In many parts of the United States, the cost of commercial power is rising, which raises operational expenses. When energy prices rise, there is uncertainty about future electricity rates, which makes planning challenging. This is particularly valid for companies that make heavy use of electricity. Commercial solar energy projects, however, can significantly save energy costs while simultaneously benefiting the environment. Currently, solar-powered businesses can take advantage of two tax benefits that greatly lower the overall system cost.
In order to grow your solar company and attract new clients, it’s essential to comprehend the commercial solar energy market. In order to properly seize this business opportunity, let’s investigate this crucial sector of the industry.
Going Green Is Great For Your Brand
In recent years, consumer demand for eco-friendly goods and services has surged. As a result, several big businesses have established carbon-neutral objectives to slow down global warming by lowering greenhouse gas emissions and fossil fuel usage. In most cases, switching to renewable energy is an essential step in lowering one’s carbon footprint.
Many small and medium-sized enterprises are adopting environmentally friendly practices, despite the fact that they might not have formalized such goals. It may improve brand reputation, attract brilliant staff, and help build customer loyalty in addition to helping the environment.
Solar Panels Can Decrease Overall Cost Of Operation
Businesses must purchase electricity, but they subsequently receive nothing in return. This is so because the majority of businesses essentially rent their power rather than own it. Either the company’s property or another location may have solar panels installed. Companies that want to switch to solar energy can either purchase a solar photovoltaic system or negotiate a power purchase agreement (PPA).
Solar panels installed on a roof can be highly noticeable and make a strong statement about being green. The promotion of solar achievements can be a clever marketing tactic. To emphasize the advantages, some businesses even provide clients with solar system information, such as a plaque on the wall, a press release, or a page on their website.
PPAs enable businesses to significantly reduce their monthly electricity costs because solar energy is typically less expensive than grid power. The corporation using the power does not technically own the solar panels; rather, a different party does. As a result, businesses can frequently go solar with no money down, which is a strong selling factor. The business employing the solar energy is not only exempt from maintaining and caring for the panels, but they also do not benefit from the tax incentives. PPAs are frequently a wise choice for non-profits and governmental organizations as they cannot exploit the tax advantages in the first place.
After the solar power system has been paid, businesses might benefit from several years of “free” electricity. If your customer has a big enough tax appetite, there is a great chance to get them a federal tax credit and extra depreciation. To find out if a customer is eligible for the solar investment tax credit (ITC) and depreciation, it is critical to request that they consult with a tax professional. Be careful when providing tax advice, it would always be best to tell customers they have to contact a tax professional.
Possibility Increase Property Value
The same is probably true for commercial property owners who have solar PV systems because numerous studies have proven that solar panels improve residential values. This is due to the fact that homes with solar panels have reduced maintenance costs because their energy costs are lower. Keep in mind that for the solar system to have an effect on property value, both the solar system and the building must belong to your customer.
Tax breaks for installing commercial solar energy
Businesses using solar energy can take advantage of two federal tax benefits. These financial incentives shorten the payback period while increasing the solar system’s return on investment.
A few jurisdictions and utilities also provide additional tax breaks or refunds for commercial solar energy systems. Understanding the incentives to give potential clients this information is crucial.
Solar Tax Credit
Companies who buy solar systems before 2033 are eligible for a 30% tax rebate. However, in 2033, this incentive will fall to 26%, so it. Encouragement of commercial solar adoption before it declines makes sense.
A tax credit is a decrease in federal taxes that is made dollar for dollar. In order to benefit from the tax credit, the corporation must have a big enough tax appetite.
Bonus Depreciation Or Accelerated Depreciation
Businesses can either adopt the Modified Accelerated Cost Recovery System (MACRS) to deduct the system over six years, or they can apply 100% of the depreciation in year one with bonus depreciation. A distinct portion of the system is depreciated year after year according to the MACRS depreciation schedule.
Financing Options For Commercial Solar
It is crucial to make sure that your client can finance the project because a solar energy system has a high upfront cost. Several alternatives exist to pay for business solar.
Financing Options For Commercial Solar
It is crucial to make sure that your client can finance the project because a solar energy system has a high upfront cost. Several alternatives exist to pay for business solar.
Purchase Power Agreements (PPAs) Or Leases
A third company owns the system in PPAs and solar leases, and your client only pays for the energy it produces or leases the solar equipment. Usually, the party using the electricity installs these systems with no money down.
Small business loans, for instance, may be guaranteed by the Small Business Administration. Long payback terms and low interest rates are two advantages of SBA loans, although the application procedure might be difficult. Equipment loans are another choice, although companies would need to come up with a cash down payment.
Cash
Cash might be a great option to buy a solar system if a commercial client has it. Due to the absence of interest payments, clients can use the money to cut operating costs.
If you want to learn more about our energy producing projects for commercial buildings, visit our page or you may contact us for more information.