The ROI of Solar Energy for Businesses
Solar installation is a sound long-term investment providing numerous benefits to those who choose to switch. From cutting overhead electricity costs to developing a green brand image, solar energy can be highly profitable. However, before committing to a solar installation purchase, it’s worth getting an idea of your ROI.
What is ROI?
ROI stands for “return on investment.” The term describes how much money you will make from your solar installation over its lifetime. By calculating your ROI, you can determine how profitable your investment in solar will be for your business.
A Simple Example of ROI
This calculation is a very simplified way to calculate your ROI. Though it will help you get an idea of the scale of savings you can make and help you understand how ROI works, it’s always necessary to consult a professional when it comes to your solar installation.
ROI can change depending on various factors, such as the impact on solar panel efficiency produced by the weather and climate, your chosen financing option, electricity price fluctuations and whether or not you have applied for any incentives. The type of solar panels you choose also determines your ROI, as each has different efficiency rates and degradation rates. However, to get an idea of what your ROI may look like, follow these steps:
The first step is to find out the proposed cost of your solar system. You can reach out to a professional installation service and request a proposal in which the details of the cost of the installation will be mentioned. For example, let’s say your solar system costs $28,000.
The next step is to locate the cost of your annual electricity bill. For this example, let’s assume that a business’s average annual electricity bill is $7,000.
The next step is to estimate the lifespan of your solar panels. With a warranty, your solar panels have a guaranteed lifetime of 25 years, but can produce energy for 35 years or more. For this calculation, let’s assume that your solar installation’s lifetime is 25 years.
Therefore, the amount you’ll save on electricity bills throughout your solar installation’s lifetime is $7,000 x 25 = $175,000.
Your net savings can be calculated by removing your solar installation’s cost: $175,000-$28,000= $147,000.
The next step towards calculating ROI is to divide your net savings by your installation cost:
The final step is to multiply this number by 100 to get your ROI percentage. In this case, ROI comes to 5.25 x 100= 525%.
In this case, we assume that this solar installation provides 100% solar offset. In reality, you can offset between 50 and 150% of your energy with solar panels, which will also impact your ROI.
7 Ways You Can Increase ROI
Quality and Value
The more experienced the installer, the better quality of the installation. A top-quality solar installer can handle the complex process of designing a commercial solar installation and provide top-quality materials and valuable expertise. The better the quality of your solar installation, the more energy it will produce over its lifetime, improving your ROI.
Design and Customization
Choose an installation service that can provide customized designs for commercial solar. Finding the most efficient and cost-effective solar installation is paramount to getting a better ROI. This can look like choosing between rooftop or ground-mounted solar or improving your parking lot with a solar canopy.
Availability of Incentives
The US provides businesses with the opportunity to recover 30% of total installation costs with the federal solar tax credit (ITC), which can significantly increase ROI. This incentive will last until 2032, when the credit will begin to reduce to 26% and eventually be discontinued. Some states are also actively incentivizing solar installation and have net metering programs or rebates on offer. For more information on which incentives you are eligible for, contact IE Construction.
Commercial solar financing options haven’t been particularly attractive in the past, but the landscape offers a very different outlook today. There is a wide range of solar loans available to business owners today which provide flexible options. Low-interest and low-payment solar loans can help you improve your ROI and get the most out of your solar system.
The efficiency rate of a solar system can be negatively impacted by the accumulation of dirt and debris on solar panels. Generally, solar panels must be cleaned once or twice a year. Keep in mind that solar panels must be cleaned very carefully without the use of power washing tools.
Solar warranties can help you safeguard your investment against equipment malfunctions, failures and other kinds of damage that may occur. A warranty with excellent coverage ensures that you can guarantee your solar system’s performance and avoid any losses that might negatively affect your ROI. IE Construction provides outstanding warranties of 25 years for commercial solar panels.
Get The Best ROI With IE Construction
Calculating your ROI will help you determine the financial implications of your solar energy system, which will reveal the investment’s financial feasibility. Suppose you’d like to get a more accurate estimate of your solar ROI. In that case, IE Construction can provide you with all the information you need and answer any questions you may have regarding improving your ROI.
We provide top-quality solar installation services to businesses with our turn-key solar solutions. From selecting the most profitable solar installation type, creating the most efficient solar design, and choosing the best financing option for your budget and needs, IE Construction is ready to assist you at every step. Ready to go solar? Contact us today to learn how we can help you make the switch.