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How Much Do Solar Panels Cost for a Business?

Solar for Businesses | 3 min read
Cost of installing solar panels for a business

As electricity costs rise, businesses must find strategies to control this expense. That’s where solar comes in. With a solar energy investment, businesses can lock in their electric rate for the next three decades, putting them in control of an otherwise hard-to-control fixed cost.

However, solar is a long-term investment, and the upfront cost can be a hurdle.

How much do commercial solar panels cost? For many businesses, solar systems can range from $50,000 to $200,000 and beyond. There are a few factors that determine how much you’ll pay.

Factors That Impact Commercial Solar System Cost

The biggest factor when determining the average cost of commercial solar panels is the size of the system you install.

The larger the system, the higher the overall cost. However, the cost per watt tends to be lower for larger systems because the hard costs (i.e., permitting) typically aren’t impacted by the system size.

In most areas, the size of the system you install will be somewhat restricted. For many, their solar system’s size can’t exceed 100% of the current annual electricity use. Most businesses want to get as close to offsetting 100% of their electricity as possible; however, not all businesses will have the room to do so.

Other factors that impact commercial solar installation cost include:

  • The type and brand of equipment you install
  • Whether your system is a roof mount, ground mount, or carport
  • If installed on a roof, the type of material the roof is made of - standing seam metal vs. a flat rubber surface
  • The roof configuration
  • The distance from the solar system to the interconnection point
  • How much shade falls on the solar panels
  • Interconnection costs
  • Local governing regulations

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Commercial Solar Incentives

Most businesses will receive a large portion of the solar installation cost back in the first few years. A few widely-available incentives return this money to the business quickly. These include:

    • The Solar Investment Tax Credit: If you install a system under the size of 1 MW, the federal tax credit returns 30% of the system’s installation cost to you in the form of a federal tax credit. If your system is larger than 1 MW, the tax credit starts at 6% and can increase to 70% if certain criteria are met. 
    • Accelerate Depreciation: With 100% bonus depreciation on your solar equipment, you can choose to accelerate all of the tax savings from the depreciation of your solar system to the first year it’s placed into service, which further frontloads the investment.Massillon-Cable-Solar-Panels-Wooster-2
  • Energy Credits: If you are the owner of a solar system, you may be able to make extra money with the clean electricity you generate. Solar renewable energy credits (SRECs) are awarded for every one-megawatt hour generated. These credits can be purchased by organizations that need to meet a specific clean energy target. These credits’ value is market-based, meaning the higher the demand and the higher their price will be. 
  • USDA Reap Grant: The USDA grant is available to qualifying rural small businesses to help fund energy-efficiency improvements and renewable energy projects. Getting one of these grants is significant, with it covering up to 25% of the installation cost. However, it's a very competitive grant.
  • Local Government and Utility Company Incentives: Additional local incentives are available in some areas. New York for example has an NYSERDA Grant, state tax credit, and a grant from National Grid. In Pennsylvania, PPL Electric Utility offers a generous grant to its commercial customers installing solar. 

Total Cost of Installing Solar Panels for Businesses

Because a system's size impacts the average cost of a solar installation, we used that to create general price estimates for a roof-mounted commercial solar system.

Average Monthly Electric Bill System Size (kW) Total Installed Cost Before Incentives Cost After Incentives
$600 50 kW $132,200 $64,393
$1,200 100 kW $236,300 $115,100
$2,400 200 kW $430,700 $209,790

Keep in mind that various financing options are available for businesses that want to invest in solar energy. Those options include outright cash purchase, solar loan, solar leases, and Power Purchase Agreements. Here's a guide that will help you select the best solar financing for your business

The value of Solar Panels for Businesses

Installing a solar energy system is a business decision. You’ll need to determine if the payback justifies the upfront costs to do what's best for your business.

The Financial Benefits of Commercial Solar

Solar can seem expensive, ranging from $100,000 to $450,000 and beyond. But the payback of a system can far exceed the cost.

Average Solar Panel Payback for businesses in 2021An investment in solar will pay for itself with the free electricity it generates for your business. Instead of shelling out hundreds or thousands of dollars each month to the utility company, your system's savings go towards paying for itself.

The payback period for a business’s solar system will vary. Many businesses tend to reach payback between six to ten years, leaving a large portion of the solar system’s 25- to 30-year lifespan left to produce 100% free electricity.

The Environmental Benefits

Reducing a monthly fixed cost isn’t the only benefit of solar power.

Solar electricity is an emissions-free energy source, replacing traditional fuels that emit billions of tons of carbon into the air. One business’s solar system can dramatically decrease its carbon footprint, which is good for the environment and business.

Studies show that most customers prefer to do business with organizations that adopt sustainable business practices. By switching to solar, you can show your customers you’re committed to sustainable business practices, earning them their loyalty.

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