By Francis Walker,
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%. Because of the new administration, the future of these incentives is uncertain. So, the best time to go solar is now.
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 = $0.0475/kWh
- 500.1 kW-1 MWAC = $0.045/kWh
Utility Savings: Every kWh produced by solar reduces what you buy from the utility, lowering OpEx.
Increased property value: Lower OpEx and REC income increase net operating income (NOI), and therefore building value.
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 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 more efficient but more expensive and not as common due to the required land.
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 capacity.
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:
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 about every two years.
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 economics and timelines. Reach out today, and check out our commercial experience.
Francis Walker is a commercial solar project developer with Namaste Solar with more than six years of experience developing commercial solar projects in Colorado. He’s worked with all types of installation solutions for a wide variety of properties, including multifamily, office buildings, land development, municipalities and non-profits. Francis’ mission is to deliver the most efficient, innovative, transparent, and high-quality customer experience while providing the greatest environmental and financial benefits to his clients and their communities.
Contact: Phone #: 303-816-3893, website: www.namastesolar.com/businessbenefits
