The Benefits Of Solar Panels For Commercial Buildings - GreenLancer

Installing solar panels for commercial buildings offers a powerful solution. Commercial solar energy systems can significantly reduce electricity costs, shield businesses from utility rate hikes, and support long-term financial stability. At the same time, solar energy for commercial buildings helps companies demonstrate environmental leadership and meet sustainability goals.

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Today, businesses that invest in solar panels for commercial projects can also take advantage of strong federal tax incentives, including the Investment Tax Credit (ITC) and accelerated depreciation benefits, which drastically lower the net cost of installing solar on commercial buildings.

Understanding the growing market for commercial buildings with solar panels is essential for solar contractors who want to expand their businesses and reach new customer segments. By tapping into the opportunity for solar on commercial buildings, you can help businesses reduce operating costs while building a stronger, more resilient clean energy future.

How Solar Panels for Commercial Buildings Decrease Operating Costs

Paying monthly utility bills leaves businesses with nothing tangible to show for their investment—essentially renting their electricity. By installing solar panels for commercial buildings, companies can shift from renting power to owning a long-term energy asset. Whether installed directly on company property or through off-site generation, solar energy for commercial buildings allows businesses to take control of their energy future and stabilize long-term costs.

When transitioning to commercial solar energy systems, companies typically have two options: entering a solar Power Purchase Agreement (PPA) or purchasing the solar panels commercial system outright. Performing a thorough cost-benefit analysis is critical to understanding the potential savings, return on investment (ROI), and overall financial benefits of adding solar on commercial buildings.

Solar PPAs for Businesses

A PPA enables companies to lock in lower electricity rates without the upfront cost of buying a solar system. Under this model, a third party owns and maintains the commercial solar energy system, while the business simply purchases the solar power it generates—often at rates lower than the local utility.

PPAs allow companies to go solar with no money down and avoid the responsibility of system maintenance. However, because the company does not own the solar panels, they are not eligible to claim tax incentives like the federal Investment Tax Credit (ITC) or depreciation benefits.

Purchasing Solar Panels for Commercial Buildings

Purchasing solar panels for commercial buildings offers businesses even greater financial upside over time. Once the system pays for itself through energy savings, companies can enjoy many additional years of nearly "free" electricity, significantly reducing long-term operating expenses. Ownership also opens the door to major tax advantages, including the 30% federal solar tax credit and bonus depreciation—provided the business has sufficient tax liability to benefit.

It’s important to remind clients to consult with a tax professional to determine their eligibility for these incentives and avoid offering tax advice directly. For companies with the right financial profile, installing solar panels for commercial systems can be a high-value investment in both energy independence and cost savings.

Advantages and Disadvantages of Owning Solar Panels for Commercial Buildings

Installing solar panels for commercial buildings can be a game-changing investment, but it’s important for companies to weigh both the advantages and disadvantages carefully. Here's a breakdown to help business owners make informed decisions about adding solar energy for commercial buildings.

Potential Increase In Property Value With Solar Panels for Commercial Buildings

Numerous studies have shown that solar power systemsincrease home values, so the same is likely true for commercial property owners with solar PV systems. This is because properties with solar are cheaper to maintain, thanks to lower energy bills. Keep in mind that your customer must own the solar panels on commercial buildings for the building owner to benefit from an increased property value.

Tax Breaks For Solar on Commercial Buildings

Another big benefit of solar panels for commercial buildings is the potential eligibility for two federal tax incentives. These financial incentives help boost the return on investment of the solar system while reducing the payback period.

In addition, some states and utility companies offer additional tax credits or rebates for commercial solar systems. It is critical to also understand these incentives to provide this information to potential customers.

Solar Tax Credit

A 30% tax credit is available to companies that purchase solar systems before . However, this incentive will decrease to 26% in , so it makes sense to encourage potential commercial clients to install solar panels for commercial buildings before the tax credit tapers down.

Depreciation of Solar Panels for Commercial Buildings

Businesses can either apply 100% of the depreciation in year one with bonus depreciation or follow the Modified Accelerated Cost Recovery System (MACRS) to deduct the system over 6 years. There is a MACRS depreciation schedule, and a different percentage of the system is depreciated each year.

