With the lucrative federal solar tax credit set to ramp down again in 2021, organizations are rushing to lock-in their commercial solar contracts before the end of this year. After all, there is no one-size-fits-all solar solution, and any good solar design / installation firm will require time to fully evaluate an organization's energy use and and engineer a system design for maximum ROI.
While each commercial operation is unique, there are a few key considerations that remain the same for virtually all commercial solar projects. To help get your wheels turning as the tax credit deadline approaches, here are a few of the most common criteria to consider when evaluating commercial solar.
Motivations to go solar
From adding to your bottom line and helping the environment, to increased employee retention and a positive impact on your reputation, there are many benefits to going solar. Determining your motivation in switching to solar will help you choose the best combination of options to help you achieve those goals.
There are a multitude of ways to pay for a solar energy system, but not all of them work well in every jurisdiction or system size. Below are brief descriptions of a few of the most common.
- Cash – As with all cash purchases, you get immediate benefits without long term debt. With solar energy, you begin realizing savings from your first utility bill onward. Tax credits increase your early investment returns.
- Loan – Loans retain your full ownership benefits, while reducing your payback proportional to the interest payments.
- PPA – Power Purchase Agreements, are most commonly used by utilities to finance the purchase of electrical generating facilities. PPAs are a common way to finance solar installations at commercial and institutional facilities in certain states. Sun Valley Solar Solutions offers PPA programs exclusively for qualified 501 (c)(3) non-profits, municipalities and schools.
Your bottom line impact
Reputable solar contractors can help you determine the impact that adding solar can have to your bottom line. In general, we recommend comparing the Levelized Cost of Energy (LCOE) between existing sources and a commercial solar option. This method allows for an apple to apples comparison of energy produced by many different types of renewable systems, as well as energy from older carbon-based sources.
Solar installer options
Modern day solar panels are designed to last for decades, and the solar partner you choose should be there for the full lifespan of your investment. A good partner should understand the key factors that impact system design and performance—especially in our uniquely harsh climate. You should also take into consideration if they have any O&M services built into their proposal, or that you could include. Ensuring your selected installer has the skills and expertise to take care of your system if anything goes awry will give you peace of mind and ensure the quickest ROI.
Limited-time solar incentives
Capitalizing on solar incentives is a great way to speed up the ROI on your commercial solar investment. The most lucrative incentive, the solar ITC, allows businesses that go solar to offset up to 26% of the purchase price in the form of a federal tax credit. This incentive, however, is getting much smaller. In 2021, the ITC will decline to 22% before hitting a permanent 10% credit for commercial solar projects beginning in 2022. So, if you want the fastest and biggest return on your commercial solar investment, this is the year to act. Given the demand on solar installers in the only 26% year, the sooner you start your commercial solar project, the better.
Rest assured that no matter what combination of options you choose for your solar solution, you’ll be joining the ranks of successful companies who are realizing the financial and environmental impacts of having their own solar energy system. Rates may change, but solar savings last for decades.
With the 26% solar tax credit decreasing again at the end of this year, going solar now will ensure the biggest and fastest return on your solar investment. Contact a member of our commercial solar team to schedule a consultation and start your solar project today!
*This blog has been updated since it's original publication of 7/15/2018 to reflect current solar incentives.