The Cost of Commercial Solar Power Systems


What is the Price of Solar Energy?

A seemingly simple question - and yet the answer can be elusive, particularly when trying to compare different commercial solar project alternatives or financing options on an “apples-to apples” basis.

The Confusing Cost of Solar Systems and Solar Incentives

The situation is further complicated today by numerous Power Purchase Agreement (PPA) and Solar Leasing alternatives that require no capital investment from the customer while providing immediate and significant savings in electrical costs (i.e. it costs my business zero to go solar). The PowerFlex team has completed a number of such PPA-style solar projects over the last several years; the benefits can be extremely attractive, particularly for non-tax paying entities or corporate entities with specific capital investment constraints.

The Truth about Solar Investment for Businesses

Historically, however, most of the commercial solar installation projects we have developed at PowerFlex have involved the outright purchase of solar PV systems by businesses. The economics of solar project ownership are compelling, particularly for tax-paying corporate entities in states with attractive solar investment and solar incentive programs, like New Jersey.

NJ Renewable Portfolio Standard (RPS) Eligible Solar PV Capacity Installed by Year and Cumulative

The chart below is from the 2010 Annual Report prepared by the Office of Clean Energy in New Jersey’s Board of Public Utilities. It shows the significant increase in NJ solar installations driven by reduced solar equipment costs in conjunction with the attractive NJ State SREC market, as well as Federal and even Utility-level solar incentives:

Source: Office of Clean Energy in New Jersey’s Board of Public Utilities 2010 Annual ReportPurchasing a commercial solar photovoltaic system in this manner is often characterized as the equivalent of “pre-paying” for 30 years of electricity. This is a fitting analogy as going solar for businesses typically requires a large upfront investment but will then provide years of predictable power generation with minimal ongoing operational & maintenance costs.

Quantifying Solar Cost per Watt

The actual gross cost of solar PV systems is easy enough to determine, and these costs are typically expressed on a “dollar cost per watt” basis. For example:

  • During the first 6 months of 2010, the average cost of a large commercial solar project (100kW and over) in New Jersey was $5.70 per watt[i].
  • The cost of solar has been declining significantly – the abovementioned $5.70 per watt cost compares with an average cost of $7.10 per watt in New Jersey for 100kW and larger systems in 2009. And costs have continued to decline significantly during 2011
  • As an example, a 500kW system in New Jersey priced at $5.00 per watt would cost approximately $2.50 million (down from $3.55 million in 2009).

The map below ranks states by cost, count and capacity of their photovoltaic installations.

Note that New Jersey ranks 4th for the entire nation, due to the very attractive solar incentive programs and solar tax credits offered by the state. Source:

The Open PV Project and Other Solar System Pricing Resources

The good news for businesses currently evaluating the cost of solar systems is that there are a number of excellent resources that provide greater transparency into commercial solar system pricing and cost information.

  • The National Renewable Energy Laboratory (NREL) “Open PV Project” which is a collaborative effort between government, industry, and the public that is compiling a comprehensive database of photovoltaic (PV) installation data.
  • “Tracking the Sun III: The Installed Cost of Photovoltaics in the U.S.”, published by the Lawrence Berkeley National Laboratory in December 2010
  • New York State’s NYSERDA posts comprehensive solar system cost data on its website:, including the ability to sort by dates, system size, and installation type.

Analyzing Commercial Solar Project Costs

However, even with ample solar system pricing data, it can be difficult to accurately compare cost information between commercial solar projects. The solar cost per watt metric itself can be problematic, in some ways it is similar to buying a car on a “cost per horsepower” metric.

Solar project cost comparability can be impacted by a number of variables

For example:

  • Are the projects truly comparable in nature or do they include a combination of residential, commercial and utility-scale projects?
  • Is the PV system mounted on a rooftop or is it a ground-mounted system?
  • Does the solar system incorporate ballasted racking or is it a penetrating system?
  • Are the photovoltaic panels produced by reputable manufacturers with the wherewithal to stand behind their 25 year warranty?
  • Do the inverters include long-term warranty “extensions”?

The answers to questions like these can materially impact the cost of solar power systems for businesses.

Grants, Incentives and Solar Investment Tax Credits

One final caveat is that the ultimate net cost per watt of a solar PV system can be quite different than the initial gross cost per watt. Many of the available federal and state solar incentive programs significantly reduce the cost of solar through upfront cash solar grants or solar investment tax credits..

Capitalizing on Solar Investment Opportunities for Your Business

We at PowerFlex advise our clients to focus on the overall Return on Investment for prospective solar projects in addition to the solar cost per watt. Our objective is to maximize project returns and cash flow certainty while minimizing risk and limiting our client’s exposure to unknown variables.If you would like to learn more about the cost of commercial solar systems for your business, please contact us at PowerFlex.