Last year, the Solar Energy Industries Association (SEIA) ranked companies by the number of megawatts they generate from solar energy. As expected, the list was topped by industry giants such as Meta, Amazon, and Walmart. But the SEIA report did contain an interesting revelation—a high number of businesses of all sizes have commercial solar installed in 100% of their facilities.
The past decade has witnessed a soaring number of solar installations, the result of several factors that have improved the ROI and motivation to implement the technology, including plummeting panel prices, heightened environmental awareness, climate concerns, and tax incentives. Because of these developments, more energy-smart businesses of all sizes are realizing the value of commercial solar.
Is solar right for your facilities? We delve into what solar energy entails to help you decide.
The Technology Behind Commercial Solar
Within the solar market sectors–utility, commercial and industrial (aka C&I), along with residential–there are two major technologies currently used to generate solar energy: concentrated solar power (CSP) and photovoltaic (PV) solar.
Falling solar panel costs, environmental goals, and the rising cost of nonrenewable energy are all leading more businesses to invest in solar. And now the recently enacted Inflation Reduction Act (IRA) is making solar energy even more compelling.
Concentrated solar power is a thermal technology that uses mirrors to reflect and concentrate sunlight onto a receiver. The heat energy, which reaches temperatures as high as 560℃, is stored in fluid within the receiver. This type of solar power technology can be excessive for a typical office building but is ideal for energy-intensive commercial and industrial applications like food processing and water desalination. Often used in power plants, CSP is cost effective and highly efficient, though it does require a large initial investment, and comes with stringent setup and space requirements.
Perhaps for these reasons, CSP doesn’t have the same popularity as a more familiar solar technology: photovoltaic (PV) solar panels. These modular panels are made from crystalline silicon, a semiconductor material that absorbs photons from sunlight, creating a direct current (DC) that is then converted to alternating current (AC) for facility use or storage.
Although the same PV technology is used for both residential and commercial solar applications, panels for home use have only 60 cells while commercial solar panels typically have 72 to 96 cells, providing a greater amount of wattage per panel.
Because PV panels are modular, they provide a flexible solution, making them highly suitable for different building sizes and locations throughout a facility. Efficiency and cost vary according to panel type, so knowing what the options are is important to ensure the best configuration for your project. Keep in mind too, that although higher-efficiency panels will cost more, they will also produce more electricity.
PV Solar Panel Types
In addition to efficiency and cost considerations, when it comes to deciding which PV panels to install, it’s important to consider additional factors such as project goals and budget, available space, and how much sunlight your location receives. With that in mind, here is a breakdown of the different types of panels available:
Monocrystalline Silicon Panels (Mono-Si)
Monocrystalline panels are made from a single crystal structure of silicon and are the most efficient panels commercially available. They are also space efficient, a vital consideration if your installation space is limited.
Polycrystalline Silicon Panels (Poly-Si)
You guessed it, polycrystalline panels are made from multiple crystal structures of silicon, that is, several semiconductor materials melded together. While they may be slightly less efficient than monocrystalline panels, they offer good performance at a lower cost.
Thin-Film Solar Panels
While less common in the C&I sector compared to crystalline silicon panels, thin-film technologies, including cadmium telluride (CdTe) and copper indium gallium selenide (CIGS), can be a good choice when lighter weight and flexibility are required. They generally cost less than crystalline panels but are often less efficient as well. Thin-film’s biggest advantage is its use in building-integrated photovoltaics (BIPV), a technology in which photovoltaic substances replace conventional building materials in parts of the building envelope, such as windows and skylights, or carport covers in parking lots.
PERC (Passivated Emitter Rear Cell) Panels
PERC technology is often integrated into both monocrystalline and polycrystalline panels, enhancing efficiency by reducing electron recombination. A newer technology, PERC panels are increasingly common in the C&I sector.
Bifacial Solar Panels
Bifacial panels can absorb sunlight from both the front and rear sides, allowing them to capture light reflected from the ground or nearby surfaces. This can significantly enhance energy production, especially in installations with reflective surfaces.
