The Pros and Cons of Commercial Solar Energy

Solar power is heating up the energy industry, and businesses across the nation are starting to make the switch. The rising demand for solar is sparked by a few factors, including major shifts in U.S. energy policy, heightened tax incentives, and calls to prepare the grid for unprecedented stressors. These factors all contribute to strong, valid reasons for businesses to switch to solar, but there are both pros and cons that commercial clients should weigh before making a decision.

Renewables are having their heyday and solar is leading the charge, partly in thanks to the outcome of the 2020 presidential election. Upon taking office, President Joe Biden set a sweeping $3 trillion economic recovery plan into motion, prioritizing renewables in an effort to build sustainable infrastructure and a future run on clean energy. Under the Biden plan, solar and other renewables will see a significant investment from the government and receive a 10-year extension to tax credits. 

It’s not just the tax breaks that have businesses eyeing renewables, either. About 40% of the energy produced in the U.S. is utilized by businesses, which means that energy efficiency and conservation is top of mind for many. Given the plummeting costs of solar in recent years, businesses have switched to solar in an effort to lower operations costs and utility bills.

What’s more, recent spikes in the severity of natural disasters have exposed weak spots in the nation’s grid. The Texas energy crisis is a prime example of what happens when energy systems are underinvested. Some businesses are considering alternative energy options to seek independence from underprepared grids to mitigate the risks of major disruptions. 

Despite all of these factors contributing to solar’s popularity, not all businesses are ready to make the switch. Many are still hurdling the challenges of adapting from the COVID-19 era to post-pandemic life. That’s where energy brokers come in: the easier they can make it to weigh options in regards to solar, the better they can serve their commercial clients.

The federal solar tax credit is known as the Investment Tax Credit (ITC), and it enables businesses and homeowners to deduct up to 30% of their solar energy installation costs from their federal taxes. With an extension on the horizon, it’s only more likely that businesses will start scooping up solar to lower their tax rates.

As more advanced and efficient photovoltaic technology is developed, the cost of solar is plummeting. Solar costs have dropped 82% since 2010, and they’re likely to keep on their downward trajectory.

Taxpayers who claim the ITC for a solar PV system installation can also take advantage of accelerated depreciation. This means they’re able to deduct a larger portion in earlier years, giving them the benefit of a greater immediate reduction in federal tax liability. Some businesses can elect to claim a 50% depreciation bonus.

If you’re looking to increase the value of your building or investment, solar is a great option. Though this depends on the building’s location and its affiliated energy policy, solar definitely has the potential to increase a property’s selling price.

Most businesses have their energy bills and consumption data available to make the calculation. Within the first year, a typical 5 kW solar PV system can easily generate an ROI of 20%.

Depending on their county, businesses can be paid for any surplus electricity generated. A strategic energy consultant should be able to help businesses navigate the local laws and benefits.

Maintenance costs for solar panels are almost none, and most solar panels come with a warranty.

Given the recent disaster in Texas, many businesses are opting for more reliable energy independent of the energy grid.

They’ll last you about 25 to 30 years, with minimal maintenance required.