Last year the Fortune 500 companies invested an estimated $15 billion for solar, mainly for their rooftops. Walmart and Target now have solar on over 1,000 of their locations across the USA. The Fortune 500 may love solar, but does it finally make sense for ALL businesses to consider?
One of the driving forces behind solar implementation is addressing climate change and (hopefully) getting good publicity. Positive PR is nice but the “bottom line” is still critical and in 2020, solar can make a lot of sense for any Oregon business with a suitable location because:
Prices are Way Down
10 years ago, the average cost for rooftop solar was in the $7.50 per watt range while installed costs today are typically between $1.95 and $2.65. It does not take an accountant to figure out that the numbers are better with costs down by about two-thirds.
Quality is Way Up
Just like television sets, each year the quality for solar seems to improve. Today’s solar panels are 30% more efficient than they were a decade ago and maintain that productivity longer. While warranties used to be for 10 years, they are now available for 25 years.
Federal Tax Credits are Available
The Federal Tax Credit is 26% this year and since this is a dollar for dollar offset against the tax bill, Uncle Sam is effectively paying for a quarter of the system cost. The 2020 credit of 26% declines to 22% in 2021 and 10% in 2022, so installing solar sooner rather than later makes sense.
Tax Savings from Depreciation
Like any other five-year MACRS asset, solar panels can be depreciated. Depending upon combined Federal and State tax rates, depreciation related deductions can save 25% or so of the cost.
Cash Rebates from Utility Company
If you are buying energy from PGE or Pacific Power, then the Energy Trust of Oregon has rebate money available for solar. The amounts vary depending on the utility and the system size, but for many businesses this will cover an additional 10% to 15% or more of the cost.
Cash Grants from the Department of Agriculture
If you are involved in agriculture and/or are a rural business, you may be eligible for a $20,000 USDA REAP Grant (“Rural Energy for America Program”). While not guaranteed, many of our customers have received REAP Grant money. Applications are submitted twice a year for grants which can cover up to 25% of the project cost.
If you add up the above, 60% to 80% of the total cost for a solar system can be recovered from tax credits, tax savings, cash rebates and grants. The lifetime cost of energy drops from the 12 cents per kWh you are probably paying now down to 2 cents per kWh (forever).
For a business that pays cash, the simple payback on a solar system is typically four to five years, which equates to a return on investment in the 20% range. After that, enjoy 30 to 40 more years of “free” energy. Financing is available OAC, one may never have any net cash investment into the solar project.
Oregon law requires a utility to offer “net metering”, so when more energy is being produced than used for the local load, the excess feeds onto the grid and you receive full retail value for it. This makes it possible to virtually eliminate your electricity bills over the course of the year.
For better economics, selling energy to the grid via net metering makes more sense than battery storage. If backup power is important to you for other reasons, then consider pairing solar with storage, especially since the same 26% Federal Tax Credit can apply to the storage system costs too.
You will always need energy, so producing your own increases resiliency by reducing future operating expenses. You can also worry less about future rate increases, which have soared in California recently, largely due to government mandates. Many are predicting that Oregon rates will eventually follow the same pattern, always best to be energy independent if possible.
Earthlight Technologies is the Preferred Solar Vendor for the Oregon Farm Bureau. For further information or to arrange a no obligation site visit, please contact: