Maybe you’ve noticed a lot of businesses in your area covering their roofs with solar panels or heard how so many fortune 500 companies are going green and saving green. But you’re still wondering,” should my business go solar?”
In this blog, we’ll cover all you need to know to make the decision if your business should go solar. We’ll talk about the most important part - the cost, go over the payback, ROI, and solar’s other benefits, and we’ll sum it up with some commonly asked questions.
How Much Does Solar Cost for Businesses
Let’s get down to business. If we’re being real, every business decision comes down to one thing - price. But like other complex purchases, there are so many variables that go into a solar panel system that an exact answer is going to be difficult to give for a general audience.
That said, if you need to know more about this before getting quotes, check out our blog on how much solar systems cost, which goes over all these variables. If you need a quick answer, here’s a rough estimate that will give you a ballpark figure:
|Solar System Size||Total Installed Cost||Federal Tax Credit||Depreciation||Net Cost||30 Year Savings|
The chart above shows the pricing based on incentives available for most businesses - the 26% Federal Solar Incentive Tax Credit (ITC) and 100 percent bonus depreciation. Businesses can take advantage of the ITC, which, for 2022, allows you to recapture 26% of installation cost through a tax credit. We’ll talk more about this later on.
Accelerated depreciation was instituted with the Tax Cut and Jobs Act, and allows you to depreciate 100% of the available depreciation on your federal taxes in year one. State depreciation is calculated on a 5-year MACRS schedule.
However, depending on which state your business is in, there could be state incentives that make the deal even sweeter.
Another important thing to understand about solar is the payback of the investment. On average, 60 to 70 percent of the investment comes back to your company in year one. Solar is a front-loaded investment, thanks to the 26 percent tax credit, accelerated depreciation, and grants. This is a unique advantage over other investments because the company’s money isn’t tied up and can be used elsewhere and reinvested.
Let’s take a look at some examples - one for a solar system with an electricity bill covering about $600/month, and one for a system covering about $1,200/month.
|$600/Month Electric Bill||$1,200/Month Electric Bill|
|Savings from Incentives||$67,807||$121,200|
|Cost After Incentives||$64,393||$115,100|
In addition to that big return in year one, your solar system is going to be producing free electricity for decades. That means the money you would have paid for the utility bill can continue to be used elsewhere.
In the beginning, that savings is going to go towards paying off the cost of your system. Depending on how much electricity you use, your electricity rates, and how much your system produces, your business can reach payback in just a few years, meaning you could be left with decades of free electricity.
The shorter the payback of your solar system, the more likely you’ll have a high return on a solar investment (ROI). As shown in the pricing chart above, a double-digit ROI isn’t abnormal for solar systems for business.
Let’s compare that investment to another common investment type - buying stocks. Studies have found average annual returns on S&P 500 stocks are about 10%, but the average is anything but normal in the volatile market. Since 1998, returns have ranged from a high of 25% to a low of -38.5%. That’s a huge range, and the bottom end of that looks pretty bad. There are so many variables that go into investing wisely in the stock market, but it seems like sometimes, it all comes down to luck.
With solar energy, a profitable investment is mainly dependent on two things: utility prices going up, and the sun shining. We think your odds are pretty good. Furthermore, if you go solar with Paradise Energy, you’ll get our Triple Ten Guarantee, which includes a ten-year production guarantee. This basically guarantees the ROI of your investment on solar for the first ten years. If your solar system doesn’t produce what we predicted, we’ll write you a check for the difference.
But don’t just take our word for it. Learn the ROI and payback period for businesses that have already made the switch in our case studies.
The Benefits of Solar Energy for Businesses
Now that we’ve gone over the cost of going solar, we want to dive deeper into the benefits that solar can provide your business.
Decrease Overhead - Increase Profits
Like we talked about in the section above, business decisions have to be financial decisions. Though going solar is a great thing to do for the environment, for most of our customers, the key driver is the financial benefit.
In so many businesses nowadays, profit margins are razor-thin, and the best way to increase profit is to cut costs. Solar is an easy way for your business to do this. No one loses their job, no one takes on more work, and you don’t have to compromise on value. Just go through the steps of a solar installation and let the sun do its thing!
