In the first half of 2016, solar accounted for 26 percent of all new electric generating capacity brought on-line in the U.S., according to the Solar Energy Industry Association’s latest U.S. Solar Market Insight Report.
The report also says commercial energy users have seen their average electricity rates increase by more than 20 percent in the last 10 years. In response to this national electricity inflation, coupled with some of the global price drops in solar, commercial solar installations have increased 49 percent from 2015.
The solar industry is growing, and many business owners are trying to understand if solar can make sense for them. For most businesses, solar power provides a double-digit return on investment with little downside potential. But there are there are some cases where solar isn’t a good fit.
Here are five tips to help you determine if solar makes sense for your business:
1. Solar should only offset your business’ electrical needs.
Your solar electric system reduces the amount of electricity bought from the utility, so you are saving the full retail value of the electricity. At times during the day, you will need more electricity than the solar is producing, so you will buy electricity from the utility. Other times, the solar will produce more than your business needs, so you sell the excess solar electricity back to the utility. This is called net-metering. Most utilities in Florida pay full retail rate for solar electricity sent back to them in this way. (The one exception is when you have sold more electricity to the utility than you bought for the year. In this case, most utilities will pay only wholesale value for this excess electricity, which is considerably less than retail and generally not worth doing. In addition, some utilities don’t allow for solar systems to be oversized to the point that this will happen.)
2. You may not have enough space available for solar.
Depending on your cost of electricity, you will need roughly 1,000 square feet of space for every $100-$200/ month of electricity you want to produce with solar. This can be a challenge for businesses like restaurants, which can have very high electricity use and very little roof space. Options like solar-covered parking can be helpful in these situations, but there are some businesses that just have too much tree cover or not enough available roof or ground space for solar to fully meet their electrical needs. However, they may still have the option of installing a small system that can offset some of their electricity usage.
3. Your peak power use should ideally be in the summer.
The best months of the year for solar in Florida are April and May. They are not the longest days of the year like in June and July, but April and May don’t have the daily 3 p.m. rainstorms. That means solar systems will likely overproduce in the early summer months, and the rest of the summer your electrical needs will start to use any credits you’ve built up with the utility through net-metering mentioned in the first tip above. If your business has an off-season peak — where your peak use falls in the winter months when solar produces the least amount of electricity for the year — then your system could produce a lot of energy when you don’t need it, and not a lot of energy when you do. You can still utilize solar, but it may not be able to meet all of your electricity needs.
4. Solar works best if you own and occupy the building you want to install it on.
If you both own and occupy the building, then installing solar will directly reduce your bills. If you own the building but lease it, then the solar will offset the bills of whatever meter it is connected to. Many landlords choose to install solar for their tenants and subsidize the system cost by increasing lease payments of the unit(s) connected to solar to reflect their new electricity savings. If your business is leasing your space and you are interested in solar, then you will need approval from the landlord to install it (and you will want to be confident that you will not be moving in the near future). Most landlords are willing to give approval because it demonstrates a long-term commitment to the property.
5. Determine if you are able to use the substantial solar tax benefits and grants.
Business (and home) owners throughout the U.S. can take advantage of an unlimited 30 percent federal tax credit for solar. Businesses also benefit from a five-year accelerated depreciation on solar. These tax benefits can cover half to two-thirds of the system cost. For agricultural and rural small businesses, grants are available that can cover up to an additional 25 percent of the system cost. That means almost 80 percent of the system cost can be covered entirely by grants and tax benefits for a small business in a rural area. This makes solar less financially attractive for non-profit businesses, churches, governments, and other entities that are typically unable to utilize the tax benefits offered by solar. Any business considering solar should consult a qualified tax professional to determine whether they can use the tax credits and depreciation, because this strongly impacts the financials of solar.
Think you’re a good candidate? You can use the Florida Solar Energy Industry Association website at flaseia.org to find a solar contractor in your area that will help you determine if solar can make sense for your business.
MIKE GARRETT is the Director of Sales and Marketing for Gainesville-based Solar Impact, a Board Member with the Florida Solar Energy Industry Association, and the Event Coordinator and Founder of Tree Fest (treefestfl.com). He also served locally on the Gainesville Chamber of Commerce Business Advisory Council, the Gainesville Energy Advisory Committee, the Wild Spaces & Public Places Citizen Advisory Committee, the Gainesville-Alachua County Cultural Affairs Board, and is a graduate of Leadership Gainesville Class #38. He can be reached at firstname.lastname@example.org.