Can you think of any businesses that don’t need electricity to operate? My list starts with “barbershop quartet” and ends with “child’s lemonade stand”. It’s pretty shortlisted. Electricity is a crucial requirement of almost any business, and its one that you can safely bet isn’t going away anytime soon. Businesses use much more electricity than homes, and the costs can add up quickly each month. It would be great if your business didn’t have to depend on electricity to function, but that’s just not in the cards. Once you recognize that your electricity needs are here to stay, the next question becomes: “If we can’t eliminate our power needs entirely, can we eliminate or reduce our energy costs?”
That’s why so many businesses are turning to solar energy as a means of controlling their energy costs. This trend is expected to continue, despite the fact that the Federal Investment Tax Credit for solar systems is set to begin its decline in 2020. Outlined below are some of the top reasons why commercial solar is a great investment for businesses.
Electricity can be a big expense for businesses. With a solar system, businesses can compartmentalize their energy costs and make them more predictable. This is achievable through financing options that spread out the cost of the system over a fixed period of time, thereby stabilizing electricity costs. Unlike volatile utility prices that can be raised year after year, solar financing allows companies to forecast their energy costs for decades out.
Of course, the percentage of a company’s power usage that can be offset with solar depends on the available space. Even if a business can’t get all the way to 100% offset, any solar power at all can help shave down the sum of the utility bill.
In many places throughout the US, switching to solar can actually save businesses money on their energy costs from day one. This is because the cost of installing solar has dropped so much, that solar power can actually cost less than utility power in some areas.
Boosted Building Value
Adding a solar system means adding a physical asset to your building. Like any other asset or renovation, a solar system increases the appraisal value of a building.
Not only can you increase the value of your building with solar, but with enough solar panels, you can actually become a net exporter. That means that you’ll produce more electricity than you use, for which you’ll be paid by the utility. Of course, this is only a possibility if there’s enough space available to offset your business’ usage first.
When your business converts to renewable energy, you can leverage your new green identity with your customers. Many consumers appreciate environmentally responsible companies. By switching to solar energy, you can signal to your customer base that your business is a forward-thinking one.
One of the reasons solar has become so competitive with other energy sources is the ITC (Investment Tax Credit). The ITC is a mechanism intended to promote the adoption of solar energy. It was originally proposed over 10 years ago, and it’s already been extended once.
The Tax Credit is good for 30% of the cost of a solar system for the rest of 2019. Then in 2020, the value of the ITC drops to 26%. The next year, it will decline further to 22%. By 2022, the ITC for commercial solar projects will settle at 10%, where it is expected to remain. For residential solar, the ITC will be eliminated entirely in 2022.
Let’s talk about the Tesla–Walmart fires. Over the course of the past few weeks, you may have heard about a big story in the world of commercial solar. Retail giant Walmart is suing Tesla for gross negligence due to a series of fires thought to be caused by Tesla solar systems. On the surface, this might sound like a bad thing for the commercial solar market. However, many prominent engineers and analysts within the commercial energy space are actually forecasting that these system failures will ultimately be a good thing for the industry. In this article, we’ll look at the facts of the lawsuit, and how solar developers are responding.
The lawsuit alleges that seven fires have broken out on the roofs of their stores and distribution centers from 2012 to 2018. They claim that Tesla did not follow industry standards when installing or maintaining the systems and that this was likely the cause of the fires. Although not all the systems were installed under the Tesla name, Tesla acquired the massive solar company SolarCity in 2016 for $2.6 billion. The suit claims that the companies “had engaged in widespread, systemic negligence and had failed to abide by prudent industry practices in installing, operating and maintaining its solar systems — conduct that greatly increased the risk of fire at Walmart sites.” Walmart claims that SolarCity used “chaotic installation practices” and that they placed a premium on install speed rather than quality assurance.
This high profile case puts a spotlight on the industry, and some of the initial reactions predicted that large companies such as Walmart would be less likely to pursue solar in the future. However, industry leaders were quick to find the silver lining on this thundercloud. The Tesla fires will serve to increase awareness, both for developers and companies alike, of the importance of meticulous design engineering and regular system maintenance. This new focus will help developers because there will be less of a “race to the bottom” mentality when it comes to commercial solar bids. For commercial solar clients, there will be an increased sense of importance regarding safety and professionalism. This will create a market environment where the most competent solar companies will rise to the top, while those that focus solely on delivering the cheapest product will be risking their reputations on shoddy work. This new spotlight will open the door wider for commercial solar outfits like Poly Energy, where quality construction has always been a major focus.
