Turning Your Roof into a Potential Revenue-generating Asset
Owners of commercial buildings have a unique opportunity to transform a cost center into a possible revenue-generating asset. By coordinating a roof replacement or refurbishment with the installation of a solar photovoltaic (PV) system, owners can:
- Reduce roof and solar maintenance costs with coincident warranty terms for the roof and solar;
- Extend the life of the roof by covering and protecting it with a solar array;
- Cut electricity costs and potentially generate revenue from renewable energy;
- Take advantage of tax incentives.
Installing Roof-mounted Solar Without Capex
Business and home owners understand that a roof is a cost center—an integral and expensive part of a building that will eventually need to be repaired or replaced. And they must plan to meet those eventual expenses.
With the installation and use of a roof-mounted solar array, business owners have the potential to cut energy costs and generate revenue without expending capital. How? Via a power purchase agreement (PPA) with a solar developer.
A PPA is a financial agreement with a developer who will design, permit, finance, and install a roof-mounted solar PV system with no capital outlays needed from the business owner. PPAs normally range from 10 to 25 years.
The developer sells the generated solar power to the owner at an agreed rate per kilowatt hour that is competitive with the local utility. The developer takes advantage of the tax credits and passes the savings onto the owner.
The benefits of participating in a PPA include:
- No capital expenditures.
- Lower electricity bills.
- Reduced risk.
- A hedge against future utility rate hikes.
Leveraging Federal Tax Incentives
Business owners may be able to take advantage of tax credits for their solar-related costs via the solar Investment Tax Credit (ITC), which can be claimed on federal corporate income taxes for 26 percent of the cost of a PV system that is placed in service during the tax year.
In December 2020, Congress passed an extension of the ITC, which provides a:
- 26 percent tax credit for systems commencing construction in 2022.
- 22 percent for systems commencing construction in 2023.
- 10 percent for systems commencing construction in 2024 or thereafter.
Any PV system placed in service after 2025, regardless of when it commenced construction, can receive a maximum tax credit of 10 percent. Typically, a solar PV system that is eligible for the ITC can also use an accelerated depreciation corporate deduction.
Eligible property includes the following:
- Solar PV panels, inverters, racking, balance-of-system equipment, and sales and use taxes on the equipment
- Installation costs and indirect costs
- Step-up transformers, circuit breakers, and surge arrestors
- Energy storage devices (if charged by a renewable energy system more than 75% of the time)[1]
Timing a Roof Upgrade with PV While Protecting the Warranty
When does it make sense to upgrade a roof with a PV system? With a bit of planning, any time can be the right time. Business owners don’t need to wait until a roof needs to be replaced to consider installing solar; although, it is a great time. A PV can be installed at any point in a roof’s life span while maintaining the warranty.
- The first step is to have a thorough review of the roof’s condition by a reputable vendor, ideally with experience working with HVAC and solar installations.
- The next step is to review the terms of the roof warranty.
Owners replacing an old roof and installing a PV system can often negotiate coincident warranties for both the roof and PV system, e.g., a 25-year warranty for the roof and for the solar array. By coordinating the installations with experienced roofers and the solar vendor, owners can streamline the process, possibly saving money, time, and rework. Using their expertise, roofers can work with the roofing manufacturer, including providing pre-installation roof surveys and reviews, to meet the terms of the warranty.
Owners looking to install a PV system on a middle-aged roof can work with roofers to make needed repairs and install the solar array to ensure the terms of the warranty are met.
By installing PV arrays on their roofs, owners of commercial buildings can transform a cost center into a possible revenue-generating asset that may cut electricity costs and potentially generate revenue without the need for additional capex.
Next Steps
If you are a business owner interested in replacing the roof of your commercial property and adding a solar array, 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. If going solar is something that sounds right for your business, there are many things to consider. We can help you make sense of the entire picture.
To learn if solar is the right move for your organization, contact usfor a free solar feasibility report.
[1]https://www.energy.gov/sites/prod/files/2021/02/f82/Guide%20to%20the%20Federal%20Investment%20Tax%20Credit%20for%20Commercial%20Solar%20PV%20-%202021.pdf