The Benefits Of Solar Panels For Commercial Buildings

Installing solar panels for commercial buildings offers a powerful solution. Commercial solar energy systems can significantly reduce electricity costs, shield businesses from utility rate hikes, and support long-term financial stability. At the same time, solar energy for commercial buildings helps companies demonstrate environmental leadership and meet sustainability goals.

Today, businesses that invest in solar panels for commercial projects can also take advantage of strong federal tax incentives, including the Investment Tax Credit (ITC) and accelerated depreciation benefits, which drastically lower the net cost of installing solar on commercial buildings.

Understanding the growing market for commercial buildings with solar panels is essential for solar contractors who want to expand their businesses and reach new customer segments. By tapping into the opportunity for solar on commercial buildings, you can help businesses reduce operating costs while building a stronger, more resilient clean energy future.

How Solar Panels for Commercial Buildings Decrease Operating Costs

Paying monthly utility bills leaves businesses with nothing tangible to show for their investment—essentially renting their electricity. By installing solar panels for commercial buildings, companies can shift from renting power to owning a long-term energy asset. Whether installed directly on company property or through off-site generation, solar energy for commercial buildings allows businesses to take control of their energy future and stabilize long-term costs.

When transitioning to commercial solar energy systems, companies typically have two options: entering a solar Power Purchase Agreement (PPA) or purchasing the solar panels commercial system outright. Performing a thorough cost-benefit analysis is critical to understanding the potential savings, return on investment (ROI), and overall financial benefits of adding solar on commercial buildings.

Solar PPAs for Businesses

A PPA enables companies to lock in lower electricity rates without the upfront cost of buying a solar system. Under this model, a third party owns and maintains the commercial solar energy system, while the business simply purchases the solar power it generates—often at rates lower than the local utility.

PPAs allow companies to go solar with no money down and avoid the responsibility of system maintenance. However, because the company does not own the solar panels, they are not eligible to claim tax incentives like the federal Investment Tax Credit (ITC) or depreciation benefits.

Purchasing Solar Panels for Commercial Buildings

Purchasing solar panels for commercial buildings offers businesses even greater financial upside over time. Once the system pays for itself through energy savings, companies can enjoy many additional years of nearly "free" electricity, significantly reducing long-term operating expenses. Ownership also opens the door to major tax advantages, including the 30% federal solar tax credit and bonus depreciation—provided the business has sufficient tax liability to benefit.

It’s important to remind clients to consult with a tax professional to determine their eligibility for these incentives and avoid offering tax advice directly. For companies with the right financial profile, installing solar panels for commercial systems can be a high-value investment in both energy independence and cost savings.

Advantages and Disadvantages of Owning Solar Panels for Commercial Buildings

Installing solar panels for commercial buildings can be a game-changing investment, but it’s important for companies to weigh both the advantages and disadvantages carefully. Here's a breakdown to help business owners make informed decisions about adding solar energy for commercial buildings.

Pros	Cons
✅ Significant Cost Savings: Lower long-term operating expenses by reducing or eliminating electricity bills.	❌ High Upfront Costs: Purchasing solar panels for commercial systems requires significant initial capital investment.
✅ Environmental Sustainability: Reduce your company’s carbon footprint and support clean energy initiatives.	❌ Sunlight Dependency: Solar performance is better suited for sunnier regions; lower output can occur in cloudy climates.
✅ Revenue Potential: Generate additional income by selling excess energy back to the grid where net metering is available.	❌ Space Requirements: Solar on commercial buildings may need substantial roof or land area to meet energy demands.
✅ Positive Brand Image: Enhance public relations by showcasing a commitment to sustainability and innovation.	❌ Aesthetic Concerns: Some businesses may have concerns about how panels impact building appearance.
✅ Energy Independence: Protect your business from utility rate hikes and improve energy resilience.	❌ Maintenance Needs: Although minimal, solar panels require periodic maintenance and eventual component replacement.
✅ Eligibility for Incentives: Access the 30% federal Investment Tax Credit and accelerated depreciation benefits.	❌ Regulatory Complexities: Permitting, inspections, and utility interconnection can add time and complexity to projects
✅ Long-Term Financial Stability: Lock in predictable energy costs for decades, improving financial planning.
✅ Increased Property Value: Commercial buildings with solar panels often see higher market valuations.