Bonus Depreciation of Commercial Solar Panels

Congress increased the allowable bonus depreciation for commercial solar energy systems, enabling businesses to claim 100% depreciation in the first year instead of spreading it out over a period of six years. Thus, 100% bonus depreciation accelerates the offsetting of installation costs, providing businesses with a quicker financial advantage.

Accelerated Depreciation of Solar Panels for Commercial Buildings

Commercial solar equipment depreciation reduces a company's tax liability. The depreciation value is calculated by multiplying the depreciation amount with the business tax rate. Consult the five-year MACRS depreciation schedule in IRS Publication 946 Table A-1, to determine the deductible portion of the commercial solar panels for each year:

Year

Commercial solar panel depreciation

1

20%

2

32%

3

19.2%

4

11.5%

5

11.5%

6

5.8%

Solar for Commercial Buildings Provide Green Marketing

Consumer demand for green products and services has skyrocketed in recent years. As a result, many large corporations have created carbon-neutral goals to help curb climate change by reducing greenhouse gas emissions and fossil fuel consumption. Typically, transitioning to renewable energy is a critical step to reducing their carbon footprint.

Although they may not have formally created environmental goals, many small and medium-sized businesses are wanting to use more sustainable energy sources. In addition to helping the environment, it can increase customer loyalty, help attract talented employees, and promote brand reputation.

Solar panels for commercial buildings can be highly visible and make a bold statement about supporting the clean energy movement. Communicating about solar for commercial buildings can be a smart marketing strategy. Some companies even include solar power system information to customers to highlight the benefits, such as a plaque on the wall, a press release, or a page on their website.

Financing Options For Solar Panels for Commercial Buildings

Because the upfront cost of a solar energy system is significant, it is critical to ensure that your client can finance the project. There are a few options to cover the cost of commercial solar.

Purchase Power Agreements (PPAs) Or Leases

With solar PPAs and leases, a third party owns the system, and your client merely pays for the energy produced from it or rents the solar equipment. Typically, these solar panels for commercial buildings are installed for no money down by the party using the electricity.

Solar Loans

There are a variety of loan programs that can help finance solar panels for commercial buildings. In addition, there are certain loans that might be available to commercial solar customers that aren’t available to residential clients.

For example, the Small Business Administration can guarantee loans for small businesses. The benefits of SBA loans are that they can have long repayment terms and low rates, but the application process can be quite rigorous. Another option is equipment loans, but businesses may be required to come up with a cash down payment.

Cash

If a commercial client has it, cash can be an excellent way to purchase solar panels for commercial buildings. This eliminates interest payments, and clients can put that money to work, reducing operating costs.

Calculating Payback Period for Solar Panels for Commercial Buildings

Solar design software will often estimate the solar payback period, but it is also possible to crunch the numbers.

Payback period in years = (Total solar system cost minus solar incentives and rebates) / annual cost savings

Determine Total Installation Costs:

• Sum up all costs related to purchasing and installing the solar panels, including equipment, labor, permits, and any additional expenses.

• Consider federal and local incentives, such as tax credits, rebates, and grants, which can significantly reduce upfront costs.

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• Assess the expected energy production of the solar panels based on factors like system size, location, and efficiency. Multiply this by the local electricity rate to estimate annual savings.

• Subtract any ongoing maintenance costs from the annual energy savings to determine the net cash flow generated by the solar panels.

• Divide the total installation costs by the annual cash flow to calculate the payback period. This represents the number of years required to recoup the initial investment.

What Are The Disadvantages Of Solar Panels For Commercial Buildings?

For example, the upfront cost of the solar system is a common obstacle. Also, if a property has a lot of shade, it might not produce sufficient solar electricity to justify the investment. Likewise, permitting and interconnection can be difficult processes, but the GreenLancer team is available to help remove roadblocks with our solar permitting, interconnection, and engineering services.

Solar Panels for Commercial Buildings FAQs

What is the payback period for solar panels for commercial buildings?

