Commercial Solar Fundamentals: Ideal solar properties

Harnessing solar energy isn’t just for residential properties—commercial solar is quickly becoming a cornerstone of sustainable business practices, contributing over 19,000 MW of electricity nationwide.

As more companies recognize the financial and environmental benefits, understanding the fundamentals of commercial solar power is crucial. Whether you’re managing a large industrial complex, a retail space, or a community property, solar energy offers a viable path to reducing operational costs while promoting sustainability.

The economics of commercial solar are influenced by several factors: electricity prices, available sunshine, state-specific incentives, and project costs. Additionally, various rebates, incentives, and regulatory frameworks such as net metering and feed-in tariffs play significant roles in the financial viability of solar investments.

For those looking to expand their impact, community solar gardens present an exciting opportunity. These shared solar initiatives offer clean energy and provide a potential revenue stream for property owners. This guide will walk you through everything you need to know to determine if your property is an ideal candidate for commercial solar, and how to maximize the benefits of this forward-thinking investment.

IDEAL PROPERTIES FOR SOLAR

Identifying whether your property is ideal for solar installation is the first crucial step. Now, the suitability of a property for solar energy largely depends on several key factors that influence the system’s efficiency, cost-effectiveness, and overall feasibility. Here’s what you need to consider:

1. Sunlight Exposure

Roof Orientation and Tilt: Properties with south-facing roofs and a tilt angle matching location latitude are typically ideal for solar installations. This orientation maximizes sunlight exposure throughout the day, enhancing energy production.
Shade and Obstructions: Ensure minimal shading from trees, nearby buildings, or other structures. Even partial shading can significantly reduce the efficiency of a solar system.
Solar Irradiance Levels: Locations with higher average solar irradiance—measured in kWh/m²/day—are more suitable for solar energy production. For example, the Southwestern U.S. has some of the highest solar irradiance in the country, making it ideal for solar projects.

2. Roof Space and Structure

Available Space: The more space available, the more solar panels you can install. Large and flat rooftops such as large buildings and car parks typically over 10,000 square feet are ideal for commercial solar.
Structural Integrity: Roof must be in good condition and capable of supporting the additional weight of solar panels. A structural assessment is often necessary before installation.
Roofing Material: Some materials are more conducive to solar installations than others. For instance, metal and flat roofs are often ideal, while slate or wooden roofs may require additional considerations.

3. Electricity Consumption

High Energy Usage: Properties with high electricity demand stand to gain the most from solar energy systems. Businesses that operate during daylight hours—like retail stores, warehouses, and offices—can significantly reduce their electricity bills.
Demand Charges: Commercial properties that incur high utility charges can benefit from solar power, which can reduce peak demand.

4. Financial Incentives

Local and State Incentives: The availability of rebates, tax credits, and other financial incentives can significantly improve the ROI of your solar investment. States like California, New York, and Massachusetts offer substantial incentives that can cover a large portion of installation costs.

Solar Economics: Function of Electricity Prices and State Incentives, and Project Costs

The financial landscape for commercial solar projects today is shaped by various rebates and incentives that can significantly reduce upfront costs and improve long-term ROI. These incentives are designed to encourage businesses to adopt renewable energy solutions.

If you are a commercial real estate asset manager looking to increase ROI and maximize profit, commercial solar offers a great way to achieve this. With federal and state incentives, you don’t have to worry about high upfront costs. Commercial-solar.org can use your tax liability and various incentives to help you pay for your solar project. Need a consult? Speak with our experts now.

Commercial solar rebates and incentives

The two most popular solar incentives are the investment tax credit (ITC) and the production tax credit (PTC). These are both federal incentives available to all commercial projects. However, there are several local incentives and rebates available to certain counties. Check out our state incentives page to find out what is available.

Here are a few incentives to consider:

California Solar Initiative (CSI): Offers cash rebates on solar systems installed on commercial properties. The rebate amount varies based on the performance of the system and the amount of energy produced.
New York State Energy Research and Development Authority (NYSERDA): Provides incentives for commercial solar projects through the NY-Sun program and additional incentives for properties located in Con Edison territories.
Solar Renewable Energy Certificates (SRECs): In states like New Jersey and Massachusetts, businesses can earn SRECs for the energy their solar systems produce. These certificates can be sold on the open market to utilities that need to meet renewable energy standards.
Modified Accelerated Cost Recovery System (MACRS): This allows businesses to recover some of their solar investment costs through tax deductions, accelerating the depreciation of solar systems over five years.

