesn’t tie up the company’s money which can be reinvested and used elsewhere.
Offset Utility Costs
Installing solar panels can help your business to hedge against electricity price volatility and inflation. Solar photovoltaic (PV) devices that use sunlight and convert it into electricity will essentially reduce your business’ monthly energy bills. This is especially true for businesses who use any number of different devices and equipment that consume a lot of electricity. If you want to increase your profits by increasing volume, you’re going to have other costs that increase incrementally.
In many states, the price of electricity can swing significantly due to demand, which can become problematic for business owners who are closely managing their cash flow. Lock in electricity prices by installing solar and reduce reliance on an unpredictable expense. Going solar makes it easier for companies to budget and plan for the future.
The average commercial property owner paid $1,950 in monthly electricity bills before going solar, according to EnergySage marketplace data. After their installation, their electricity bill was reduced to approximately $500 – a 75% reduction. The savings drop right to your bottom line with solar.
Increased Property Value
Your organization’s property value will improve when you install a commercial solar power system. An environmentally responsible commercial building will not only reduce operating costs but become much more attractive to potential buyers who be willing to pay top dollar for a building that is operationally cost effective.
More than half of the Fortune 500 have pledged to shrink their carbon and other greenhouse gas emissions, according to a recent report. Companies, municipalities, non-profits and others will be seeking real estate that is energy-efficient, self-sufficient, and powered by clean energy.
Homes and commercial buildings that have solar panels can have higher property values and sell faster than those that don’t, per multiple studies. And that is not likely to change. With the solar revolution gaining steam, adding commercial solar panels figures to make your building more desirable. If you have lower electric bills, that’s a boon for any business owner.
Positive Image and Improved Reputation
Environmental responsibility is important to consumers. Deciding to go solar will not only be a good investment for your business but also for the environment. Giving up on the traditional energy sources you will have your part in the decrease of the overall carbon footprint of the world. Solar energy is a clean and green source of energy that contains absolutely nothing that could be harmful to the nature – no greenhouse gases, no chemicals released into the air.
In addition to the financial rewards, you can be proud that your organization’s facility is environmentally friendly. Solar energy is a good way to show the world that you care. It will make you competitive among other businesses and earn you a good reputation incentivizing your customers to choose your company over those that use traditional energy sources. The decision to go solar will place your organization a step ahead of its competitors and represents your commitment to a clean environment. Having an environmentally friendly image is a plus for any organization.
Many current and potential customers are attracted to businesses with a commitment to sustainability. Businesses that have won large contracts due to their solar investments are succeeding because buyers love sun-powered products and services! Solar installation is a great opportunity to raise awareness of your contribution to the local community and promote your organization.
The demand for solar is increasing at a rapid pace resulting in decreased costs. Federal and state incentives allow for even greater savings. Owning a commercial solar system is now a reality for many business owners and it is a guaranteed way to give yourself an environmentally responsible image and achieve energy independence. So, let’s do the math:
Lower electric bills now.
+ Less vulnerability to energy rate hikes.
+ Investment tax credit (ITC).
+ Solar renewable energy certificates (SRECs).
+ Increased property value.
+ Positive image/environmentally friendly.
= Cost savings now and in the future!
A Profitable Investment
With solar energy, ROI (return on investment) is mainly dependent on two things: utility prices going up, and the sun shining. The odds of both are pretty good. If paying up front isn’t an option for your business, don’t worry – there are financing options available, including solar loans and solar leases/power purchase agreements (PPAs).
Solar can generate a significant return on investment after just 3-5 years in some regions with high electricity costs. Many states offer clean energy programs and financial incentives. In New Jersey, Solar Renewable Energy Credits allow businesses to sell excess energy to electric generators that can translate into significant sums of money for building owners. Other states, including New York, offer strong solar rebate programs. Companies are also eligible for Federal income tax credits (30 percent ITC), and the bonus of year depreciation of the entire system cost. When added up, these incentives could be used to cover a large percentage of the overall cost.
With short payback periods and steady financial returns, New Jersey business owners hedge against rising energy prices.