A commercial solar system's payback period varies based on system size, installation costs, energy savings, and available incentives. On average, commercial solar systems have a payback period ranging from 5 to 10 years and a return on investment (ROI) between 10 and 20%. However, specific circumstances and local conditions can influence commercial solar panel payback.

Solar energy savings, impacted by the local solar resource, electricity rates, and building energy consumption, play a crucial role. Financial incentives, such as commercial solar tax credits and rebates, can significantly shorten the payback period. Careful consideration of these variables, along with efficient system design and maintenance, is essential for accurately assessing and optimizing the payback period of a commercial solar investment.

What is the lifespan of solar panels on commercial buildings?

Commercial solar panels typically operate effectively for about 25 to 30 years, with many continuing to generate electricity beyond this duration. The longevity of the panels is influenced by factors such as the quality of materials, manufacturing standards, and the operating conditions at the installation site. Regular maintenance and proper care can contribute to extending the effective operational period of commercial solar panels.

Do solar panels for commercial buildings require permits?

Yes, commercial solar systems typically require permits. The permitting process ensures compliance with local building codes, zoning regulations, and electrical safety standards. Solar permits may also be needed for various aspects of the solar PV installation, including structural integrity, electrical connections, and environmental impact.

It's essential to check with local authorities having jurisdiction to understand and obtain the necessary permits before installing a commercial solar system. Commercial solar systems often require solar engineering reviews and PE stamps from a licensed engineer. GreenLancer specializes in solar engineering and permitting and works with solar contractors to obtain solar permits for commercial buildings.

Do I need to replace the roof before installing solar for commercial buildings?

We recommend assessing the condition of the roof before installing solar panels on a commercial building. If the roof is in poor condition and nearing the end of its lifespan, it is prudent to replace or repair it before installing solar.

This ensures a solid foundation for the solar array and prevents potential complications in performing roof work. Consulting with a roofing professional can provide a comprehensive evaluation and guidance on performing roof work before installing commercial solar panels.

Solar Panels for Commercial Buildings Can Benefit Businesses

Knowing the answer to common questions and being able to describe the key benefits of solar panels to businesses will help installation companies capture an important – and rapidly growing – market sector.

Solar permitting for commercial solar projects is tedious and time-consuming if not done properly. GreenLancer helps solar professionals overcome these challenges with our solar permit design and engineering services. Sign up today for free or complete the submission form below to learn more. 

As we approach , the integration of solar panels in commercial projects is no longer just an option but a strategic necessity. This blogpost delves into how solar energy works and the multifaceted benefits it brings to commercial buildings. Solar panels have been used on residential buildings for many years, but it’s only recently that they’re becoming more common in commercial construction.

Solar energy is a cost-effective, dependable, eco-friendly way to power a business. It can power lighting, heating, air conditioning and water heating in commercial buildings. The panels can be installed on rooftops, parking lots and side yards.

In this article we discuss how solar panels work and the benefits of using solar energy in commercial buildings.

Use of Solar Energy Is Growing

Electricity costs in the U.S. are increasing, making it more expensive for businesses to operate and more challenging to plan ahead. Meanwhile, solar panel prices have dropped significantly in recent years as the technology and production processes have improved. 

The U.S. Energy Information Administration expects electric generation from solar to be the leading source of growth in the U.S. power sector through the end of , with 79 GW of new solar capacity projected to come online over the next two years.

In the EIA’s Short-Term Energy Outlook, the agency said it expects renewable energy’s overall share of electricity generation to rise to 26% by the end of .

Read also: 20 Eco-friendly & sustainable building materials for greener construction

How Solar Energy Works

Sunlight is captured and converted into usable energy through different methods, some more efficient than others. Today, solar panels can convert 20% of the sunlight they capture into solar energy, making it a more viable source of power for commercial buildings.

A solar panel, also known as a solar module, consists of silicon cell layers, a glass casing unit, a metal frame and wiring to transfer electric current from silicon. Silicon has conductive properties that absorb and convert sunlight into usable electrical power. The sunlight causes the silicon cell electrons to set in motion, creating an electric current.

