So your commercial business is starting to consider investing in commercial solar energy to power your operation. Before investing in anything, there’s one question that needs answered: How much does commercial solar energy cost?
One of the knee-jerk reactions to a solar system proposal is sticker shock. The average company can fit in about 500 kW worth of solar. At the average solar price, this works out to about $18,000 up front. Any CFO would gasp at a price tag in the tens of thousands of dollars. But here’s the bottom line: If your business can afford to pay its electricity bills, it can afford the cost of commercial solar power. Let’s unpack why maybe we shouldn’t give too much credence to solar sticker shock.
Is the Cost of Commercial Solar Energy Worth It?
There are multiple factors that play into the cost of solar energy with your commercial business. Here are the things you’ll need to consider when assessing your finances:
There are two parts to the energy consumption factor. First, what is the business’s electric load? Second, what amount of that load can a PV system (photovoltaic system) meet? The answer to the first part requires the business owner to simply know how much electricity his or her facility is consuming now and is expected to into the future. The answer to the second part will depend on the values of the other factors discussed in this section.
Does the proposed site have good access to sunlight? The reality is that if a site doesn’t get much sun, it’s not going to generate much electricity. Variables that influence site suitability include facing direction and slope of the roof, unobstructed sunlight (i.e. no trees, other buildings, etc. to obstruct throwing shade on the panels) and area climate.
Your Utility Rates
While the costs associated with producing commercial solar power remain relatively stable and predictable, the costs of electricity provided by local utility companies change constantly, with a consistent long-term upward trend. Utility costs also vary significantly from region-to-region, state-to-state and provider-to-provider.
Rebates and Incentives
Government incentives like tax credits and accelerated depreciation, along with other incentives like rebates, play a huge role in making commercial solar systems cost effective.
How Much Does Commercial Solar Energy Cost?
In January 2019, the average national solar panel cost is $3.05/watt. The average solar panel system size in the U.S is approximately 6 kilowatts (kW), therefore an average solar panel system would cost $12,810 after tax credits. That’s more than two percent lower than it was just a year ago, and solar panel system costs are continuing to fall.
What range of costs should you expect to see in quotes for a solar panel system? The average price per watt for solar panels ranges from $2.67 to $3.43, and solar panel costs for an average-sized installation in the U.S. usually range from $11,214 to $14,406 after tax credits.
Now that you know the average cost per watt, you need to understand what $3.05/watt actually mean for your business? The cost of installing solar for your business depends on how much electricity you want to generate. For example, a bigger system will cost more because you’ll need to buy more equipment and more labor will be needed to install it.
Based on the averages, here are some example costs for solar panels based on system size:
These prices reflect the cost of a solar energy system both before AND after deducting the federal solar tax credit (known as the ITC), which reduces your solar system cost by 30 percent. Some states, local governments, and utilities also offer rebates and other tax incentives that can further reduce the solar system costs in your quotes from solar installers.
The ROI on Commercial Solar Energy
Given the costs explained in the chart above, would you rather potentially pay $40,000+ over 25 years to your local utility company or pay $10,000+ for a solar system?
Let’s say your company’s current electrical bill is around $165 per month, which is $1,980 annually. Over the course of 25 years, that is a total payment of $49,500 to the utility company. Electrical rates increase nationally an average of 4% every year, so you should anticipate these numbers to be even higher with rate hikes. So over 25 years, payment to the utility will very likely be much more than $55,000.
At the end of the day, the exact cost is going to depend on your company’s exact situation and the factors we mentioned above. It’s important to get a clear picture of potential commercial solar energy costs from a trusted third-party that can give you an unbiased cost estimate and energy audit.
At Telamon Energy Solutions, our focus is on supporting the planning, management, and solar energy generation for a business while helping to develop a clear customized corporate energy strategy tailored to your business. Request a free energy assessment of your business today.