With so many options, how do you pick the commercial solar solution that’s right for your facilities? The best practice is to gather information from reputable solar engineers and installers. These professionals can offer valuable information on the performance capabilities and efficiency of different solar panel types, enabling you to make a well-informed decision based on your unique project and facility requirements.
Commercial Solar Tax Benefits
Falling solar panel costs, environmental goals, and the rising cost of nonrenewable energy are all leading more businesses to invest in solar. And now the recently enacted Inflation Reduction Act (IRA) is making solar energy even more compelling.
The IRA aims to increase investment in American-made clean energy and has already resulted in over $100 billion in new private sector investments by the U.S. solar industry, with 51 solar technology manufacturing facilities built or expanded during the last year. While this rapidly growing industry heralds more competitive prices for the consumer, it’s the tax incentives from the IRA that are making many businesses commit to investing in commercial solar.
For businesses that use solar, two tax credits are available–but be aware, they can’t be combined. You’ll need to pick the one that’s right for your company:
- The investment tax credit (ITC) offers a federal tax credit of 30 percent on the cost of solar systems installed now through 2032. After that, the credit begins to step down, starting in 2033 when it decreases to 26 percent. This is an upfront credit that does not vary according to the system’s energy production.
- The production tax credit (PTC) is based on energy production. The credit is calculated based on the kilowatts per hour (kWh) of electricity generated. The credit is provided for the first ten years of the energy system’s operation and is adjusted for inflation.
Deciding which tax credit to apply for depends on usage and other factors. Generally speaking, a smaller facility in a less sunny area with high installation costs will do better with the ITC credit, while larger facilities in sunny locations will gain more from a PTC credit. But bear in mind that as commercial solar array production and adoption increases, system installation costs are likely to fall, making a credit based on kWh production a more valuable option across all facilities.
Solar Efficiency and Cost Evolution
A powerful and free source of energy, the sun provides the Earth with enough sunlight in an hour and a half to meet the world’s energy needs for an entire year, according to National Geographic. But the challenge has always been converting this resource into usable energy efficiently and at the right cost. Over the years the evolution of solar has been meeting that challenge.
In 2010, the cost of commercial photovoltaic (PV) solar energy was a hefty 39 cents per kWh, making it 710 percent more expensive than the cheapest fossil fuel-based solution, according to the Office of Energy Efficiency and Renewable Energy (EERE). Fast forward to 2020, and the cost of solar had plummeted to nine cents per kWh, making solar PV 29 percent cheaper than fossil fuels. And the price keeps dropping. It’s predicted that the cost of solar power will be just four cents per kWh by 2030.
And while costs have dropped, solar panel efficiency has been on an impressive upward trajectory. Over the last twenty years, efficiency has risen by seven percent. Solar panels currently have an efficiency of around 23 percent, and the technology continues to improve. This translates into tangible benefits for businesses, with solar-powered operations costing 60 to 85 percent less than traditional grid electricity, as reported by EnergySage.
Investment Calculations
While the initial investment in solar installation might seem substantial, experts estimate the ROI on commercial solar to be in the range of seven to 20 percent, with a payback period spanning three to ten years. Calculating the return on solar investment is inherently complex and varies from one business to another, but these numbers indicate a favorable return for businesses that embrace solar energy.
In calculating whether solar is an option for your facility, it’s useful to consider the levelized cost of energy (LCOE) of solar versus other options. An LCOE analysis takes into account the average per-unit cost of generating one unit of electricity from the solar energy system over its entire lifespan, including costs for initial setup, operation, maintenance, etc. To make an accurate estimate of what commercial solar will cost for your facilities, LCOE calculations are a must. To that end, the federal government provides a useful LCOE calculator.
Going Forward with Solar Energy
It’s clear that cost benefits, such as reduced energy expenses and tax incentives, make commercial solar an economically viable choice for many businesses. But embracing solar goes beyond harnessing renewable energy; it also aligns with many companies’ environmental, social, and governance (ESG) values.
By integrating solar solutions, your business will not only secure a cleaner energy source, but also establish your organization as a leader in the transition towards a greener and more sustainable business landscape.