This photovoltaic effect, first discovered in , comprises three steps:

• The photovoltaic solar cell absorbs solar radiation.
• When the silicon interacts with the sun rays, the electrons start to move and create a flow of direct electric current (DC).
• The wires feed this DC electricity into the solar inverter and convert it to alternating power (AC).

One of the challenges of using solar energy is how to store more of it to produce more power from it.

How Solar Energy Is Stored

There are several ways to store solar energy:

Battery Storage

When solar energy is fed into an electrochemical battery, the chemical reaction on the battery components keeps the solar energy. In a reverse reaction, the current exits from the battery storage for consumption.

Thermal Storage

Thermal storage uses mediums such as molten salt or water to retain and absorb the heat from the sun. The heated mediums are then stored in an insulated tank until the stored energy is needed for consumption.

Mechanical Storage

Mechanical storage converts the surplus electric power to mechanical power, then converts it back into electricity for later consumption.

There are three primary types of mechanical energy storage systems:

Flywheel

This method uses surplus electricity to spin a flywheel, generating electricity during peak demand times.

Pumped-Storage Hydropower

Water is pumped to a reservoir using surplus energy from solar panels and sent upstream of the turbine generators. Then water is allowed to flow through the turbines to generate electricity.

Compressed Air

This system stores compressed air in large vessels such as tanks or natural formations (e.g., caves), then releases the air to generate electricity.

Benefits of Solar Energy for Commercial Buildings

1. Saves Money, Cuts Operational Costs

Electricity is one of the biggest ongoing expenses that commercial buildings have. Solar panels significantly reduce energy costs. While the initial investment can be high, overtime the cost of installing solar panels is recouped by the money saved on electricity bills.

2. Increases Property Value

Energy efficiency is tremendously popular these days. Installing solar panels can increase the value of commercial buildings and help them sell faster.

3. Gives Access to Tax Breaks

There are two tax federal credits available for businesses, nonprofits and local and tribal governments that purchase solar energy systems:

• The investment tax credit (ITC) reduces the federal income tax liability for a percentage of the cost of a solar system that is installed during the tax year.
• The production tax credit (PTC) is a per kilowatt-hour (kWh) tax credit for electricity generated by solar and other qualifying technologies for the first 10 years of a system’s operation. It reduces the federal income tax liability and is adjusted annually for inflation.

Solar systems that are placed in service in or later and begin construction before are eligible for a 30% ITC or a 2.6 ¢/kWh PTC if they meet labor requirements issued by the Treasury Department or are under 1 megawatt (MW) in size.

Generally, project owners cannot claim both the ITC and the PTC for the same property, although they could claim different credits for co-located systems, like solar and storage.  

In addition to these tax credits, the Tax Cut and Jobs Act of offers the option of a 100% bonus depreciation on solar systems. Furthermore, some states and utility companies offer additional tax credits or rebates for commercial solar systems. 

4. It’s Good for the Environment–and Your Brand

Solar energy is a renewable resource that does not produce greenhouse emissions; therefore, using solar energy helps the environment by reducing reliance on fossil fuels.  

Consumer demand for environmentally friendly products and services has increased in recent years. By installing solar panels, a brand shows that it cares about the environment and is making an effort to reduce its carbon footprint. 

5. It Protects Against Power Outages

Buildings that rely entirely on electric grids are vulnerable to power outages that occur during bad weather or electrical system malfunctions. Solar panels installed with battery systems allow commercial buildings to continue to function during power outages.

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6. Low Maintenance Costs

Solar panels require very little maintenance throughout their lifespan–a wash every once in a while, depending on where you live and how much debris accumulates on the panels. They have no moving parts, so they’re not likely to break down. Made of tempered glass and non-corrosive aluminum frames, solar panels can withstand rain, wind, hail and snow. The photovoltaic cells are designed to last 25 years or more.

Final Word

The advantages of using solar panels to power commercial buildings are likely to multiply as solar energy technology continues to develop. Rather than being an afterthought, solar panels should be considered during the design and construction phase of commercial projects.

If you want to learn more, please visit our website Commercial Solar Energy System.