Potential Increase In Property Value With Solar Panels for Commercial Buildings

Numerous studies have shown that solar power systems increase home values, so the same is likely true for commercial property owners with solar PV systems. This is because properties with solar are cheaper to maintain, thanks to lower energy bills. Keep in mind that your customer must own the solar panels on commercial buildings for the building owner to benefit from an increased property value.

Tax Breaks For Solar on Commercial Buildings

Another big benefit of solar panels for commercial buildings is the potential eligibility for two federal tax incentives. These financial incentives help boost the return on investment of the solar system while reducing the payback period.

In addition, some states and utility companies offer additional tax credits or rebates for commercial solar systems. It is critical to also understand these incentives to provide this information to potential customers.

Solar Tax Credit

A 30% tax credit is available to companies that purchase solar systems before 2033. However, this incentive will decrease to 26% in 2033, so it makes sense to encourage potential commercial clients to install solar panels for commercial buildings before the tax credit tapers down.

Depreciation of Solar Panels for Commercial Buildings

Businesses can either apply 100% of the depreciation in year one with bonus depreciation or follow the Modified Accelerated Cost Recovery System (MACRS) to deduct the system over 6 years. There is a MACRS depreciation schedule, and a different percentage of the system is depreciated each year.

Bonus Depreciation of Commercial Solar Panels

Congress increased the allowable bonus depreciation for commercial solar energy systems, enabling businesses to claim 100% depreciation in the first year instead of spreading it out over a period of six years. Thus, 100% bonus depreciation accelerates the offsetting of installation costs, providing businesses with a quicker financial advantage.

Accelerated Depreciation of Solar Panels for Commercial Buildings

Commercial solar equipment depreciation reduces a company's tax liability. The depreciation value is calculated by multiplying the depreciation amount with the business tax rate. Consult the five-year MACRS depreciation schedule in IRS Publication 946 Table A-1, to determine the deductible portion of the commercial solar panels for each year:

Year	Commercial solar panel depreciation
1	20%
2	32%
3	19.2%
4	11.5%
5	11.5%
6	5.8%

Solar for Commercial Buildings Provide Green Marketing

Consumer demand for green products and services has skyrocketed in recent years. As a result, many large corporations have created carbon-neutral goals to help curb climate change by reducing greenhouse gas emissions and fossil fuel consumption. Typically, transitioning to renewable energy is a critical step to reducing their carbon footprint.

Although they may not have formally created environmental goals, many small and medium-sized businesses are wanting to use more sustainable energy sources. In addition to helping the environment, it can increase customer loyalty, help attract talented employees, and promote brand reputation.

Solar panels for commercial buildings can be highly visible and make a bold statement about supporting the clean energy movement. Communicating about solar for commercial buildings can be a smart marketing strategy. Some companies even include solar power system information to customers to highlight the benefits, such as a plaque on the wall, a press release, or a page on their website.

Financing Options For Solar Panels for Commercial Buildings

Because the upfront cost of a solar energy system is significant, it is critical to ensure that your client can finance the project. There are a few options to cover the cost of commercial solar.

Purchase Power Agreements (PPAs) Or Leases

With solar PPAs and leases, a third party owns the system, and your client merely pays for the energy produced from it or rents the solar equipment. Typically, these solar panels for commercial buildings are installed for no money down by the party using the electricity.

Solar Loans

There are a variety of loan programs that can help finance solar panels for commercial buildings. In addition, there are certain loans that might be available to commercial solar customers that aren’t available to residential clients.

For example, the Small Business Administration can guarantee loans for small businesses. The benefits of SBA loans are that they can have long repayment terms and low rates, but the application process can be quite rigorous. Another option is equipment loans, but businesses may be required to come up with a cash down payment.

Cash

If a commercial client has it, cash can be an excellent way to purchase solar panels for commercial buildings. This eliminates interest payments, and clients can put that money to work, reducing operating costs.