Ready to talk about your solar project? Speak to an expert now to begin.

Electricity Cost

The current commercial electricity rate averages around 11 dollars cents per kilowatt-hour. Many commercial properties are subject to Time-of-Use (TOU) rates, where electricity prices vary depending on the time of day. Solar energy effectively offsets these costs because it generates the most power during peak daylight hours when electricity rates are typically highest.

This alignment allows businesses to minimize their dependence on expensive grid electricity during peak periods, thereby reducing overall energy costs. Additionally, commercial properties often face demand charges, which are fees based on the highest level of power used during a billing cycle.

Solar energy can help reduce these demand charges by lowering the peak electricity demand from the grid, leading to substantial savings. By generating your electricity, you also protect your business from future increases in utility rates, providing long-term financial stability and predictability in your energy expenses.

In essence, the economic benefits of solar are closely tied to how much you currently pay for electricity and the structure of those rates. A well-designed solar system can effectively reduce both your energy consumption and demand charges, making it a smart investment for businesses looking to control costs and enhance sustainability.

Regulatory Matters, Net Metering, and Feed-In Tariffs

There are two ways to reduce energy costs with solar energy. Through net metering or by offsetting your grid consumption by using the energy you generate.

Net metering is one of the most significant policies to understand. It allows businesses to feed excess electricity generated by their solar systems back into the grid in exchange for credits, which can reduce their overall electricity costs.

However, net metering policies vary by state, with some offering full retail rates for the electricity sent back to the grid, others providing reduced rates and some states like Alabama do not offer statewide net metering policy. Understanding these differences can help businesses optimize their solar investment.

Feed-in tariffs (FiTs) provide another incentive by offering long-term contracts to solar energy producers for selling electricity back to the grid. Unlike net metering, where credits offset electricity bills, FiTs involve direct payments for every kilowatt-hour generated. While FiTs are more common in Europe, some U.S. states have adopted similar programs, providing a reliable revenue stream for businesses with large solar installations. For example, Vermont’s Standard Offer Program offers fixed payments for solar energy, ensuring a stable return on investment.

Community Solar Gardens

Community Solar Gardens are shared solar energy projects where multiple participants, including homeowners, renters, and businesses, can buy or lease a portion of a solar installation.

Instead of installing solar panels on their property, participants invest in or subscribe to a share of a larger, centralized solar farm. The electricity generated by their portion of the solar farm is fed into the grid, and participants receive credits on their electricity bills based on the amount of power their share generates.

Community solar is available in many U.S. states, though the specific programs and regulations vary. States like Colorado, Minnesota, and Massachusetts have robust community solar programs, making it easier for residents to participate in these shared solar projects.

What is Community Solar?

Community solar gardens allow businesses and individuals to benefit from solar energy without installing panels on their property. Participants can subscribe to a share of a solar project located off-site and receive credits on their electricity bills for the energy produced. This model is particularly appealing to those with unsuitable rooftops or those who rent their properties.

How Can Real Estate Owners Make Money?

Real estate owners can monetize unused space by leasing rooftops or land to community solar developers. This creates an additional revenue stream, as they receive payments for hosting the solar installations. For instance, a commercial property owner might lease roof space to a developer who then installs a solar array, providing the owner with a steady income from lease payments while contributing to the local grid.

Is Community Solar Available in All U.S. States?

Community solar is available in many states, but not all. States like Minnesota, New York, and Colorado have robust community solar programs, while others are still developing their policies. The availability of these programs often depends on state-level regulations and incentives designed to promote renewable energy. For example, Minnesota’s community solar program is one of the largest in the country, allowing businesses to participate and benefit from clean energy without installing panels on-site.

What Type of Properties Are a Good Fit for Community Solar?

Properties with large, unused rooftops or open land are ideal for community solar projects. These spaces can effectively host solar installations that benefit multiple subscribers.

For example, a warehouse with a large, flat roof could be an excellent candidate for a community solar garden, providing both the property owner and local community members with financial and environmental benefits.

Properties located near grid infrastructure are particularly attractive, as they reduce the costs associated with connecting the solar system to the grid, making the project more economically viable.

Get a Solar Quote

Choosing the right solar solution is critical for maximizing energy savings and sustainability. Considering our Proprietary Energy Savings Payment Model that helps you pay for your solar project, Commercial-solar stands as one of the leaders in commercial solar installation across the country.

By understanding the unique needs of your business and navigating through various financing options, rebates, and regulatory considerations, we ensure that your transition to solar is both cost-effective and efficient. Ready to talk about your soar future? Get started now.