5 Reasons Why Interest in Solar Energy Is at an All-time High
Business owners are expressing interest in solar energy for a number of reasons—important among these are the high cost of electricity, new government tax credits, and the ability to access solar without the need for capital expenditure. By adopting solar as part of a larger energy mix, business owners and managers can mitigate the impact of rising electricity prices.
High Cost of Electricity
Natural gas is the fuel stock used to generate a significant percentage of the nation’s electricity. Spiking natural gas prices in the U.S. have increased electricity generation costs, which are being passed onto consumers. In 2022, commercial and residential consumers experienced electricity bill increases of between six and 45 percent. Natural gas prices are expected to remain high for some time due to a number of factors, including:
- Geopolitics
- U.S. exports to Europe
- Lack of domestic investment in infrastructure
- Ongoing supply chain issues.
Taking Advantage of 40% Tax Credits
To encourage investments in solar, the U.S. Congress passed the Inflation Reduction Act of 2022, which increases the Investment Tax Credit (ITC) from 26 percent to 30 percent. The credit applies to both business and residential projects, including solar projects installed in 2022, until the end of 2032. By purchasing domestically produced hardware, solar power projects may qualify for a 40 percent total tax credit—the ITC plus an additional 10 percent.
Insulating the Bottom Line Against Rate Hikes
With an average thirty-year life span and low maintenance costs, solar energy systems produce energy at a fixed cost, which can help insulate companies from future energy price hikes. In finance, the concept of investment diversification is recognized as a risk management best practice. Similarly, diversification of energy sources can help stabilize energy costs.
Securing Your Power Needs
Recent cyberattacks, including the DarkSide criminal organization’s attack on Colonial Pipeline, alerted energy consumers that critical energy infrastructure may be vulnerable. This attack, which shut down a major fuel supply for the East Coast of the U.S., spurred panic buying and drove up the price of gasoline.
Beyond the risk of cyberattacks, the infrastructure of regional electrical grids isn’t immune from failure. In February 2021, Winter Storm Uri affected critical energy infrastructure and created an unprecedented loss of power across Texas.
Businesses can increase their resilience by installing a solar energy system, which can mitigate some of the risks of cyberattacks and infrastructure failure.
Demonstrating Concern and Care for the Environment
In Deloitte’s Resources 2020 study, 81 percent of Millennials and 64 percent of Gen X reported that they are very concerned about climate change and their personal carbon footprint. Forty-seven percent of Millennials responded that it is important for them to work for a company with sustainability and/or climate goals, compared to 33 percent of Gen X, 21 percent of Baby Boomers, and 32 percent of Matures.
By going solar, companies can demonstrate their commitment to the environment and the future, while meaningfully connecting with the values of millennial and Gen Z consumers.
Installing Solar Without Capex
The good news for businesses considering solar is that installing a solar facility isn’t usually capital intensive. In most commercial and industrial solar projects, an investor will pay for the installation. The client pays the investor back over time by way of a power purchase agreement (PPA).
A PPA is a financial agreement between a business and a developer who will design, permit, finance, and install a solar system on the business property or other site with no capital outlays needed from the business. PPAs normally range from 15 to 25 years.
The developer sells the generated solar power to the business at an agreed rate per kilowatt hour that is competitive with the local utility. The developer takes advantage of the tax credits and is usually able to pass the savings onto the business.
Next steps
If you are a business owner interested in mitigating the impact of rising electricity prices with solar, contact us for a free assessment. Making a switch or diversifying your energy sources with a solar energy system can be a safe, financially smart, and profitable decision in the longer term. To learn if solar is the right move for your organization, contact us for a free solar feasibility report.