IGS Energy Expert: 3 Considerations Before Investing In Solar for Your Business

The following article recently published in  Facility Executive. You can access the original article on the magazine's website here.

For more insights from IGS Energy, visit our Energy Resource Center.

If you type “Should my company invest in on-site solar?” into Google, you’re likely to see an extensive list of results comparing pros and cons. While on-site solar offers numerous benefits, determining its suitability for your organization and understanding the benefits can be a process. All this to say, there’s still no clear-cut answer to this question that fully considers the pragmatic approach to initiating a solar program.

With energy technologies evolving and options increasing, the transition to sustainable energy may seem daunting. When it comes to energy solutions like solar, what makes sense for one organization may not work for another. The path forward will vary for every business and is completely dependent on an organization’s goals, business model and budget.

If your organization is considering on-site power generation through solar and the myriad of benefits it can provide, there are a few key factors you should discuss and consider before investing time and resources.

Where to Start Before Investing in Solar Power Generation

There are three considerations your company’s decision-makers should examine before moving forward with on-site solar. If you’re interested in exploring the viability of solar, be prepared to discuss the following with your energy partner:

Property And Equipment Ownership And Site Suitability

Focusing on ownership and site suitability helps businesses quickly determine if an investment in solar makes sense. While the process of going solar is simpler when the business owns the property from which it operates, there are still options for those who don’t. An informed solar partner will be able to walk you through these options. The conversation around owning or leasing solar generation equipment is more nuanced, involving  tax incentives and whether the business can benefit from them. This typically requires a review of a business’s taxable income, the appetite for capital expenses and whether your organization wants to maintain a long-term power generation asset.

When determining site suitability, consider these questions about your property: “Do you have a relatively new large, flat roof that can be used for solar panels?” and “Do you have another space available on your property, like a large field or parking lot?” If the answer to both questions are no, on-site solar may not be a viable option for your business. In the case that the facility can’t host solar onsite, community solar may be an option in states where these programs exist.

Overall Energy Goals

When the primary goal is savings, on-site solar might not be an organization’s first choice, as it’s possible that a commercial customer’s high demand charges won’t be offset through solar. However, the utility’s demand charge won’t go away even if a company is generating power on-site. In some cases, offsetting the energy portion of the bill alone can create savings especially where there are state incentives or high energy rates. Adding battery storage might also be an option for reducing demand charges. In many cases, it makes the most sense for a commercial or industrial customer to go the route of a green energy contract through a retail energy agreement bundled with renewable energy credits (RECs).

Businesses considering on-site generation need to invest a fair amount of time in an analysis of their ROI. When working with a third-party solar partner, it’s important to align on the specific savings your business could truly see.

Ultimately, businesses with any sort of sustainability aims should be working with an energy partner that can help them focus on the goals and draft an energy plan that helps achieve those goals, whether that’s reducing your organization’s carbon footprint or lowering your energy spend.

Why Solar Could Be Right for You

Beyond the positive environmental impact, there are other reasons to make the transition to clean energy, including economic and risk-mitigation benefits and an opportunity to meet your customers’ sustainability expectations.

As fossil fuel prices rise, the cost of sustainable energy sources, notably solar, has dropped significantly. In the last decade, solar and wind costs have steadily dropped, with commercial rooftop photovoltaic (PV) costs dropping by nearly 70%.

While fossil fuels such as natural gas are still essential for meeting domestic energy demand, cleaner energy sources are becoming a large and economically viable part of the generation and consumption mix in the U.S. Declining costs for solar panels, wind turbines and battery storage as well as government subsidies, such as those included in the Inflation Reduction Act, have resulted in renewables becoming increasingly cost-competitive when building out new power capacity.

There are three potential benefits of making the transition to on-site generation:

1. By generating power onsite, businesses can benefit from selling their surplus energy back to the grid.
2. When businesses own their generation resources and are connected to the grid, they may be less affected in the instance of a power outage. Pairing on-site power generation with a battery makes a system more resilient.
3. On-site generation can help protect a business from a volatile energy market. On-site solar is the only energy source that allows customers to “lock in” their energy costs for up to 30 years. All other sources have varying costs that can typically be secured for up to five years.

Regardless of an organization’s goals, the most effective first step is to enhance efficiency anywhere it’s possible — replacing outdated equipment, retrofitting facilities with LED lighting, installing occupancy sensors and more. After this step, a company should investigate other sustainable technologies and options with their energy partner, such as buying grid power with RECs, exploring solar or some other initiative. These decisions, of course, come down to the business’ goals — operating more sustainably, saving money or both.