The U.S. is surpassing its energy transition phase and quickly normalizing renewable energy as a major resource for clean and reliable power. American businesses are at the forefront of this movement, with many companies creating internal policies for renewable energy procurement. Solar has become a major component in the sustainability initiatives of corporate entities, and solar project economics continue to become more attractive as equipment costs decline and available project structuring alternatives increase. Many U.S. CEOs are taking note of these favorable returns, and top executives from our clients – Bloomberg L.P., Swiss Re, Ricoh and more – have already begun pushing the “solar agenda” in their companies.
One of the key considerations for a corporation looking to go solar is deciding where to put the photovoltaic (PV) array. Many customers are considering utility-scale offsite solar projects. These grid-connected projects can allow customers to “go green” on a larger scale than with distributed generation (DG) projects, where the energy is produced where it is consumed. Utility-scale projects can provide greater contributions to internal renewable goals and RE100 certifications by letting corporates purchase bigger quantities of renewable energy, yet they typically yield smaller economic returns than onsite DG projects. Financial returns will vary, but the most profitable solar projects tend to take advantage of state, federal and utility incentives, and directly offset onsite electricity consumption. They also offer the most visibility for companies looking to publicize their sustainability initiatives and provide a way for companies to tap into solar energy directly for their day-to-day operations.
DG Solar remains heavily untapped, and the U.S. has an abundance of roof space available for new, onsite solar projects. Onsite DG should be the first step in your company’s solar procurement – monetizing your roof can yield strong economic returns before looking to offsite for greater scale.
Evaluating onsite solar includes looking at the physical attributes of the building (how many panels can fit on the building), the building’s energy usage, the solar resource (how “sunny” it is), the historical weather data and the available state, federal and utility-sponsored incentives. The size and usage of the building dictate the size of the solar PV system; typical corporate solar projects range in size from 500 kW to 2 MW. The solar resource and weather data help estimate how much energy the panels will produce per annum, and the available incentives improve the financial returns of the investment.
There are a variety of ways states use utility rates to encourage onsite DG:
In addition to favorable energy rates, there are various state-level policies that further strengthen returns on onsite solar projects. Many of these policies stem from state-level Renewable Portfolio Standards (RPS) which requires that a certain portion of the energy production come from renewables.
Companies can also take advantage of federal incentives: the Investment Tax Credit and the MACRS and Bonus depreciation schedule.
Owning a solar system is not the only way that a corporation can go solar at an eligible site. Creative financial structuring alternatives are opening the market to companies without available investment capital or tax liability – previous limiting factors for going solar. Third-party ownership alternatives provide no capital outlay options for corporations looking to take advantage of solar energy. These alternatives can be through solar operating leases, roof or site leases, or PPAs (Power Purchase Agreements). Third-party owned agreements give companies flexibility in using solar energy and can allow a pathway to ownership over time.
If your company is interested in evaluating solar, PowerFlex can provide a tailored analysis based on your portfolio, energy usage and available incentives. PowerFlex is agnostic to project structuring and provides a turnkey solution for corporates.Contact Us Today!