The benefits of solar for commercial/industrial buildings are numerous. But the price tag of the initial investment may create tunnel vision, preventing a clear view of the long-term ROI. Let’s broaden the field of vision by looking at the top five benefits of installing solar panels on your commercial buildings.
1. Increase Cash Flow with Commercial Solar
Solar for commercial buildings can significantly increase cash flow by reducing monthly utility bills. This increase, in turn, can allow your business to have money on hand for more vital expenditures. When offsetting your utility bill with commercial solar, you can invest your savings in new equipment, hiring critical employees, or saving for a rainy day. What does that savings mean for you? More money for things that matter.
2. Reap THE BENEFITS OF the Solar Investment Tax Credit
The Solar Investment Tax Credit (ITC) is a dollar-for-dollar federal tax credit for business owners installing solar panel systems and solar battery backup systems on their commercial buildings. The ITC is currently a 26% credit offsetting the cost of your solar panel system. This is an extremely generous incentive since it can translate into immediate dollar-for-dollar savings. If you’re interested in going green and saving money on your energy bills, the solar ITC is definitely worth considering.
3. Depreciate the Entire Expense of Your Solar ELECTRIC System
Accelerated depreciation is a tax credit that encourages private sector investment. Businesses can recover certain capital costs by reducing tax liability and accelerating the rate of return on their solar investment. The Modified Accelerated Cost Recovery System (MACRS) is the current depreciation method used by the Federal government.
MACRS is a method of depreciation in which a business’ investments in specific tangible property are recovered, for tax purposes, over a specified period through annual deductions. Qualifying solar energy equipment is eligible for a cost recovery period of five years. MACRS allows for faster depreciation in the first years of an asset’s life and slows depreciation later on. There are two types of MACRS systems – the General Depreciation System (GDS) and the Alternative Depreciation System (ADS).
MACRS is calculated in a straight line. LN calculates the percentage for a year by dividing one depreciation period by the remaining life of the asset and then applying this amount with the averaging convention to determine the depreciation amount for that year.
With the Tax Cuts and Job Act (TCJA), enhanced bonus depreciation deductions are available for qualifying MACRS solar energy equipment placed in service before January 1, 2023. TCJA currently allows for 100% depreciation of your commercial solar system as opposed to the standard MACRS five years. The allowance will decrease 20% per year after 2022 and expires altogether in 2027.
4. Safeguard Against Ever-Increasing Electricity Rate Hikes
Solar can help protect your business against ever-increasing utility rates. Not being completely reliant on the grid can insulate your business from future PG&E rate hikes. Volatile utility rate hikes adversely affect your business and make it difficult to forecast operating costs for the future.
Tax Credits & Overhead Savings Take a Big Bite Out of the Cost of Your Investment
5. Realize Substantial Long-Term ROI with Commercial Solar
Another benefit to going solar is that installing a system offers a substantial return on investment (ROI). In most cases, the payback period for a commercial solar system is five to seven years. After that, your business will be generating free electricity for the remainder of the system’s lifespan. Commercial solar is an excellent long-term investment for companies looking to reduce operating costs.
The Savings Add Up
There you have it: The benefits of solar for commercial/industrial buildings. Ready to see what solar panels can do for your business? Contact our solar experts today, and we’ll help you determine how much benefit your business can gain by going solar!