Is Commercial Rooftop Solar Right for Your Business?
The mechanics behind solar photovoltaic (PV) technology are the same regardless of location or how many panels are used. As the size of a solar project increases, there are more overall things to install, configure, and test before bringing a new system online. Larger solar installations introduce complex permitting and documentation requirements when seeking the necessary approvals from local utilities and regulators.
As a result, many businesses turn to commercial rooftop solar installers who specialize in more extensive and more challenging projects.
What Are Solar Solutions Available for a Commercial Building Owner?
Commercial solar companies offer the same range of services as residential installers, with the main difference being scale. When PV systems grow beyond a specific size, it’s not uncommon to involve several different solar contractors. Oftentimes, each specializes in various aspects of the project. Players in this field don’t always refer to themselves as “commercial rooftop solar installers.” They might go by “solar project developer,” “PV contractor,” or even “engineering, procurement, and construction (EPC) provider.”
Moreover, you won’t necessarily find everything you need under a single “roof” (so to speak). Some commercial PV contractors only specialize in solar project development’s design and installation stages. Others offer their business clients the full range of services below.
Commercial Roof Service #1: Solar Financing Assistance
Using cash to pay for your commercial rooftop installation delivers the shortest payback period and highest returns. Unfortunately, most business owners don’t have that kind of liquidity. This explains why a growing number of commercial project developers now guide their clients through the process by helping them source and apply for the various solar financing options below.
1. Solar Loans
With a solar loan, you borrow money from a bank or green lender to pay for your commercial PV installation (parts and labor included). But because you can use your monthly utility bill savings to pay down this loan balance over time, you are never technically paying “out-of-pocket.” And this makes using solar loans a very affordable option for commercial property owners who can pass the relevant credit checks and approvals.
2. Solar Leases
With this approach, a third-party (“lessor”) covers the total upfront cost of the installation for you – although there is sometimes a nominal fee that you may have to pay. Once the solar leasing agreement is in place, you then pay a fixed rate for the clean electricity the PV system generates over the 10 to 25 years of the contract. This fixed rate is set at a lower value than grid electricity, allowing you to begin saving right away. Better still, solar leases tend to have a more relaxed credit check and approval requirements than traditional loans do.
However, when using a lease, solar is no longer an investment that delivers predictable returns. You are simply buying electricity from a cleaner and cheaper provider. And thus, you’ll never break even.
3. Power Purchase Agreements (PPAs)
PPA’s are almost identical to solar leases except that you (as the lessee) only pay for the clean electricity your business consumes. Any unused solar power goes back into the grid, with the PV system owner (i.e., lessor) receiving either:
- Utility credits if enrolled in net energy metering (NEM)
- Solar renewable energy credits (SRECs) if they live in a participating state
4. Property Assessed Clean Energy (PACE)
Similar to a conventional loan, PACE financing provides you with the cash you need to cover the total cost of a new PV installation. You then use your utility bill savings to pay down the PACE loan balance (through your annual property tax bill).
PACE financing is a smart option in the residential market since many people own their own homes and are accustomed to paying annual property taxes. This financing approach might be worth exploring if you own your commercial property.
In addition to affordable financing, many commercial solar installations also qualify for a range of green incentives to help drive down the upfront and long-term costs even more. Below are some of the essential subsidies available to commercial solar customers:
- The Federal Investment Tax Credit provides you with a 26% tax credit from the IRS when you install commercial rooftop solar panels. This 26% threshold will continue to be downgraded over the next couple of years – ultimately dropping to 10% by 2024.
- Net energy metering and feed-in tariffs (FITs) are incentive programs that compensate solar customers for any excess electricity they send into the grid. With net energy metering, customers qualify for utility credits to future bills. You receive cash payments for any solar power you “sell” to your utility provider with feed-in tariffs.
- State and local rebates provide solar customers with “cashback” once their PV systems come online. These are highly location-dependent, with the exact eligibility requirements and payout amounts differing from jurisdiction to jurisdiction. Working with a commercial rooftop installer specializing in your geographic market increases your odds of finding and applying for local solar rebate programs.
Given the sheer scope of many commercial PV projects, most installers will help you navigate the financing landscape by connecting you with relevant lenders or leasing providers. It’s also worth remembering that while the upfront cost for commercial rooftop solar panels is often much higher than for residential installations, you’ll usually pay a lower price per watt thanks to economies of scale. Remember that many incentives – including net metering and the Investment Tax Credit – go to the PV system owner. You probably won’t qualify for most subsidies as a lessee if you lease your installation.
Commercial Rooftop Service #2: PV System Design and Installation
The next phase involves designing and installing your commercial PV system with financing in place. There are significant differences between commercial solar installations and their residential counterparts.
For example, the average size of a residential solar panel is 65” x 39” – with about 72 PV cells. By contrast, a standard commercial panel measures 70” x 39” with closer to 96 PV cells. In addition, residential roofs are usually pitched, while commercial ones tend to be flatter. Flat installations are easier to work with since contractors don’t need to penetrate the roof. However, special racking and mounting may be required to achieve the optimal tilt for the installed solar panels.
Whereas matching load, voltage, and current is relatively easy to do when installing enough solar capacity for home appliances, this balancing act becomes much more complicated when the goal is to power office equipment or industrial machinery:
- Will transformer upgrades be necessary?
- Are new electrical panels required?
- Will the installation need insulated wiring?
Factors like these explain why commercial solar installations can take up to an entire month to complete, whereas a typical residential PV installation might only take a couple of days. Moreover, many utility markets use different permitting and approval requirements for PV projects that exceed 10 kW. And even a tiny change to the original specifications can trigger another formal review, causing the permitting process to start all over again.
The good news is that commercial solar customers often qualify for more overall design options. Rooftop installations are by far the most popular. But ground-mounted PV systems are standard when sufficient land is surrounding the property. And many business owners commission solar carports that offer the dual benefit of free electricity and shaded parking (which can be a massive bonus in the sunniest regions of the country). Some solar carports can even be configured to charge electric vehicles (EVs).
Commercial Rooftop Service #3: Solar Storage Installations
Adding on-site batteries is an increasingly popular option for solar customers who want to maximize their savings over the lifetime of their PV systems. Batteries allow you to store daytime solar power for nighttime rather than grid electricity.
This marriage is a natural fit for many residential customers since their homes are often empty during the day when PV panels generate the cleanest electricity. These customers can then use the free energy stored in their solar batteries once they come home.
Installing on-site batteries is less common among businesses that follow regular working hours. It’s simply more cost-effective to use daytime solar power as it is being generated. But there are many businesses with heavy nighttime power requirements, from nightclubs to factories to hyper-illuminated car dealerships. And adding storage allows them to manage their costs better since they have the option of using whichever electricity is cheapest at that very moment – whether it comes from their solar panels, batteries, or the grid.
Commercial Rooftop Service #4: Solar Monitoring
Solar monitoring is usually an optional add-on service designed to provide customers with peace of mind in the residential market. This monitoring allows homeowners to track the performance of their PV systems, with some platforms sending automatic alerts whenever solar output deviates unexpectedly.
Monitoring is also optional for most commercial rooftop installations. But adding this technology is highly recommended since tiny performance dips can translate to huge losses as the solar installation grows. It’s technically possible to detect these dips by carefully scanning each utility bill. But most business owners don’t have the time to inspect every monthly or quarterly electricity statement. This is especially true since solar is often billed as a “set it and forget it” technology during the original sales pitch.
There are plenty of consumer-side solutions that will allow you to monitor your PV system’s performance. And depending on your own needs, any of these may be sufficient for your commercial solar installation. However, using a bespoke platform from your installer might be a better option. That’s because both you and the installer will receive real-time alerts. And often, these notifications are very detailed – enabling contractors and technicians to pinpoint the exact location of potential issues within the PV system. As a result, the underlying problem will likely be resolved faster, allowing you to begin generating savings again.
Commercial Roof Service #5: Solar Maintenance and Servicing
Many commercial rooftop solar companies offer maintenance and service agreements to ensure their customers’ PV systems remain in optimal working condition. These service agreements common different varieties, including:
- Scheduled maintenance at set intervals (i.e., quarterly, yearly, bi-annually). Also known as preventive maintenance, these types of service agreements allow you to catch issues early on and fix them before they mushroom into more extensive and more expensive problems.
- Emergency maintenance for whenever issues crop up unexpectedly. Being reactive, you can only fix problems once they’re detected. Monitoring will help in some cases. But frayed wires, slipped panels, or rusty mounting are all issues that can exist for years without negatively impacting PV system performance. And by the time these problems are discovered, repairing them can be prohibitively expensive.
Just as with solar monitoring, maintenance is 100% optional. But both are highly recommended for larger solar installations. More components mean that more possible things can go wrong with your system over the 25+ years of each panel’s warrantied lifetime.
How Do I Know If My Building Is a Good Candidate for Solar Power?
That’s a fair question since not every property is eligible for solar power generation. Your commercial building, for example, must receive sufficient sunshine – either on the rooftop directly or wherever you intend to install a ground-mounted system or solar carport. If neighboring trees are creating too much shade, it may be possible to trim them back – provided you get permission from the landowner and local agencies.
If installing panels on your commercial rooftop, the building must be structurally sound – i.e., strong enough to support however many boards you plan on adding. This may require redoing some or all of the roof, which can significantly add to the total cost of your installation. And unlike the PV panels themselves, roof upgrades usually aren’t eligible for federal incentives like the Investment Tax Credit.
Fortunately, any experienced commercial rooftop contractor should be able to assess your building’s solar eligibility. And since most property inspections are free, you have nothing to lose by scheduling one (or several).
How Much Does a Commercial Solar PV System Cost?
Thanks to increased competition and innovation, solar panel prices continue to plummet in price, with the National Renewable Energy Laboratory (NREL) reporting that the average residential, commercial, and industrial customer now pays 64%, 69%, and 82% less than they did just ten years prior.
Because of these price decreases, locking down the current cost of a commercial rooftop solar array is difficult. Solar isn’t usually priced by the panel or module to further complicate things. Instead, the actual cost is measured in price-per-watt, which factors all the components, labor, and time required to bring a PV project online. According to the Center for Sustainable Energy, solar panel prices currently hover between $2/W and $4/W after applying incentives like the Investment Tax Credit or local rebates.
