Commercial solar energy is one of the fastest businesses in the solar world. With continuous rise in electricity rates and financing options becoming more available, businesses such as Target, Kohls, Best Buy, Apple, Coors Light and many more are turning to solar as an investment that makes a lot of sense.
1.) Federal Tax Credit
Federal tax credit of 30% of the purchase price is available until 2020. This means that as long as you pay federal taxes, you can qualify for the 30% Federal tax credit. You can even roll over the credit up to 5 years in case you can’t take advantage of it the first year. For example, if the solar system cost $100,000, you are eligible for $30,000 in federal tax credit, dollar for dollar reducing your net cost down to $70,000.
2.) Instant Utility Savings
Saving the planet is great, but lets face it you are business owner and if its not saving you money, why do it? A good solar contract should be at minimum equal to your electricity bill or lower with a short payback; unless there significant work to be done outside of solar such as roofing or other electrical.
3.) Accelerated Depreciation
Businesses may take a 5 year depreciation over the cost of the solar system under “MACRS” act, allowing MACRS to lower the tax liability over the initial 5 years the system is installed.
4.) Payback Period / Return on Investment
Payback period is also important and is one of the biggest metrics you should look at in determening whether or not you go solar. Your capital is precious, and you always have to weigh in opportunity cost. Should you invest in project A or project B? Solar can save you alot of money with an average annual return on investment at 17%. But if you can invest that capital into something that yields a higher rate, then that is what you should do. To know if you are getting a fair and good deal, you should recoup your investment within 5 years or less. Anything higher than a 5 year payback should raise a red flag.
5.) Rate Lock
One of the biggest benefits that people often don’t put enough value on is the fact that you are locking in your rate. Your payment is fixed in most cases, which is crucial in projecting cost and cash flow. Having rates that are unpredictable can be challenging in terms of projecting cost and cash flow. Knowing your solar payment is locked in for a period of time is a big benefit. Gas prices in California are about $3.25/gallon. If you had the option to not only lock in that gas price, but also save say 10-20% would you do it? Of course you would, because over 10-20 years odds of it going higher than $3.25 is very high. Buying solar is the same scenario, we know rates will go up, so even if you pay what you pay today or lower, it makes sense.
The financial benefits of going solar are clear as outlined above. At Sunlux we specialize in both residential and commercial solar panels. Feel free to Contact Sunlux for any commercial solar panel advice or download our Solar Information Book for Free!