The ROI of Commercial Solar in South Texas
By BEC Solar
Nearly every business owner is aware that installing solar can help reduce their monthly energy bills. Instead of paying for expensive grid electricity, solar allows you to generate your own clean power from free sunshine.
Better still, the ROI of this solar energy investment is easy to calculate.
You begin saving money on Day 1 – the moment your photovoltaic (PV) panels come online. Over time, those monthly savings quickly add up – eventually surpassing the upfront cost of the installation.
In effect, your solar PV system pays
Realistic Solar Payback Periods in South Texas
In a sunny market like South Texas, the average payback period of a commercial solar installation ranges between 7 and 10 years. However, the exact
breakeven point depends on important variables like:
- The size of your PV installation. A larger system may cost more, but it will also deliver higher monthly savings.
- The upfront cost of your PV system. The ultimate goal is to get the most power output at the lowest possible price.
- The financing used to pay for the system. Cash delivers the shortest payback period, followed by low-interest loans. Leasing (by definition) never pays for itself – although you do benefit from cheaper electricity for the duration of your contract.
- Whether you take advantage of incentives. Most commercial solar installations qualify for the 30% Federal Investment Tax Credit (ITC). In addition, many regions of Texas offer net metering, which allows you to sell excess solar electricity to your utility provider. Moreover, some utilities – like CPS Energy and AEP Texas – offer generous cash rebates to help offset the upfront cost of your commercial solar PV system.
- How you amortize or depreciate your system. When done correctly, your solar investment counts as a business expense that you can spread over many years. It’s best to talk to a tax advisor for particulars.
- Whether you generate Renewable Energy Credits (RECs). Although Texas has no official program for RECs, it’s possible to trade your solar credits in other markets.
Once your solar PV system reaches the breakeven point, all additional electricity generated is 100% free. Moreover, although commercial solar PV panels are typically warrantied for 25 years, a well-installed system can easily last 40 years or longer – with minimal maintenance. As such, you benefit from decades of free electricity many years after
the payback period has long passed.
Measuring the True ROI of Commercial Solar
Given the above benefits, solar consistently offers better returns than the S&P 500, whose average annualized ROI over the past 90 years is less than 10%.
Moreover, these solar returns are virtually risk-free since:
- The sun will always shine tomorrow – guaranteed.
- Your PV panels are warrantied for 25 or more years.
- Utility rates keep trending upward – even in South Texas.
In fact, the ROI of your solar power investment will only increase as electricity prices keep going up. This is because your panels essentially shield you from future price hikes – allowing you to save even more
However, even these numbers don’t capture the true ROI of commercial solar power. There are 2 additional factors that can help boost the return on your clean energy investment.
1. Property Value Increases
In an exhaustive analysis of the residential solar market, the National Renewable Energy Laboratory (NREL) and Lawrence Berkeley National Laboratories discovered that solar-enabled homes sold for more than their non-solar counterparts did.
More specifically, the study found that for every $1 in annual utility bill savings, the property increased by an average of $20. Equally important, those solar homes spent half as long on the market. The reason behind this trend is simple. Future buyers are often willing to pay a premium for the monthly savings they’re guaranteed to receive if the property comes already installed with solar PV technology.
Although there hasn’t been a comprehensive study of commercial solar properties, the same logic would apply. The resale value will increase since future buyers know they’ll benefit from lower utility expenses once moved in.
2. Corporate Social Responsibility
Installing solar panels can dramatically decrease your carbon footprint. These environmental savings, on their own, are sufficient motivation for a growing number of prospective commercial solar customers.
However, there’s another benefit as well (beyond leaving the planet cleaner for future generations).
Customers increasingly prefer doing business with environmentally-responsible companies. And going solar is a cost-effective way to demonstrate your green commitment. Installing panels can also serve as a powerful differentiator – especially if you work in a competitive market or industry.
That corporate social responsibility (CSR) can help you attract more business is well-documented. According to a 2014 Nielsen study,
“55% of global online consumers across 60 countries say they are willing to pay more for products and services provided by companies that are committed to positive social and environmental impact.”
In other words, CSR not only leads to more sales, but it also allows you to charge higher prices.
Moreover, the benefits of solar aren’t just limited to customer acquisition. Installing PV panels can also help you attract top talent (often for a fraction of the cost). A 2012 survey by Rutgers University and Net Impact found that nearly half of all surveyed graduates would take a pay cut if their next job had a “positive social or environmental impact.”
CSR can also increase your company’s overall performance. A 2015 Harvard University analysis found:
“[S]trong evidence that investing in firms that are performing well on material sustainability issues yields considerably better future stock market performance compared to other firms.”
Many prospective commercial customers put off going solar – choosing to invest their limited resources elsewhere. But installing PV panels on your business allows you to:
- Enjoy ROIs that outperform the S&P 500.
- Reduce the size of your carbon footprint.
- Generate more sales (at higher prices).
- Attract and retain better talent for your firm.
Very few investment opportunities can deliver comparable returns to what solar power offers. Fewer still deliver returns that are essentially guaranteed. Simply put, going solar is a virtually risk-free investment that can boost your bottom line while simultaneously protecting the environment.