Maximizing Your Business with Solar Energy: Pros and Cons
VeloSolar • Updated on February 20, 2023 • [rt_reading_time postfix=”minute”] read
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If you spend any time on the internet, you’ll no doubt come across a plethora of opinions on solar power. Some folks will be firmly in the “pro” camp but others won’t be big fans.
We may be a bit biased here at Velo Solar, but we think solar power is pretty amazing. As you can probably guess, we strongly believe the pros of investing in a solar panel system for your business far outweigh any cons. Why? Well, we’re glad you asked.
Here is a rundown of some of the most common arguments for and against solar energy. In the end, we think you’ll agree that there are very few downsides to owning and generating your own electricity with solar panels.
Table of Contents
The Pros of Installing a Solar Energy System
Let’s take a look at some of the top reasons why solar power is a good investment for businesses of all sizes.
It’s Proven Technology
Solar has received a lot of attention in the press recently, so you might be tempted to think it’s some new-fangled thing. But people have been using this technology to harness the power of the sun for more than 100 years. The first solar device patents can be traced back to around 1888 and commercially viable photovoltaic cells, or solar panels, have been around since the late 1950s. In short, solar technology is proven technology.
Manufacturing processes have improved the quality and reliability of solar panels significantly in the last 70 years, as shown in many recent studies. For example, the National Renewable Energy Laboratory (NREL) found that only 5 out of every 10,000 panels installed between 2000 and 2015 failed.
Here are some other ways in which this time-tested technology has proven itself.
Solar Panels Work In All Climates
Despite popular belief, solar panels generate electricity in all climates and all seasons – even winter. That said, the position of the sun relative to your location and the time of year will impact the efficiency of your solar system. Weather conditions including rain, cloudy days, or snow and ice accumulation, can also reduce the electricity output of your system.
A trustworthy commercial solar provider like Velo Solar can mitigate these factors when they design your solar system. They’ll take your location, the weather, and countless other factors into consideration when creating an efficient system customized to meet your energy goals.
A Solar Energy System Is A Long-term Investment
Most solar power plants have a lifespan of thirty years. Normal wear and tear, weather, and other factors can impact the efficiency of your system over time, so it’s important to make sure your system is properly maintained. But, the bottom line is that an investment in solar is a long-term investment in reducing your energy costs.
Solar Panel Systems Are Low Maintenance
The good news is that commercial solar systems are pretty low maintenance, and an operations and maintenance (O&M) agreement through your solar provider makes things even easier. O&M agreements typically include an annual system checkup for your solar panels, the racking and mounting infrastructure, the electrical system and wiring components, the inverter, and the components of your battery storage system. Your solar provider can repair damage to your solar energy equipment and also alert you to any overgrown vegetation that may be impacting its power output.
Routine maintenance is recommended to ensure your solar power system is in good repair and functioning at maximum efficiency.
Velo offers best-in-class, cost effective maintenance for systems built by us and by others so don’t hesitate to reach out to learn more.
Solar Power Lowers Your Energy Bills
One of the biggest solar energy benefits is the immediate impact a solar installation will have on your electricity bills. Here’s how:
Levelized Cost Of Energy (LCOE)
When it comes to solar, what you’re really purchasing is a hedge against future energy costs. That’s why you need to look at the entire financial picture when determining if solar is right for your business. ROI alone won’t show you the real value of your investment.
To understand the real value of solar, you need to compare how much your utility-generated electricity costs will escalate over time, as compared to the more fixed costs of electricity provided by your solar panels and battery storage system. This is your levelized cost of energy.
As a general rule, grid electricity costs can escalate 2-5% per year (or more if inflation rates are higher). If you have a solar system powering your business, even partially, you own all the energy it makes and that means that once the system is paid for, your business has protection from rising energy costs.
The new tax credits in the Inflation Reduction Act will help you capitalize even faster (more on that and other financing options in a minute).
Peak Shaving
You have to pay the rates set by the utility if you want electricity from the grid – including the higher prices they demand during peak hours. Most commercial utility rates are a combination of capacity (kWh-used) and demand (potential kWh you might use). Often these demand charges can be many times higher than your capacity rate. If you have solar panels powering your business, even partially, you’ll save money by reducing your demand at these peak times.
This is especially true once you’ve paid for your system – you already own every kilowatt of energy your solar panels produce. Drawing on your own power during peak hours when utility rates are higher not only lowers your electricity bills but it makes them more predictable.
A battery energy storage system can provide additional energy cost savings, predictability in peak shaving, and flexibility if your operations run 12-24 hours a day.
A Solar Panel System Provides Energy Independence
Think about how much your last major power outage cost you in terms of lost business or lost inventory. Some studies show that for a manufacturer, even a single hour of downtime can cost a company upwards of $5 million. That means your solar panels could more than pay for themselves during the next grid power outage.
The resilience of a commercial solar installation requires that it include an energy storage system and is a great insurance plan in case of an electricity outage. Combining the two technologies can keep things running without a hitch for days or weeks. Other sources of backup power, like a diesel generator, can’t provide the same kind of reliability – especially if you can’t get your next delivery of fuel because of storm damage.
Solar Energy is Sustainable Energy
When you reduce the amount of grid energy you use by installing solar panels, you also reduce the greenhouse gas emissions of your business. Grid electricity is still generated primarily by burning fossil fuels, and while utilities are integrating renewable energy into their portfolios, there’s a long way to go before we can call our electric grid green.
Plus, if you replace a diesel backup generator with a solar plus storage system, you can see even greater carbon emissions reductions. You’re also hedging against the ever-rising costs of fossil-fuels.
