Considering Solar? Consider This.

There’s been a lot of positive press surrounding Fortune 500 companies, cities, and schools committing to net-zero energy goals. Perhaps because of this, organizations around the globe are looking to renewables like solar PV to solve their energy challenges.  According to new research conducted by Centrica Business Solutions, 79% of businesses are planning to increase the amount of power they self-generate over the next five years.

Why is Solar so Enticing?

Solar energy allows organizations to lower operating expenses and increase revenue by reducing or eliminating utility costs. It also protects organizations against energy price fluctuations and inflation — providing greater budget stability and improving forecasting. Solar power is 100% sustainable, reliable, and cost-effective — ideal for organizations that want to reduce both energy costs and greenhouse gas emissions. 

And, of course, there are environmental and health benefits. Fossil fuels are a major source of air pollution and ground-level ozone. Burning fossil fuels for electricity is also the largest source of greenhouse gas emissions from human activities in the United States, contributing to global climate change.

Nevertheless, some organizations are hesitant to commit to solar because of the initial installation cost. The good news is that there are a variety of funding mechanisms, utility incentives, and tax credits that make solar not only attractive but affordable.

For example, funding options include:

Capital Purchase: Financing your Solar PV system with available capital delivers the best return on investment (ROI). This approach pays for itself through increased savings and profits – allowing companies to reinvest the savings back into their core business. 

Benefits include:

  • Increased savings over the lifetime of the PV system
  • Tax advantages from limited-time incentives
  • Customer retains Renewable Energy Certificate (REC) income and incentives where applicable

Power Purchase Agreement (PPA): A PPA is a low-maintenance option. With a behind-the-meter PPA, organizations can purchase the electricity generated from their solar PV system at a set kWh price that is lower than the local utility’s retail rate. With a PPA, the third-party system owner is responsible for the operation and maintenance of the system and is entitled to any financial incentives.

Benefits include:

  • No capital outlay
  • Immediate electricity savings
  • No ownership responsibilities

Solar Lease: A solar lease is very similar to a PPA, but rather than paying for the power generated, organizations simply pay a fixed monthly lease payment for the term of the contract. Under the terms of the solar lease, the solar company owns and maintains the solar system and is entitled to any tax incentives.

Benefits include:

  • No capital outlay
  • Immediate electricity savings
  • End-of-lease purchase option 
  • Customer retains REC income and incentives where applicable

Property Assessed Clean Energy (PACE): PACE is sponsored by state and local governments. To date, 32 states plus the District of DC, have adopted legislation for commercial PACE programs. PACE solves the economics of installing solar by producing a cash-flow positive project from day one. This option is ideal for businesses who want to go solar with no upfront capital outlay but do not have the credit rating required for traditional solar loans or leases. Projects can be secured by the building they benefit and repaid (at low-interest rates and with $0 down), through the property tax bill rather than from corporate earnings.

Benefits include:

  • 100% upfront financing
  • Long repayment terms
  • Low, fixed-rate interest
  • Immediate payback 
  • Tax advantages from limited-time incentives
  • Retain REC income and incentives where applicable

Available tax credits and incentives include:

  • The Investment Tax Credit: The Investment Tax Credit (ITC) is a U.S. federal corporate tax credit that allows individuals or businesses to deduct a certain percentage of investment costs from their taxes. These credits are in addition to normal allowances for depreciation. These credits differ from accelerated depreciation in that they offer a percentage deduction at the time an asset is purchased. Eligible technologies for the ITC include solar water heat, solar space heat, solar thermal electric, solar thermal process heat, photovoltaics, wind, biomass, geothermal electric, fuel cells, and geothermal heat pumps. The current credit is 30%, but that drops to 26% in 2020, 22% in 2021 and 10% in 2022. 
  • Rebates & Incentives: Many states, counties, municipalities, and utilities offer rebates or other incentives for solar energy technologies. The Database of State Incentives for Renewables & Efficiency (DSIRE) has a comprehensive list of solar incentives by state, as well as maps showing solar policies across the U.S.
  • Net Metering: Net metering is a billing mechanism that allows commercial customers who generate their electricity from solar to sell the electricity they aren’t using back into the grid. Differences between state legislation, regulatory decisions, and implementation policies mean that the mechanism for compensating solar customers varies widely across the country.
Maximizing the Benefits of Solar

Experts agree, combining renewable energy like solar with energy efficiency upgrades delivers the greatest value. When combining energy efficiency with solar systems, the total benefit is greater than if either of them was used individually. According to the American Council for an Energy-Efficient Economy “synergies between energy efficiency and renewable energy use the strengths of one to complement the weaknesses of the other.”

