Blog Published: October 2022
Namaste Solar has seen businesses from all different industries and verticals invest in on-site solar. We designed and constructed 4.2 MW of solar across 20 sites for Colorado State University. We worked with Jax Ranch & Home to design and install a system that will offset 100% of their store’s energy use. And we built solar carports and installed EV charging stations for the KONG Company. Industry or vertical aside, most property owners can benefit from solar in these five ways:
An Improved Bottom Line Via Tax Benefits
At least half of your original investment in solar is recouped through tax credits and deductions, allowing solar to deliver a double-digit internal rate of return (IRR) in many cases. Now, thanks to the Inflation Reduction Act of 2022, the federal Investment Tax Credit (ITC) is back up to 30%. You can also increase the tax credit through adders, including an additional 10% if the project meets domestic content minimums.
Reduced Utility Expenses
On-site solar replaces an otherwise sunken expense with an asset. The money you typically pay to the utility company can instead be used to purchase a three-decade solar asset that provides long-term benefits to your company. Even owners of triple-net (NNN) leased properties where tenants pay the electrical bills can recoup their investment while also offering energy savings to their tenants.
Potential to be Cash Flow Positive Immediately
Colorado’s Commercial Property Assessed Clean Energy (C-PACE) program allows businesses to implement solar with little to no money out of pocket (100% loan-to-cost), enabling projects to be cash-flow positive from year one after recouping the tax benefits. Additionally, building owners can bundle the cost of a new roof, solar PV system, LEDs, and heating, ventilation, and air-conditioning upgrades into one fixed-interest loan with terms up to 25 years. The loan structure removes all risk for property owners, as the non-recourse financing is tied to the property via a special tax assessment. As a result, C-PACE financing can transfer to the next owner if the property is sold.
Brand Reputation and Differentiation
The Denver metro area is a growing and increasingly competitive market that is attracting many national and international firms. Commercial solar sets these businesses apart from the competition and provides real estate investors with access to a more sophisticated tenant class with internal sustainability committees or mandates. Solar helps increase occupancy and base rates, meet corporate sustainability goals, comply with regulations (such as Energize Denver), and retain quality employees and tenants. Companies that have installed solar know that there are few capital energy improvements that offer such a holistic range of benefits.
Increased Property Value
In addition to utility savings from solar, some utilities will purchase the renewable energy credits (RECs) generated by your system. For example, a 200kW system on a 30,000 square foot flat roof in Xcel Energy territory will generate approximately $11,000 in annual income for 20 years. This income directly increases your property’s Net Operating Income (NOI).
To Sum It Up
On-site commercial solar electricity is cheaper than traditional, utility-based electricity over time. As utility rates continue to rise, so does the value of your solar system’s energy, and these savings free up capital to fund core business initiatives or investments. For those seeking to achieve environmental, social, and governance goals or mandates, solar brings impressive and quantifiable environmental benefits to the table. It also increases the marketability of your property, giving you an edge in today’s hyper-competitive market, all while generating an attractive return on investment.