Author: Matthew Brenn
Corporate budgets for commercial properties include many different business expenses – from maintenance costs and the water bill to acquiring tenants and mowing grass. Amongst these expenses, one of the most important variable costs includes the monthly electricity bill.
According to the 2012 Commercial Building Consumption Survey (a new survey is currently underway), commercial property owners spend $1.44 per square foot per year on their electricity costs. This means for a facility that is 16,400 square feet (the average size of a warehouse), the annual electricity expenses could be a whopping $23,616. What if there was a way for businesses to reduce their electricity costs and increase their marketability at the same time?
Renewable energy, particularly on-site solar, is the way to go. Commercial on-site solar includes solar panels installed on the roof, mounted on the ground, or built as canopies over parking lots.
Let us look at exactly how including solar in corporate budgets can benefit commercial businesses:
Reduce Operational Costs
Installing on-site solar can reduce the utility bill for a corporate property by capitalizing on a policy framework known as “net metering.” Net metering allows solar customers to give the excess energy they produce back to the electric grid in exchange for credits that lower their electricity bill. With the right solar energy system design, property owners and businesses can use the credit they have accumulated during the summer, when there is typically more sunlight, to use for the winter. This way, businesses can reduce their utility costs significantly during a 12-month period.
In particular, businesses are a good fit for on-site solar and can benefit significantly from net metering policies. Extra Storage, one of the largest self storage companies in the United States, began installing solar on their units in 2010. Since then, some properties have seen as much as an 80 percent reduction in their electricity costs. In 2018, Pivot Energy announced a partnership with Extra Storage, intending to further reduce the company’s carbon footprint and costs.
Increase Market Value and Revenue
On-site solar can also improve the market value of commercial properties and possibly create additional revenue. This can translate to higher property and resale values for the owner if or when they should sell. Since solar energy directly impacts the building’s operational costs, this translates to a better net operating income (NOI) for the owner and a better business opportunity, hence a higher property valuation.
The best part is that solar energy is often exempt from property tax assessments, providing the upside of an investment into your property without the downside of higher taxes. In fact, there are currently 36 states that offer property tax exemptions for solar energy.
Federal Tax Credits
Organizations that install commercial solar also can take advantage of the Federal Solar Investment Tax Credit (ITC) and receive a dollar-for-dollar reduction on corporate taxes. Even non-profit organizations, public entities, or businesses without tax liability can benefit by procuring through a power purchase agreement framework.
The ITC amounts to 26 percent of project costs if they commence construction before the end of 2020 and falls to 22 percent next year.
In addition to monetary impacts, a growing number of companies have committed to corporate sustainability measures in response to the shareholder, customer, and employee pressures. With this trend, embracing green building standards has become a market necessity. As a result, companies can differentiate themselves, increase revenue, and retain different stakeholders by including solar in their corporate budget.
Plus, renewable energy is good for the environment. On-site solar is especially helpful because it causes a direct offset of potentially carbon-intensive grid electricity. This environmental benefit can also be monetized by earning a solar renewable energy credit (SREC) for each megawatt-hour of electricity produced from the on-site solar array. In some places, these credits can be worth hundreds of dollars and significantly reduce system costs.
All in all, solar energy provides many benefits for commercial businesses. Beyond the cost savings, it also supports corporate sustainability measures and can serve as a differentiating factor when marketing to potential customers. With the Federal ITC set to decline at the end of this year and further in the future, the time is now to consider solar for your business.
The Pivot Energy team is ready to support your business in its energy strategy. Reach out to speak with a member of our team.