Calculating Payback Period for Solar Panels for Commercial Buildings

Solar design software will often estimate the solar payback period, but it is also possible to crunch the numbers.

Payback period in years = (Total solar system cost minus solar incentives and rebates) / annual cost savings

Estimating the payback period for solar panels on commercial buildings involves several steps.

Determine Total Installation Costs:

• Sum up all costs related to purchasing and installing the solar panels, including equipment, labor, permits, and any additional expenses.

• Consider federal and local incentives, such as tax credits, rebates, and grants, which can significantly reduce upfront costs.

• Assess the expected energy production of the solar panels based on factors like system size, location, and efficiency. Multiply this by the local electricity rate to estimate annual savings.

• Subtract any ongoing maintenance costs from the annual energy savings to determine the net cash flow generated by the solar panels.

• Divide the total installation costs by the annual cash flow to calculate the payback period. This represents the number of years required to recoup the initial investment.

What Are The Disadvantages Of Solar Panels For Commercial Buildings?

Commercial solar energy has few disadvantages when quality equipment is properly installed by a reputable solar company. However, getting the project built can be challenging.

For example, the upfront cost of the solar system is a common obstacle. Also, if a property has a lot of shade, it might not produce sufficient solar electricity to justify the investment. Likewise, permitting and interconnection can be difficult processes, but the GreenLancer team is available to help remove roadblocks with our solar permitting, interconnection, and engineering services.

To learn more about GreenLancer solar permit design, engineering, and interconnection service, create an account. You can then shop for GreenLancer services.

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Solar Panels for Commercial Buildings FAQs

Let's explore some common questions regarding commercial solar panel installations.

What is the payback period for solar panels for commercial buildings?

A commercial solar system's payback period varies based on system size, installation costs, energy savings, and available incentives. On average, commercial solar systems have a payback period ranging from 5 to 10 years and a return on investment (ROI) between 10 and 20%. However, specific circumstances and local conditions can influence commercial solar panel payback.

Solar energy savings, impacted by the local solar resource, electricity rates, and building energy consumption, play a crucial role. Financial incentives, such as commercial solar tax credits and rebates, can significantly shorten the payback period. Careful consideration of these variables, along with efficient system design and maintenance, is essential for accurately assessing and optimizing the payback period of a commercial solar investment.

What is the lifespan of solar panels on commercial buildings?

Commercial solar panels typically operate effectively for about 25 to 30 years, with many continuing to generate electricity beyond this duration. The longevity of the panels is influenced by factors such as the quality of materials, manufacturing standards, and the operating conditions at the installation site. Regular maintenance and proper care can contribute to extending the effective operational period of commercial solar panels.

Do solar panels for commercial buildings require permits?

Yes, commercial solar systems typically require permits. The permitting process ensures compliance with local building codes, zoning regulations, and electrical safety standards. Solar permits may also be needed for various aspects of the solar PV installation, including structural integrity, electrical connections, and environmental impact.

It's essential to check with local authorities having jurisdiction to understand and obtain the necessary permits before installing a commercial solar system. Commercial solar systems often require solar engineering reviews and PE stamps from a licensed engineer. GreenLancer specializes in solar engineering and permitting and works with solar contractors to obtain solar permits for commercial buildings.

Do I need to replace the roof before installing solar for commercial buildings?

We recommend assessing the condition of the roof before installing solar panels on a commercial building. If the roof is in poor condition and nearing the end of its lifespan, it is prudent to replace or repair it before installing solar.

This ensures a solid foundation for the solar array and prevents potential complications in performing roof work. Consulting with a roofing professional can provide a comprehensive evaluation and guidance on performing roof work before installing commercial solar panels.

Solar Panels for Commercial Buildings Can Benefit Businesses

Knowing the answer to common questions and being able to describe the key benefits of solar panels to businesses will help installation companies capture an important – and rapidly growing – market sector.

Solar permitting for commercial solar projects is tedious and time-consuming if not done properly. GreenLancer helps solar professionals overcome these challenges with our solar permit design and engineering services. Sign up today for free or complete the submission form below to learn more.