Commercial Energy Solutions

Are Commercial Solar Panels Worth It?

Whether viewed from a financial or environmental standpoint, commercial photovoltaic systems are a worthwhile investment. From a financial perspective, solar panels are a long-term investment that continues to generate benefits for decades. They mitigate the impacts of rising electricity costs from utility companies. From an environmental perspective, solar panels reduce your carbon footprint. Within 2 years, they will offset the carbon footprint caused by producing them. And then for the next couple of decades, they will work to offset greenhouse gases.

What are the Benefits of Solar Panels on Commercial Buildings?

In addition to reducing your electricity bills and lowering your carbon footprint, commercial PV systems offer several other benefits. Commercial solar systems can increase the asset value of a commercial real estate property. The reduced electricity bills mean an increased Net Operating Income (NOI). When that NOI is multiplied by a Capitalization Rate, the resulting asset value is often greater than the cost of a turnkey PV system. This is particularly useful when selling a commercial property, but can also be beneficial for unlocking access to additional debt to leverage in other investments.

The sustainable nature of photovoltaic systems often attracts higher rent-paying tenants. This is often seen in office and retail buildings, where prospective lessees require that their building satisfy certain green criteria. This can also be seen in multi-family buildings, which aim to attract the kind of clientele willing to pay more when the building offers additional amenities and sustainability features.

How Long do Commercial Solar Panels Last?

Commercial solar panels typically last 25-30 years, as per a standard warranty. Many commercial solar panels installed decades ago are still in operation. Today’s panels are much more efficient and robust than those installed when the solar industry was just taking off.

How Efficient are Commercial Solar Panels?

Commercial solar panels are about 20-23% efficient, meaning about one-fifth of the energy found in sunlight is converted into usable electricity.

What Commercial Solar Tax Credits are Available?

The Investment Tax Credit (ITC) is a federal tax credit equal to 30% of the cost of the entire commercial solar project. Customers receive a tax credit equal to 30% of the amount they paid for solar installation. What’s more is that this credit is actually 40% in counties which the US Dept. of Energy designates as “Energy Communities”, including Los Angeles County and all adjacent counties (e.g., Orange County, Ventura County, Riverside County). Note that this tax credit is ending in 2027. In order to receive it, a commercial project must start by the middle of 2026 or must be fully finished by the end of 2027.

Another tax incentive from the federal government is accelerated depreciation. Commercial PV systems allow you to claim the cost of the system as a deduction, over 6 years, rather than over the much longer whole useful lifetime of the system. This means you end up reporting a lower taxable income amount on annual tax filings, and those benefits are all recouped over the first six years, rather than being spread out over 20+ years.