Is Solar Power Worth It For A Business?

Is Installing Solar Panels a Good Choice for s Small Business?

Installing solar panels benefits businesses by reducing electricity costs and limiting long-term energy price increases. Installing solar panels will negatively affect a business’s cash flow as it involves substantial upfront costs for equipment and installation. However, over time, on an average of ten years, the savings on electricity bills and potential incentives can offset these initial expenses.

Many small businesses can benefit from installing solar panels. This technology can help a business owner save money while enjoying major tax credits. Also, solar panels are good for the environment, which is appealing both to employees and customers alike. They can also help a business make money by selling excess energy to utility companies. This writing is informed by representing thousands of business owners; additionally, the best data comes from my first-hand conversations with business owners and their leadership team.

That said, despite the benefits, investing in solar energy is not the best move for every business. It is expensive to set up solar panels, and it can be difficult to find an installer one can trust. Also, it may not be worth switching to solar panels if a business’ electric bill is already low. If your company was defrauded into installing solar panels, please contact our Los Angeles commercial litigation lawyer for a free consultation.

The Importance of Solar Energy

Solar energy is one of the best energy sources for the environment, because other methods of generating power, such as cola and gas, are bad for the earth. These methods result in carbon dioxide emissions, which encourage climate change. Solar energy, by contrast, is renewable, abundant, and sustainable.

The sun, as the most abundant source of energy available, produces more than 10,000 times the world’s energy usage. While fossil fuels will eventually run out, sunlight is completely renewable.

Over the past decade or so, the cost of solar power has plunged by 70%. Because of updated solar panel technology, solar panels are much more efficient.

What Are the Pros of Solar Energy

There are a number of advantages to using solar energy to power one’s business. It can not only lower costs, but also increase a business’ value. It is also possible to attract environmentally-minded customers and employees. For example, big companies like Target and Walmart use solar power, which presents them as caring about sustainability.

1. Lower Electric Bills

If a business owner switches to using solar energy, he or she can expect to save money on their energy bills. Some companies, in fact, see a reduction in energy costs of 75% or more. One report claims that the average commercial property owner pays $2,000 a month for electricity, compared to those with solar panels who pay only $500 a month. The Southern California Edison and the state of California has solar panels incentives for businesses in the state.

After a business owner has paid off the expense of purchasing and setting up solar panels, energy is thereafter basically free. The only exception to this would be when there is not enough sunlight to create power (on cloudy days). During these times, a business owner can rely on traditional electricity. Businesses in sunny climates can expect to see the most savings.

There are now battery systems that allow energy to be stored for later use when it is dark or cloudy. These, however, can be pricy.

2. Improve Business Value

Nowadays, many customers think about the environmental impact of their consumer habits. By installing solar panels, businesses can demonstrate to customers that they are trying to be a sustainable business. A business owner should consider mentioning the company’s solar panel system in marketing materials and social media posts.

Also, by investing in solar energy, a company can attract environmentally-conscious employees. According to a 2019 survey, 70% of individuals said that they were more likely to work for a company with a passion for environmental sustainability. In fact, 10% of workers claimed they would take a pay cut to work for an environmentally responsible company.

If a business owner decides to sell his or her business, installing solar panels can make the business look attractive to potential buyers. It means a buyer will not have to pay for the installation themselves and can enjoy the savings right away.

3. Reduce Carbon Footprint

A carbon footprint, the amount of greenhouse gas produced by any action, is typically expressed as the number of tons of carbon dioxide the activity creates. The typical small business creates between 11.6 and 23.3 tons of carbon dioxide every year. These emissions of CO2 are linked to climates change.

Solar panels can help reduce a business’ carbon footprint because the energy they produce does not create emissions. That said, the creation and transport of solar panels creates carbon dioxide, so they are not completely carbon neutral.

After a small business owner has chosen a solar panel installer, he or she should ask them about their sustainability practices. In general, the energy used to make the panels is “paid back” within a few years. After a few decades, solar panels must be replaced, but their components are recyclable.

4. Earn Back Money on Investments

When it comes to how much money a business will save from using solar panels, estimates vary. The federal government gives tax incentives for solar panels. For some businesses, it can take as little as three years to begin saving enough to cover the installation cost. Most solar panel systems last for between 25 to 35 years.

A business can also sell its excess solar energy back to the utility company, depending on the locale. This process is called net metering, and it means that a business can enjoy extra profits from its solar panels.

Along with other savings, a business may be eligible for tax credits, which states offer to motivate people and companies to switch to solar power. The Solar Investment Tax Credit (ITC), a federal program, allows businesses to claim a 26% credit for installing a solar energy system.

What Are the Cons of Solar Energy?

While there are plenty of advantages to investing in solar power, it is not right for all businesses. The initial cost of installing solar panels is one major concern business owners have, because it can take several years for the panels to pay for themselves. Other than the cost, there is also the issue of finding reputable installers.

1. Solar Is Not the Right Solution for Everyone

While some kinds of solar panels will work on most roofs, installation costs can be much higher for certain types of buildings. For instance, a steeply sloped roof will need extra care when installing panels. Conversely, a flat roof will have drainage issues.

Rooftop solar panels are most effective when facing south. However, certain obstructions, such as chimneys and trees, can affect their ability to work. It may be necessary to supplement the panels with another energy source. Also, if a roof needs repairs soon, then some installers may recommend having the renovation done prior to getting the panels installed. This can be cost prohibitive.

While there are ground-mounted solar panels, a business must have the proper amount of space for these to be installed.

2. Initial Purchase Is Expensive

The cost of solar panel installation depends on a number of factors, including a business’ size and energy requirements. Another factor is the kind of system one chooses to install.

The average upfront cost of a solar panel system is approximately $18,000 before tax credits. This amount is based on a price-per-watt model, which is what many solar panel companies use. As of 2020, the average price per watt is $2.96.

If a business owner decides to relocate, then he or she will likely be unable to move their solar panels with them. This would mean another expensive purchase of panels at the new location.

3. Lower Electricity Costs Mean Lower Savings

Depending on the location and kind of business an entrepreneur operates, his or her electricity bills may already be low. If this is the case, then the savings from solar energy will not be as big a deal. It would also take longer to pay off the cost of purchasing and installation. For some business owners, the high upfront costs are therefore not worth it.

4. Difficult to Find Installers

It is important to work with a reputable installer when getting solar panels. If solar panels are not installed correctly, then they can be inefficient or even damage a building’s roof.

If a business is located in a rural or remote area, it can be difficult to find an installer. It is also possible that local installers are charging inflated prices, or their schedules are completely booked.

A legitimate installer should have the proper licenses and insurance. They should also offer a warranty in the event there are any issues with installation. Also, they should have a good reputation, having done excellent work for previous customers.