Despite the negative PR that comes with an incident like this one, the economics of commercial solar is so good that business will not be deterred from installing solar on their roofs. A solar system represents an opportunity for a business to seize control of its energy costs, rather than relying on volatile and unpredictable utility rates. On top of that, companies are increasingly turning to renewable energy as something to leverage in their branding campaigns. Companies like Apple, Google, Facebook, and Amazon all seem to be trying to out-do one another when it comes to securing renewable energy for their portfolios.
Commercial solar has been booming in the past 5 years, and it’s unlikely that business will give up the favorable economics for fear of having the same problems that Walmart has. In fact, an analyst from Wood Mackenzie Power & Renewables has stated that the incident may actually increase corporate confidence in leaning towards renewable generation because there’s a “level of protection built into the system, which they otherwise might see as an unknown risk.”
Going forward, there must be a new industry-wide standard set for engineering and maintenance of solar systems. Too often in the solar industry, there’s a high premium placed on the sale and installation of new systems, with less attention paid to service and maintenance. This can lead to problems down the road, so it’s hugely important to go with a reputable installer who can get the job done right. Even if the system is installed perfectly, over the years things like weather as well as critter contact can take its toll. Therefore, regular maintenance of the system is just as important as a flawless install.
The best summation of this whole scenario can actually be found within the suit itself: “To state the obvious, properly designed, installed, inspected, and maintained solar systems do not spontaneously combust,”. As we continue to march towards a goal of increased renewable energy capacity, this lawsuit will serve as a landmark and reminder that quality must be the #1 priority for solar developers. When a company like Tesla cuts corners and fails to deliver support to their clients, situations like this can arise and threaten the progress we’ve all worked so hard to build.
The United States has the biggest economy in the world in terms of GDP (gross domestic product). We produce the most influential companies in the world, whose names become ubiquitous in languages across the globe. By many standards, America is a global leader, and it stands to reason that we should also lead the world in commercial wind and solar. Companies like Apple, Google, Facebook, and Amazon have all ramped up their procurement of renewables in recent years. However, even with this tremendous growth, the market is so enormous that we’re nowhere near our capacity. If we wish to maintain our economic dominance, businesses should seize control of their energy futures so they can focus on growth.
A recent report from Wood Mackenzie and the American Wind Energy Association (AWEA) illustrates the potential for the commercial renewables market in the United States. The report looks specifically at the electricity consumption of the Fortune 1,000 companies in order to encompass a large share of the US economy. Of all the electricity used by these companies, only around 5% was generated by renewable sources. That means that the corporate renewables market could still expand by 20 times or more. The report forecasts approximately 85 gigawatts of potential renewable energy demand over the next ten years. For perspective, the demand from these 1,000 companies is more than the sum of all existing residential, commercial, and utility-scale solar currently installed in the US.
The corporate world is one where economics is paramount. That makes it a fantastic fit for renewable energy. As corporations forecast their growth into the coming years, they must consider their energy use as a part of the equation. Energy can be a big expense for corporations, and it’s one that’s traditionally difficult to forecast based on unstable electricity rates.
There’s not a person or group in the world that can predict with accuracy what traditional energy rates will look like in the future because public utility commissions can vote to raise rates at any time. A finite supply of fossil fuels means that prices will rise in an inverse relationship with availability, but that’s not the only thing driving up energy prices. Utilities must repair and maintain a vast transmission and distribution network to deliver power from the place where it’s produced to the place where it’s needed. Power companies have no way to recoup these costs other than by raising electricity prices for their customers, and the unfortunate truth is that the grid is aging and in need of some serious investment.
Take for example the largest utility in the country, Pacific Gas and Electric of California. A spark from a faulty transmission wire in Northern California was the cause of the devastating Camp Fire in 2018, in which 85 people lost their lives. The fire torched a bewildering 153,336 acres of land and left thousands of homes and businesses in ashes. The financial burden PG&E incurred because of this tragedy left the company unable to move forward, and so with very little warning, America’s biggest utility filed for bankruptcy.