Here’s why:

An overwhelming number of organizations simply don’t understand how much energy they use — and, more importantly, how much energy they’re wasting (often as much as 30%). 

The amount of energy a solar system needs to produce to power a building/business naturally depends on how much energy is used. As such, it simply makes sense to reduce consumption wherever possible, eliminating any wasted energy. Right? Once an organization understands exactly how much energy its business needs, it will know how much energy it needs to produce.

The main benefits of combining solar with energy efficiency upgrades include:

  • Optimizing energy efficiencies/decreasing consumption wherever possible ensures the solar PV system is right-sized to the organization’s needs, delivering maximum value and reducing upfront costs. (The general rule of thumb is that every $1 spent to improve the efficiency of a structure saves $3 to $5 on the cost of a renewable energy system.)
  • An energy-efficient building requires less solar power capacity than another building of the same size that hasn’t been retrofitted for energy efficiency.
  • The money saved through energy efficiency upgrades can help finance additional efficiency improvements and/or additional renewable energy technologies,
How to Increase Efficiency Before Installing Solar
  • Audit Your Energy Consumption: Conducting an energy audit before installing solar is a smart first step. In addition to providing a clear accounting of how much energy an organization uses on a monthly basis, it will outline specific opportunities for reducing energy consumption.
  • Optimize HVAC Systems: Together, HVAC and lighting can account for over 75% of energy expenses – with heating and cooling accounting for the lion’s share. Accordingly, HVAC is a great starting point for any energy efficiency retrofit. Upgrading older, inefficient HVAC systems – especially systems that are more than 10 years old – will dramatically reduce energy consumption.
  • Install programmable thermostats: A programmable thermostat can automatically adjust the temperature of a building during different times of the day – and when it’s not occupied. Setting the AC or heat to turn on 30 minutes before people arrive and off 30 to 60 minutes before they leave is a quick fix. It’s also beneficial to set the thermostat no lower than 78 degrees during summer working hours, and no higher than 68 degrees during the winter. Keeping your office temperature just 1° cooler in winter and 1° in summer can reduce energy consumption by 10%. (A word of caution here: if setting the temperature to 68 during the winter results in multiple employees plugging in individual heaters, you should consider raising the temperature a little – since individual heaters draw excessive energy.)
  • Upgrade Lighting: Lighting is frequently the second-largest energy cost for commercial buildings – accounting for up to 20% of the electricity consumption. LEDs are extremely energy efficient relative to other lighting technologies. New LEDs use a minimum of 75% less energy and can last 50,000 to 100,000 hours or more. (The typical lifespan for an incandescent bulb is approximately 1,200 hours.) Optimized lighting has also been proven to have a positive effect on employee productivity and well-being. An indirect benefit of efficient lighting is that less waste heat is released, reducing the load on any air conditioner present.
  • Add Controls: Use motion detectors and automatic dimmers to reduce lighting costs. Optimizing where and how lighting is used can greatly reduce energy consumption. Consider installing motion detectors in hallways, meeting spaces and other places where “always-on” isn’t needed—along with automatic dimming controllers that measure and adjust to the light levels required during the day.
  • Seal and Weather Strip: Air leakage (the uncontrolled migration of air through the building envelope) is a major source of wasted energy and indoor air quality problems in commercial buildings. It can increase energy consumption as much as 22% to 46% in large commercial buildings. Window sealants and weather-stripping are two of the easiest ways to prevent air leakage.
In Conclusion

Even while the cost of solar systems continues to drop, saving energy is still less expensive than generating it.  Accordingly, organizations shouldn’t ponder whether to commit to improving their energy efficiency or installing solar, they should combine the two options to maximize their return on investment.

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