Why Do Businesses Go Solar?
More and more corporations are choosing to go solar not only because of what they “give back” environmentally but for what they “get back” financially. With rapid payback, strong internal rates of return, and a predictable cash flow stream, commercial solar projects can deliver outstanding long-term investment returns for businesses. In addition to dramatic reductions in your company’s ongoing electricity costs, a commercial solar project can generate incremental revenue, effectively creating a new profit center. Presently, regulatory incentives are stronger than ever, so now is a prime time to go solar.
Your Return on Investment
In today’s economy, businesses must allocate their limited available capital between competing investment alternatives. From a risk-adjusted ROI basis, a well-executed solar photovoltaic project can be one of the soundest financial investments any business can make.
Rapid Payback Period
The payback period is simply the amount of time it takes for a project to earn back the initial unlevered investment. A solar project typically provides rapid payback, which is particularly attractive given its long-term asset life.
Improved Internal Rate of Return
IRR is the standard metric for capital budgeting analysis, and allows businesses to understand and compare the project’s annualized effective compounded return rate. The IRR on most solar projects range between 12-25% depending on specific markets.
Eliminate Energy Cost Volatility
Electricity prices are highly volatile and difficult to predict. In fact, historically, the cost of electricity has increased at compound annual growth rates in excess of 5%. By generating your own clean electricity onsite, you eliminate your company’s exposure to such price volatility.
Government Incentives You Can't Pass On!
Federal, state and even local governments frequently offer attractive rebates and incentives to encourage businesses to invest in solar. Effective utilization of available incentive programs can dramatically reduce the upfront cost of solar, while providing a predictable long-term revenue stream.
Investment Tax Credit
The 30% Solar Investment Tax Credit is now extended for commercial projects that begin construction before the end of 2019. The tax credit will then decrease to 26% in 2020 and 22% in 2021 for projects begun in those years, respectively.
Federal Depreciation Benefits
The Federal Modified Accelerated Cost-Recovery System (MACRS) allows solar system owners to deduct their solar investment on a significantly accelerated 1-year schedule.
Additional Federal Benefits
There are several other federal incentives that may be available on a situation-specific basis, including the USDA Rural Energy Grant Program and the New Markets Tax Credit Program. Louth Callan Renewables will ensure you tap all incentives available to you.
Bottom Line for U.S. Businesses
Federal solar incentives can provide corporate solar system owners with significant economic benefits, often reducing the net effective cost of solar by more than 60%.