However, the exact cost of your own commercial rooftop solar array will depend on the size of the system, what technology is being used, and how you choose to finance the project.
In addition to installation costs, there are also ongoing maintenance costs, which can vary considerably depending on the scope of the service agreement (if any) and the size of the installation itself. Maintenance and monitoring are justifiable expenses for many business owners if they allow you to detect and fix problems early on quickly. However, both can be overkill if the cost of these services exceeds the savings reclaimed by correcting issues.
What Kind of Financial Returns Can I Expect from Commercial Solar Power?
There are many different reasons to go solar – including energy independence and environmental protection. But for most business owners, generating measurable financial returns is the number one goal. This makes sense since solar is still a significant upfront investment even with incentives and financing. And you want the cumulative savings from your solar installation to offset these costs so that you break even as quickly as possible. All solar electricity generated after that is free for the lifetime of your system.
Because PV panels are warrantied for 25 years, solar is a very safe investment that can sometimes outperform the S&P 500. However, several key factors can influence what kinds of returns your commercial solar installation will generate over its lifetime.
The actual cost of the solar project matters, with larger and higher quality PV systems carrying heftier price tags than smaller or lower quality installations. Either way, applying for as many incentives as possible can help drive down these costs, which in turn increases your returns.
Below are other factors that can directly impact the ROI of your commercial solar investment.
How Much You Pay for Grid Electricity
Because solar power offsets grid electricity spending, those who live in more expensive utility markets will save more money by installing PV panels. Equally important, those savings only grow with time as grid prices continue to increase. That’s because solar panels help today shield you from rate increases tomorrow.
How Much Solar Energy Is Created, Used, Stored, or Sold
The amount of energy generated impacts the types of returns your investment will cause. And this is a function of the PV system’s size, solar exposure, and components being used.
But arguably more important is what you do with that energy once it is created:
- Solar energy consumed in real-time offsets daytime electricity spending – precisely when utility rates are often highest
- Excess solar fed into the grid can generate credits (if enrolled in net metering) or cash (if enrolled in a feed-in tariff program)
- Batteries allow you to store, consume, or feed solar power at times that maximize your savings
- Making energy efficiency improvements can help improve the ROI of your solar investment since you won’t need as many panels to cover your electricity needs
- Electrifying more of your business allows you to power more of your operations with free solar energy rather than natural gas
The US Department of Energy has a Commercial Solar Decision Guide designed to help you determine whether a PV installation makes financial sense for your business. It is a dated and dense read, but it provides the broad strokes of what financial consideration should factor into your decision-making.
An even faster way to determine the potential ROI of your commercial solar installation involves scheduling a free property inspection with an experienced installer. They can analyze your building and provide you with a detailed proposal – complete with all the costs, savings, payback periods, and returns itemized for you.
What Are the Challenges of Commercial Solar?
This article has already explored some of the technical challenges of installing new PV installations for commercial clients. But even after your system becomes operational, there are additional hurdles you may have to worry about. For example, who is ultimately responsible for fixing a cracked panel or malfunctioning inverter if your PV system’s performance starts to decline in its second year?
This issue might not be as prominent when dealing with vertically integrated commercial solar providers who are accustomed to working with the same technology repeatedly. But troubleshooting issues after the fact becomes more challenging if the original solar installation involved subcontractors or multiple teams specializing in a different aspect of your PV system – from the panels to EV-charging to on-site batteries.
Another challenge is whether the original installer offers performance guarantees or operations and maintenance (O&M) contracts. If so, are these services automatic, or do they require dedicated agreements? And what is the exact scope of service once the contract goes into effect?
Even having a full-service maintenance agreement doesn’t necessarily mean that you’re fully protected. For example, many current solar monitoring solutions rely on 2G and 3G cellular technology to send and receive energy production data. But by the end of 2022, significant telecoms will have phased out these protocols in favor of 4G and 5G cellular data. This means any solar monitoring solutions dependent on the 2G or 3G standard will suddenly cease working. And unfortunately, most commercial solar installers aren’t set up to swap out legacy monitoring solutions once the 3G Shutdown goes into effect.
How Can Technology Overcome These Challenges?
Because commercial solar projects involve more actors and components, there are many more things that can go wrong after the fact. Even with an ongoing solar maintenance agreement, finding the right team to resolve these issues can be challenging, given that roles and responsibilities are often blurred. Worse still, there’s no guarantee that the technicians who ultimately do show up have experience working with the specific components in your solar installation.
With technology, however, it’s possible to eliminate these challenges.
Our cleantech marketplace allows you to connect with qualified PV professionals trained and certified to troubleshoot whatever issues your commercial solar installation may be facing.
We generate a unique “DNA” profile of your PV project, complete with its location, size, age, and other technical specifications. Our algorithm then matches your solar installation’s DNA against an exhaustive database of specialized technicians. Whether for one-off repairs or ongoing maintenance, our technology ensures you always find the right team for the job – at a transparent and affordable price.
To learn more, visit our About Page today.