Sustainable Companies Attract New Customers
In addition to reducing our carbon emissions, your sustainability efforts can grow your business by attracting new customers.
If you sell directly to consumers, you probably know that a growing number of shoppers are looking to buy from companies that are reducing their carbon emissions.
If you sell B2B, it’s important to know that many vendor and supplier agreements now include sustainability clauses. The carbon footprint of a product includes the impact of all stops up and down the supply chain, so corporations want to work with vendors that are reducing their own emissions. Going solar can give you a leg up on the competition when you’re bidding for or renewing supplier contracts.
Cons of Solar Energy Systems
There are some common arguments you might hear against solar power technology – but the solar industry is working hard to address each of these concerns and turn them into solar energy pros.
Solar Panels Have a High Upfront Costs
One of the biggest cons you’ll hear about solar energy is that it’s expensive. But here’s the thing – solar costs continue to decline as adoption increases. Even with the recent supply chain impacts of COVID-19 and tariffs imposed on foreign made modules, we are optimistic that pricing will settle down in 2023 and return to pre-pandemic levels.
There are a number of solar incentives and financing avenues you can explore to lower and manage the costs associated with installing solar panels. A reputable solar provider like Velo Solar can help you understand which of these options are right for you.
The IRA Lowers Your Initial investment
Whether you pay with cash or a loan, most businesses making a direct purchase of their solar energy system are eligible for the Solar Investment Tax Credit, also known as the Solar ITC. The Solar ITC is designed to reduce the cost of commercial solar projects by reducing your tax liability with both a tax credit and an accelerated depreciation schedule.
In August of this year, President Biden signed into law the newest iteration of the Solar ITC as a part of the Inflation Reduction Act (IRA). The new law sets the tax credit for qualifying solar and energy storage systems at 30% through 2032. The IRA means you can save thousands of dollars on your solar installation – and that means solar energy is now accessible to businesses of all sizes.
Power Purchase Agreement
If you don’t want the upfront costs associated with owning your own commercial solar system, another popular way to reap the benefits of solar energy is through a power purchase agreement (PPA). With a PPA you contract with a solar developer that pays for, installs, and maintains a solar system on your property.
The developer owns the system but agrees to sell you electricity at a fixed, reduced cost per kilowatt hour (kWh) used, in exchange for you letting them install the array on your property. These types of agreements are usually in place for 10-25 years. There may be a provision for your business to purchase the system at various points during or at the end of the contract. These agreements can include energy storage and electric vehicles charging infrastructure as well to create a holistic solution.
Lease Agreement
Similar to a power purchase agreement, a solar lease involves a third-party owner and can often be structured with no upfront costs. With a lease you’ll pay a fixed rate over the lifetime of the contract (typically 7-25 years), rather than costs being based on how much energy you use.
The downside is that you’re paying a flat rate every month, even if you don’t use all of the energy that’s allowed under the terms of your deal. Of course, that’s offset by your levelized cost of energy, which is significantly reduced, adding tremendous value to your system over time.
Intermittency
The fact that solar panels can’t produce electricity 24 hours a day is one of the biggest arguments solar energy opponents will cite. While it’s true that solar panels don’t generate electricity when the sun isn’t shining, it’s also possible that at certain times of day, your solar system will generate more electricity than you can use in real time. Depending on your utility, you may get credit for excess electricity generation at certain times and then get credit for it when you use grid electricity later. This is called net metering or monthly netting. Be sure to check with your solar power provider about the rules with your utility.
Connecting your solar panels to solar energy storage technology is the best way to maximize your investment in solar power regardless of your utility’s rules.
Simply put, energy storage solutions like batteries allow you to bank the excess solar energy generated by your array for future use – giving you energy flexibility and independence.
Environmental Impact
Some will argue that while solar can reduce your carbon footprint in terms of the electricity you use, actually manufacturing the solar panels has a negative impact on the environment. While there are carbon dioxide emissions and there can be toxic chemicals associated with the manufacturing process, the fact is that solar is still one of the least polluting sources of electricity over its lifecycle. The environmental impact of solar panel construction is also expected to decline over time as more solar manufacturers work to improve technologies around things like solar panel recycling.
You Can’t Take Em With You
A lot of business owners think that solar won’t be a good investment if they don’t own their building, but the reality is quite different. Solar energy can benefit both you and your landlord or the future owner of your building – you’ll reduce your energy costs, and the building will increase in value without an increase in property taxes. Your landlord may even be willing to install solar panels in exchange for you signing a long-term lease.
I Can’t Install Solar Panels On My Roof
Many business owners think solar won’t work for them because they have limited roof space, or their building is older. Rather than dismiss solar energy technology altogether, you can work with a reputable commercial solar company like Velo Solar to design a solar installation that works for your situation.
If you have obstructions that limit your roof space, you can always consider a ground-mounted array or install solar carports and canopies.
Your provider will also recommend the best type of solar panels for your situation. For example, if your commercial building is older, or will require a significant amount of retrofitting to be able to support the weight of a traditional solar system, you may want to consider thin film solar panels. These are ideal for buildings with thin roofs (like some metal roofs) or in tight spaces that would make installation of conventional panels more labor intensive.
Solar Energy Pros Outweigh the Cons
If you look at the big picture, it seems pretty clear that solar energy advantages outweigh any potential disadvantages. Let Velo Solar help you save money, reduce your carbon emissions, and achieve energy independence with a solar power system customized to meet your energy goals.
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