In addition to that, if you want to increase your profits by increasing volume, you’re going to have other costs that increase incrementally. If you want to produce more widgets, you have to hire more people and buy more machines. With solar, the savings drop right to your bottom line.
Benjamin Franklin famously said, “nothing in life is certain but death and taxes.” Many agree he was a pretty smart and forward-looking guy - that idiom feels as real now as it did in the 1700s. But tax day can be a little less painful with solar.
The ITC lets businesses deduct 26 percent of the cost of a solar system from the business’s taxes, assuming they own the system. (This doesn’t work for solar leases.) There is no cap to the return, meaning you can install a system that covers 100% of your electric bill and still deduct 26% of the installation cost from the taxes you owe.
That said, the ITC decreases after 2022, so don’t wait to have this conversation. In 2023, the credit goes down to 22 percent. In 2024 and beyond, the credit will exist as a 10 percent benefit for businesses only.
The Benefits to the Environment
The great thing about solar is that it isn’t just a good financial decision, but it can make a positive impact on the environment, the community, and your employees.
From the conservation of natural resources to combating global warming to sending a positive message to employees, potential talent, and customers, solar panels on your business can make a huge statement.
For now, the majority of electricity in the United States is being produced with coal and natural gas. Not only do these energy sources have a negative impact on the environment, but the supply of these fossil fuels is limited. And just like anything that is limited, it will one day become scarce - and expensive.
However, the sun is going to keep shining, so your solar system can keep producing electricity. Not only that, but the electricity it produces has no negative impact on the environment.
Benefits to Your Brand
Let’s get back to business. Sure, solar energy can help the environment, but it can also help you recruit top talent and win over customers. As our communities become more and more environmentally conscious, incorporating environmentalism into your brand can be a key differentiator to winning them over.
A study by Nielson shows that both Millennials and Gen Zers are willing to spend more money on products or services produced by companies that employ green practices. Installing solar is a fantastic, visible way you can show your commitment to the environment to these discerning consumers. It will also help build loyalty and trust that will remain with them as they grow older.
And this propensity for environmentalism isn’t just for customers. Studies suggest that employees, especially those of younger generations, will appreciate your commitment to the environment and the adoption of renewable energy sources.
In the 2016 Deloitte Millennial Survey, a whopping 87% of respondents said: “the success of a business should be measured in terms of more than just its financial performance.” And lessening the negative environmental impact your business has could go a long way.
In the same study, 70% of millennials reported that their personal values are shared by the companies they work for. This increases to 82% among the younger crowd who plan to stay at their company for another five years.
So installing solar can really resonate with young talent, ensuring you have loyal employees for years to come.
Business Going Solar FAQs
We want to sum this blog up with a few frequently asked questions and the answers to those questions.
Question: How much does it cost to go solar?
Answer: That’s a tough thing to answer without a professional evaluation because there are so many variables that change on a case-to-case basis. However, you can use our chart to estimate the cost based on the amount of electricity your business uses, to help give you an idea of the cost.
Question: How much will we save by switching to solar?
You: The payback and ROI are dependent on the cost of the system, how much the system produces, how much electricity we use, and the rate of that electricity. But the good news is that about 60% of your investment will be returned to your business in year one.
There are a variety of incentives available that help lower costs, and for businesses, it’s not uncommon for payback to be reached in a few years and for the ROI to be in the double digits. A detailed quote from a solar company should answer this question.
Question: Does solar energy require maintenance?
Answer: Solar typically requires little maintenance. Most solar panels come with warranties of 25 years, and inverters come with warranties of 10 years. Depending on the installer we chose, we may also receive a workmanship and production guarantee.
Tip: Paradise Energy offers a Triple Ten Guarantee, which not only covers all workmanship issues and system monitoring for ten years but also the system’s production for ten years.
Question: How long do solar panels last?
Answer: The typical expected lifespan of a solar system is 30 years. Depending on how long your payback period is, you’ll have years of free electricity from the system.
For many businesses, solar energy is a great way to reduce costs, increase profits, and make a positive impact on the environment and the community. Don’t wait to start saving with solar energy.