Volatility like this is just one reason why businesses are turning towards renewable energy sources. While there is often still a utility surcharge to connect to the electricity grid, companies are able to insulate their energy costs from unexpected turbulence in the conventional electricity market. Most renewable energy purchases or power purchase agreements are predictably structured and are therefore more valuable when predicting future energy costs.
An investment in renewables not only stabilizes electricity costs, but it also helps companies brand themselves as forward-thinking and conscientious. If we take America’s largest companies as examples, it’s clear that this image is a desirable trait as far as consumers are concerned. With so much room to grow, and so much incentive to do so, the commercial solar and wind markets should continue to pick up momentum in the coming years.
Apple has surpassed Amazon as the leader in installed commercial solar capacity, according to the 2018 Solar Means Business report from the Solar Energy Industries Association (SEIA). Apple now commands 393.3 MW of installed commercial solar assets. When the same report was released for the 2017 calendar year, Apple’s capacity was 263.3 MW. That means that Apple added an impressive 130 MW in one year. For reference, the state of South Carolina’s total installed commercial solar capacity is about 100 MW. 2018 was also the year in which Apple declared that 100% of its global business is now powered by renewable electricity generation.
There are several reasons why a company like Apple would choose to go 100% renewable. First and foremost let’s look at the most important thing to a corporation: Money. In many places throughout the US, renewable energy is already a more cost-effective bet for companies than drifting along with conventional energy fuel costs. No one knows the future cost curves of coal, natural gas, and oil, but one thing is certain: The price is not coming down. Any Economics 101 class will teach you that a limited resource in high demand will go up in price. Over the long run, that’s certain to be the case with conventional energy production. Renewables, on the other hand, can provide business with predictable electricity costs for years to come. Whether a business purchases the systems themselves or enrolls in a solar lease or loan program, they can effectively hedge their bets against rising energy costs.
Part of the reason for the newfound economic viability of solar is the drop in equipment cost and installation cost. In the last ten years, the cost associated with an on-site commercial solar system has dropped by 63%. The average system size is also trending upwards during that period. The average commercial solar system was just under 117 MW in 2009. In 2015, the average size was 153.6 MW. Now, the latest recorded total shows the average commercial solar system at just over 200 MW per project. As cost goes down and system size goes up, commercial solar will continue to represent an increasingly larger slice of the corporate energy pie.
Another reason businesses are investing in renewable energy is linked to altruistism (or at least, the perception of altruism). Some business have sincere motives to preserve the environment and help fight climate change. Many others simply wish to appear caring and conscious to their customers. It’s also worth noting that businesses like these see themselves as generational brands, who will still be in business many years into the future. Many companies just want to be on the right side of history.
Corporations recognize that climate consciousness is important to their customer bases, so they want to be a part of that movement. Whether the intentions are sincere, or just bets on effective marketing practice, can be tough to discern. Either way, the result is more companies investing in renewables… and it’s been having an impact. In 2018, the electricity generated by commercial solar systems offset 7.5 million metric tons of carbon dioxide that would have been released through conventional generation sources. That’s about the same amount as 1.6 million cars would emit in one year.
The idea of “100% Renewable Energy” for an entire nation is often viewed as something that’s currently unattainable for the electricity grid as a whole. The accuracy of that notion can be debated. On the one hand, there are some difficult problems involving energy storage and the demand curve that make that idea seem impossible. Renewables are dependable generation assets over the long run, but conventional generation is still very much a part of the puzzle. For example, when it comes to ramping up to supply peak demand, natural gas plants are often still the preferred generators. On the other hand, with stronger government support and wider corporate adoption, we can deploy existing technology more widely in pursuit of a 100% renewable target. If storage costs continue to drop, can deploy more batteries to capture power in times of excess generation. With enough batteries, we could supply power whenever it’s needed. When considered in this light, the problem does not seem insurmountable.
For corporations, however, a 100% renewable energy offset target is already possible. Apple, for instance, likely still draws power from the grid. That power can come from any power source. The company offsets that power with renewable generation, thus achieving a net result of 100% renewable power. As the commercial solar market continues to soar, we are likely to see even more companies follow suit with Apple, Amazon, Target, and Walmart.