Why You Can Trust CNET Tax Credits and Incentives Help Businesses Go Solar Too
Are you a business owner looking at solar power as a way to save money on your energy bills? Here's what you need to know about commercial solar.
Solar panels aren't just for home rooftops. They can go anywhere the sun shines -- including on top of a business.
One of corporate America's newest status symbols? The solar panel.
About half of all corporate solar has been installed over the past three years, with large companies such as Meta, Amazon, Apple and Walmart significantly investing in solar energy, according to the Solar Energy Industries Association.
"From data centers to industrial freezers, the most energy-intensive business operations are turning to solar as the most reliable and affordable way to power their infrastructure," SEIA President and CEO Abigail Ross Hopper said in a statement.
But it's not just America's largest corporations that are reducing their energy bills by adopting solar. The Inflation Reduction Act has significantly increased the incentives for renewable energy, and small businesses across the country can benefit greatly from the bill as well as other programs.
Commercial solar "is wholly untapped and a massive opportunity where you can see small businesses break even on capital costs in six to seven years in a lot of parts of the US," Steve Ricketts, principal at Generation Solar and chair of the Kentucky Solar Energy Society, told CNET. "It's one of the best and quickest capital investments small business owners can make for the long term."
If your business is thinking about going solar, here's what you need to know.
What is commercial solar?
Commercial solar projects can vary greatly, from rooftop solar systems on top of a car repair garage, similar to those on houses, to corporate solar farms that take up acres of land. It's not just about infrastructure, however: Solar could offer greater savings for commercial users because of how energy utilities charge businesses for energy.
Many utilities will charge businesses higher rates than they charge residential customers. Businesses often also have to pay demand charges, a fee for a company's peak usage during intervals between 15 to 30 minutes, like when a factory turns on all its machinery.
"Where I am, it costs 30% to 40% more as a small business for energy than a home," Ricketts said. "The best opportunity to actually reduce your bills in any situation is with solar. It's a real gold mine for cost savings."
Because of these demand charges, the financial incentive for installing batteries to store energy is much greater for businesses than for homeowners. If a business can pull stored energy from batteries rather than the grid, it can potentially avoid more expensive demand charges.
Where can commercial solar panels be installed?
That depends on your property, but it could be basically anywhere.
"In some ways, there are less restrictions on installing solar for commercial use than residential," Ricketts said. "You're typically not faced with homeowners associations or historic districts. Businesses already got potentially acres of roof space or ground around their operation to lay solar on. The only restriction a business may hit is it might have to work with a utility to upgrade the size of its transformer."
The largest hurdle for businesses considering solar is likely to be whether their state limits net metering, when a utility pays for energy fed back into the electrical grid. That can negatively affect the financial savings of a larger solar array.
Even in places with lower net metering limits, solar companies can make systems work. Ricketts gave the example of Kentucky solar companies installing 44.9-kilowatt systems to avoid the net metering limit of 45 kilowatts.
Net metering is "really the policy that governs commercial adoption more than anything else," he said.
How much do commercial solar panels cost?
Due to logistical and supply chain issues, the average cost of solar panels has been trending upward for the past 18 months, approaching about $2 per watt for commercial solar projects. Overall, however, commercial solar projects are "substantially" cheaper than residential, which cost on average around $3 per watt, due to "an economy of scale thing more than anything else," Ricketts said.
Prices trend downward the larger a project is. Larger commercial projects can see savings by directly ordering from manufacturers. Smaller businesses may be able to access these savings by partnering with their peers to do bulk orders, a tactic advocated by Solar United Neighbors.
Are commercial solar panels eligible for tax credits?
Not only will businesses pay less on average for solar equipment, but they have access to the 30% tax credit granted by the Inflation Reduction Act. Business owners also have access to other programs, including REAP (the Rural Energy for America Program), a US Department of Agriculture program that provides loan guarantees and grant funding not only to farmers but also any rural small businesses installing renewable energy systems.
"REAP can be a phenomenal scheme," Ricketts said. "I've used it many times. If your business is outside a 50,000-inhabitant population center, you're eligible for REAP and can get a 25% grant on the system. It could be a laundromat, a bowling alley or a car dealership -- as long as it's in a rural kind of community, it equally gets the grant as much as farms do."
How to pick a commercial solar company
The scope of the project will determine what solar companies are available for your commercial solar installation. Small- to medium-scale business areas may be able to work with local installers, but larger projects will require a specialized provider.
"There is quite a demarcation between being residentially capable and being commercially capable," Ricketts said. Commercial projects require "different electrical skills, a higher level of technical knowledge or significant voltages. Don't necessarily expect your residential company to have commercial skills."
Ricketts has two pieces of advice for finding a qualified commercial solar installer:
Look for qualifications. "Anybody worth their salt will have installers, team leaders, electricians and engineers who've got their NABCEP qualifications, which is not just a board qualification -- they have to actually show they have performed a number of jobs in the field successfully," he said. The board's website has a directory of accredited professionals.
Do your research. "Second, anybody worth their salt would always be entirely happy to give reference visits to existing projects and walk people across the roof of prior customers and have the systems explained to them," Ricketts said.