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Blog Updated: August 2024
An increasing number of businesses are boosting cash flow while also differentiating their business with commercial solar. They are investing in solar to capture tax benefits, reduce operating expenses (OpEx), and meet environmental, social and governance (ESG) criteria. Navigating the complexities of a solar capital energy improvement can be challenging, so we've answered some of the most common questions below.
Are there any incentives to go solar?
Federal Investment Tax Credit (ITC): Taxable entities with tax burden can recoup 30% of the investment for the year the system is placed in service, and the Inflation Reduction Act includes tax credit adders which can increase the credit up to 70%.
40% Bonus Depreciation: 40% of the asset may be depreciated in the first year for systems placed in service in 2025. Bonus allowance drops 20% annually through 2027. The basis is the system price less half the ITC, and the value is a minimum 21% of the investment for a Colorado corporation, or up to 34% for a high-net-worth LLC member.
Xcel Commercial & Industrial Solar Rewards Program: Should you choose to sell your Renewable Energy Credits (RECs) to Xcel Energy, they will pay for the production of your system for a 20-year term at the following rates, which are dependent on system size:
- 8-250 kWAC = $0.04/kWh
- 250.1-500 kWAC = $0.0375/kWh
- 500.1 kW-1 MWAC = $0.035/kWh
Utility Savings: Every kWh produced by solar reduces what you buy from the utility, lowering OpEx. There are mechanisms for recouping these benefits from tenants in triple net leases (NNN).
Increased property value: Lower OpEx and REC income increase net operating income (NOI), and therefore building value.
What is the life expectancy of a solar system?
An expertly engineered and constructed system with equipment from reputable and bankable manufacturers will have a three-decade estimated useful life (EUL). Solar modules typically have a 25-year performance warranty. Inverters have a standard warranty of 10 years.
What is the typical payback period for solar?
A typical 200-kW commercial solar system in Xcel Energy’s Colorado territory breaks even in 6-9 years, then provides 21-24 years of pre-paid clean energy.
What can I expect to save, and will solar reduce demand?
A typical 30,000-square-foot roof can accommodate a 200-kW solar system. In year one, this system may reduce utility bills $19K, and generate about $11K of incentive income and $300K in tax benefits on a $500K investment.
Demand (kW) is a separate charge on the bill, one for which we do not model savings. Solar can reduce measured demand, but because of the way Xcel Energy measures it (the highest single 15-minute average throughout a month), it is not predictable enough to model with certainty. There is, however, a solar rate available which lowers the price of demand.
What is the most common solar system in the Denver market?
Rooftop systems are the most common and cost-effective type of solar installation in our market.
Carports are another option for commercial property owners that will protect vehicles from the sun and elements, such as hail. While they are about double the cost of a rooftop system, they offer these additional benefits:
- Covered parking can generate revenue.
- Greater visibility of your system.
- Pairs well with installing electric vehicle (EV) charging stations.
Ground-mount systems are roughly 1.5X the cost of a rooftop system and are more efficient systems but are not as common for commercial property owners due to the required land.
Custom solar solutions like building integrated photovoltaics (PV) and solar awnings are much less common, frequently less efficient, and always more expensive.
Namaste Solar installed the 929-kW system for the new Denver Water building and site. There are three distinct arrays: a garage top canopy, a rooftop array, and ground parking canopies.
How does solar attach to my roof?
Flat rooftop systems are secured to the roof by a hybrid system of ballast blocks in padded aluminum pans and engineered mechanical attachments to account for our winds and the roof’s deadload (structural) capacity.
Will my roof support solar?
Flat roof systems need about 5-6 pounds per square foot (psf) of available deadload capacity, while pitched roofs with flush-mounted solar need about 3 psf. The more deadload capacity a roof has, the fewer mechanical attachments needed, so 7-10psf for flat roofs is preferred.
When is a good time to go solar?
Ideally, your roof will have 20 years of life left. It’s also a good idea to consider other future capital energy improvements, such as LED retrofit, higher efficiency HVAC, and electrification, when sizing solar systems.
How long will it take to put solar on my rooftop?
Depending on system size and complexity, installation may only take 4-8 weeks. However, engineering, permitting, and equipment procurement lead-times can add six months or more, so the norm from contract to commissioning is 8-12 months.
Does solar make sense if I don’t occupy my building?
Solar is beneficial to both property owners and tenants in gross or NNN leases. There are two common methods to overcome the split incentive: Commercial Property Assessed Clean Energy financing (C-PACE) and green leases.
What is maintenance like?
Routine monitoring and preventative maintenance are key to ensuring your system is operating at peak performance and maintaining manufacturer warranties. Just like any building asset, a solar system requires repairs from time to time.
Solar owners should plan for an unexpected service visit at least every two years. The most common maintenance needs arise from system outages that occur due to electrical anomalies in the facility or inverters. Solar systems protect themselves from damage by shutting down in such cases and frequently are resolved with minimal troubleshooting and a simple system reset.
How do I get in touch with a commercial solar expert?
Namaste Solar’s purpose is to transform energy and transform business. Our experienced commercial solar developers will help you understand your project goals, timelines, and milestones. Reach out to day. And you can look at our extensive commercial experience and see how we measure up.
