Commercial Solar Power System for Business Customers
In tough economic times, why should You invest in a Commercial Solar Power System?
The answer is simple – substantial savings on utility bills with a Return on Investment (ROI) as high as 15% with system payback by Year 5. There has never been a better time to make that investment – utility rebates for commercial solar power systems, state and federal tax incentives and new, lower prices make a commercial solar power system more affordable than ever.
What’s Hiding in Your Utility Bill?
Run on Sun starts by analyzing your utility bill and for many customers there are some nasty surprises hiding there. For example, if you are a commercial building owner in Pasadena Water & Power's territory, did you know that you pay a penalty if your power factor is too low or that a single, fifteen minute spike in power demand will keep your bills higher for the next twelve months? Or if you are a Southern California Edison customer, installing a solar power system could not only lower your overall usage, but also your peak demand, which might let you change from the GS-2 to GS-1 rate structure, thereby saving you thousands of extra dollars?
We will explain what is hiding in your bills and help you size your commercial solar power system so that you can maximize your utility bill savings.
Rebates & Incentives for Commercial Solar Power Systems
We have a detailed explanation of the utility rebates that are available on our site; access it here. Generally speaking, for commercial solar power installations, the rebate will be paid in five annual installments based on actual system performance. This means that a well designed, engineered and maintained commercial solar power system may well outperform rebate projections. Run on Sun offers five-year maintenance contracts to give you the confidence that your system will meet or exceed your performance expectations.
Under recent changes to federal law, the tax benefits of installing a solar power system are greater – and more readily available – than ever. For companies with sufficient tax liabilities to take advantage of it, federal law allows for a tax credit of 30% based on the installed cost of the system. However, for systems placed in service in 2010, commercial customers may elect to take a 30% grant directly from the U.S. Treasury in lieu of the tax credit. Thus, commercial customers, even if they will owe nothing in taxes this year, may receive the full 30% value in the form of a direct grant. Run on Sun can supply you with the documentation needed to qualify for a 30% Treasury grant - but you must act this year.
In addition to the federal tax credit and grant, federal law also allows for a five-year accelerated depreciation schedule for commercial solar power systems. (California’s tax code also allows for an accelerated depreciation schedule.)
Of course, Run on Sun cannot provide tax advice and customers must check with their own tax advisors to determine the applicability of these incentives to their own tax situation. Nevertheless, between rebates and incentives, it is possible for commercial solar power customers to see their actual cost reduced by as much as 60-75% of the contract price.
Example – Hypothetical Commercial Solar Power Installation
Let’s look at how this might work with a practical example. Consider a hypothetical SCE commercial customer that uses approximately 125,000 kWh/year with a peak demand of 100kW. Such a customer will likely be billed under the GS-2 rate structure which, based on the April 2009 SCE rate increase, would yield an annual bill of $29,000. A 70kW solar power system could reduce those bills by as much as 80% for an annual savings of $23,000 in Year 1. However, assuming that peak demand coincides with peak sunlight (a fair assumption if A/C is a major driver of the customer’s peak power demand), our customer might also able to get below the 30kW limit for GS-1. Under that rate structure the remaining bill would be just $1,300 in Year 1 – a savings of $27,000!
Commercial Solar Power Systems are More Affordable than Ever!
Those savings are a powerful incentive, but there is more good news – recent price reductions have made that 70kW system more affordable. In 2007 the price of solar panels was, literally, through the roof. Supplies of feedstock silicon were very tight as the worldwide production of solar panels consumed more silicon than what was used in the semiconductor industry. At the same time, demand for solar panels was soaring as larger rebates – lead by California’s Million Solar Roofs project – came online. As a result, supplies were tight and prices were very high.
In response, new plants were built to refine silicon and downstream solar panel manufacturing was ramped up around the world – just in time to coincide with the greatest economic downturn since the 1920’s. Today, those factors have combined to drive prices down to an all-time low. But as demand rebounds, and as utility costs continue their inexorable climb, prices for solar panels and related equipment will begin to move higher once more, making this the perfect time to act.
Example Revisited – Commercial Solar Power ROIWhat does this all mean for our hypothetical commercial customer? When we factor in lower prices, rebates and incentives, our commercial solar power customer could see an ROI of nearly 15% with payback occurring in Year 5, as shown in this graph: |
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Utility Costs and Reducing CO2 Emissions
According to the California Energy Commission, over the past thirty years prices for electricity have increased 6.8% every year. But that was before the United States decided to get serious about CO2 emissions. The implementation of a cap-and-trade program (or some similar vehicle for disincentivizing the burning of fossil fuels) will cause a substantial increase in the cost of using fossil fuels – and as of 2008, all of the utilities in the Run on Sun service area provided more than 50% of their electricity from burning fossil fuels.
Utility |
Power Content % (2007 unless otherwise indicated) |
|||
Coal |
Natural Gas |
Renewables |
Other |
|
PWP (2010) |
60!!! |
16 |
12 |
12 |
SCE (2008) |
12 |
46 |
16 |
26 |
46 |
29 |
8 |
17 |
|
42 |
31 |
1 |
25 |
|
37 |
34 |
14 |
15 |
|
Moreover, under California law, by 2010 all utilities are required to provide at least 20% of their electricity from renewable sources. Collectively, these programs will drive utility prices higher, faster than ever before. But a commercial solar power system means that you will have locked in your cost of energy for the next twenty-five years.
Now, more than ever, a commercial solar power system provides a competitive edge in a tough economy. Give us a call or click here today and let’s get started!
