When Does Solar Make Sense for your Company?
by Mary Lemm
Considering Solar?
It’s not surprising that one of the most significant issues facing our world is energy security. As the turbulent global political climate continues to affect energy assurances, finding ways to guarantee consistent energy at an affordable price and in an environmentally conscious manner is at the forefront of many change-makers.
Solar energy is the fastest growing and most affordable source of new electricity in America. A Photovoltaic (PV) system, more commonly referred to as a solar panel system, is having its moment in the sun (pun intended!). Over three million installations have taken place across the country – with one million built in the last two years (US DOE).
Solar arrays are one of the most common ways commercial and residential energy customers can save money and cut down on their energy usage. Understanding how solar generation can lower utility bills is critical to understanding its potential value.
When reviewing a utility bill, commercial consumers usually have two varying charges:
Consumption charges and
Demand charges.
Consumption is a straightforward pay-what-you-use figure generally measured in kilowatt-hours (kWh). Demand charges are the “fee associated with maintaining the electric utility’s infrastructure required to deliver electricity to your building.” Perhaps it’s more easily explained by how it's calculated. The energy grid is in constant motion, moving energy of different sizes, voltages, and types as it travels from generation facility to transformer, ultimately completing its journey as usable energy for the consumer. Demand, which is measured in Kilowatts (kW), is how much power a customer is drawing from the grid at any one time.
For example, when looking at the graphic below, you can see how running a refrigerator alone overnight will draw less power than when you are running it along with a dishwasher, stove, and washing machine all at one time. Utility companies measure your demand in intervals (typically 15 min) and will charge you a fee based on the specific interval within the billing cycle in which the facility was demanding the most power from the grid.
When considering an onsite solar system, it is critical to understand that solar panels will almost always lower energy consumption charges but may not alleviate demand charges. The highest demand intervals usually occur shortly after midday, commonly attributed to air conditioning (AC) loads reaching their peak in the afternoon. This increased demand will not only increase a facility’s energy consumption but also amplify the energy needed to power not only the AC, but all your lighting, computer, and appliance needs.
Does Solar Make Sense for my Location?
Commercial solar installation density varies across the country depending on the unique environmental, economic, and regulatory characteristics of each state. The states that hit the sweet spot in all three categories tend to have the most robust solar industries. The heat map above illustrates the best US commercial solar industries by state (white being the best-suited, dark being the least-suited).
A common misconception is that solar panels will not produce energy on cloudy days. In fact, a solar system can harness energy by direct or indirect sunshine, although the system is more effective on sunny days. Rain might be misconceived as detrimental, but actually helps wash away any dust or dirt accumulating on the panels.
Economically, the cost of solar panels has dropped significantly over the past two decades. The price to install an onsite system has fallen by 30% over the last five years. (SEIA, 2019) This not only piqued the interest of corporate buyers, but increased the size of arrays. The Federal Tax incentive (ITC), established in 2005, aims to support the development and proliferation of solar energy across the country.. Extended several times by congress, the ITC tax credit can be claimed on federal corporate income taxes for 26% of the total cost of the system for projects commencing construction or placed in service in 2022. The credit is scheduled to decrease to 22% in 2023 and furthermore down to 10% in 2024. Fortunately, there is no indication of implementing a complete expiration of any credit in the future.
Regulatory hurdles are present no matter where you live. The most important factor to review is your local net metering or distributed generation policy. This is a program offered by utilities where solar panels or other renewable energy generation sources are connected to a public-utility power grid. Surplus power is then transferred onto the grid, allowing the owner of the solar system to offset the volume and cost of power drawn from the utility. Many jurisdictions allow facility operators who install solar onsite to participate in Net Metering to earn credit for the electricity they send back to the grid. Start by exploring your local policies and incentives is through the Database of State Incentives for Renewables & Efficiency (DSIRE)
If I Buy a Solar System, Should I get a Battery System, too?
Battery storage feasibility is a bit more complex than solar feasibility. The most common reasons consumers look at implementing battery storage is some combination of emergency backup power, financial savings, and maximizing their self-supply of energy. Although, setting realistic expectations of your needs and how a battery could potentially benefit your total system is a critical step. For example, ask yourself – does my facility frequently have power outages? Does my utility company have sufficient net metering policies that render a battery unnecessary? You would be surprised to find out that having an onsite battery is not always the best decision.
If you do decide on a battery storage system, the main categories to consider include chemistry and configuration, power and performance, and warranty and price.
Chemistry & Configuration: Lithium-ion batteries come in various chemistries, but the top is either Lithium Nickel Manganese Cobalt Oxide (NMC) or Lithium Iron Phosphate (LFP). NMC batteries are perhaps the most common solar batteries, but LFP batteries are gaining traction with higher power ratings and longer lifespans. They can come with or without an integrated inverter, but to avoid needing an external, third party to convert the energy from a usable alternating current (AC) to a storable direct current (DC) energy, you should include an inverter.
Power & Performance: Choosing a system that meets your needs includes considering some key performance indicators. The usable capacity, measured in kilowatt-hours (kWh), is a measure of the maximum electricity your battery can store at full charge. The continuous power rating, measured in kilowatts (kW), is a measure that determines the maximum amount of consistent output your battery can produce. The latter is comparable to the demand charge on your utility bills.
Warranty: Solar battery warranties are complex due to the battery’s performance use and metrics. Most solar batteries have a 10-year warranty on the integrity and output of the system. Many manufactures also include a certain level of performance capacity throughout the battery’s usable lifetime that can be altered by a cycle clause. Each time a battery is completely drained and recharged it is considered a cycle. Each cycle reduces the battery’s ability to hold a charge and as such, manufacturers will warranty a specific number of cycles in place of a time period.
Price: Due to the factors above, the pricing of a solar battery isn’t exactly straightforward. An easier way to compare various prices is simply comparing the Manufacturer’s Suggested Retail Price (MSRP) against your needs, including usable capacity and performance output. Additionally, you’ll want to consider various configurations that are available because two smaller batteries can sometimes be more cost-effective than one large battery.
No matter where you are in your renewable energy journey, solar panels are a great way to provide a reliable, environmentally positive, and cost-effective energy supply.
If you are interested in determining if a solar PV system makes sense for your business, consider a consultant who can look at your energy needs through a holistic lens. Understanding your current energy demands will set the stage for how a solar system can be an influential asset to your business.