No question, electricity bills in the U.S. have increased substantially, with customers burdened with some of the highest bills they’ve seen in years. But don’t blame your electricity provider for bill shock surprises. Instead, volatile natural-gas prices being driven higher by various factors, including winter demand, geopolitical events, and a global natural-gas supply shortage are to blame.
The natural-gas supply shortage has made it considerably more expensive for utilities to produce or purchase electricity. And the result? Higher bills for consumers.
But there’s a solution to the electrical bill shock — solar power.
Solar power is increasingly becoming a reliable, clean, and affordable power source for businesses of all sizes. Considering the benefits and advantages solar provides, the price of solar panels dropping considerably over the last decade, and an average ROI of 20 percent or more, it’s little surprise that solar for businesses is booming.
In 2020, solar was the U.S. energy industry’s fastest-growing sector. Fast forward to 2022. If supply chain constraints don’t undercut the industry, the U.S. Energy Information Administration is projecting a solar boom this year with U.S. businesses expected to install 21.5 gigawatts of utility-scale capacity. This would shatter the annual record of 15.5 GW set in 2021.
Why the big boom in solar for U.S. businesses? Follow along for key reasons why solar is increasingly becoming an attractive investment for business owners.
Lower Overhead Costs
One of the highest overhead costs for a business is electricity. Switching to solar power reduces electrical bills significantly. In fact, EnergySage reports that the monthly power bills for the average commercial business dropped 75% after converting to solar — from an average of $1,950 to approximately $500. The savings start immediately after installation and continue at that rate for the lifespan of the system, which typically is 25 to 30 years.
Better Budgeting and Long-Term Planning
Solar eliminates bill surprises that can throw a monkey wrench into managing cash flow, budgeting, and long-term planning. With solar, there’s no need to worry about volatile electricity rates and how they impact your operations. Choosing solar allows you to hedge against the price volatility of electricity by locking in energy costs for years to come. This protects you from unpredictable and undoubtedly higher rates down the road and makes budgeting and planning processes more streamlined and accurate.
Investing in solar allows you to reduce or remove your dependence on the local power company. This provides a couple of benefits:
- Greatly reduces overhead costs.
- Ensures that no matter what happens on the commercial grid, you’ll have a reliable electric supply. Unlike electricity, there is no need to worry about lost productivity or data due to a power outage.
Additionally, a solar system has no moving parts so a breakdown is highly unlikely. Plus, maintenance requirements are low. For many systems, all that’s required to keep the system properly maintained is keeping the panels clean and free of debris.
Converting to solar provides tax benefits and initiatives on the local, state, and federal levels. And the good news is you don’t have to install a certain type or size of solar system to quality. Here are the primary ones offered:
Investment Tax Credit for Solar (ITC)
ITC is the best solar incentive and gives back 26 percent of what you paid for solar on your taxes. Instead of a deduction, which reduces your taxable income, a tax credit directly offsets what you would otherwise owe in taxes. Or to look at it another way, instead of just being taxed on a lower income, the federal ITC offsets what you actually owe in taxes, and can even come back to you as a refund.
State Tax Credits
Some states offer additional tax credits for installing a solar panel system. Amounts vary significantly by state, but when paired with the federal ITC, it can really add up.
Some states, municipalities, and utility companies offer up-front rebates for installing a solar panel system. They generally are available for a limited time and go away once a certain amount of solar has been installed in your region. Typically, these rebates further reduce your system costs by 10 to 20 percent.
Solar Renewable Energy Certificates (SRECs)
This incentive allows you to recover equipment installation costs by using your system’s energy production. Government frameworks calculate one SREC as equal to 1,000 kWh. They make it mandatory for electric companies to participate and honor every SREC you produce from your solar equipment.
Performance-Based Incentives (PBIs)
PBIs pay you a per kilowatt-hour credit from the utility for the solar electricity that your system produces. These incentives can be significant and can greatly enhance your financial return over the lifetime of your system.
You are entitled to accelerated depreciation on your solar energy equipment through the Modified Accelerated Cost-Recovery System (MACRS) — a federal government program. While typical equipment depreciation tax deductions are normally spread over the entire life of the products, through MACRS you can write off your solar panel system in the first year. This significantly improves cash flow and the ability to finance your solar installation.
Interested in converting to solar?
The first step is to talk with a professional provider/installer, followed by a site visit by your provider/installer. Making the move to solar is not flipping a switch. It requires careful consideration and planning and the knowledge and experience of a reputable provider/installer to determine if solar is right for your business and can help you achieve your business goals.