Installing commercial solar power is a smart decision for many Australian businesses looking to reduce energy costs and go green. This guide will break down the different aspects of commercial solar ROI (Return on Investment) and give you the facts and info.
What is Commercial Solar ROI and Why Does it Matter?
Return on Investment or ROI is a financial measurement to calculate the profitability of an investment. For commercial solar systems, ROI is the financial return from energy savings and incentives against the upfront cost of the system. A positive ROI means the investment is profitable, a negative ROI means it might not be worth it.
Understanding Commercial Solar Systems
What is a Commercial Solar System?
A commercial solar system is a specialised solar power system designed to meet the energy needs of businesses and organisations. Unlike residential solar panels, commercial solar systems are typically larger and more robust, capable of generating substantial amounts of electricity to power commercial buildings such as offices, warehouses, and retail stores. These systems can be installed in various locations, including rooftops, parking lots, or open ground spaces, and are tailored to the specific energy requirements of the business. By harnessing the power of the sun, commercial solar systems provide a sustainable and cost-effective energy solution for businesses.
How Do Commercial Solar Systems Work?
Commercial solar systems operate by converting sunlight into usable electricity through photovoltaic (PV) cells. These PV cells are grouped together in solar panels, which are then connected to an inverter. The inverter plays a crucial role by converting the direct current (DC) electricity generated by the panels into alternating current (AC) electricity, which is compatible with the electrical grid. This AC power is then used to power the building, and any excess energy can be sold back to the grid, providing additional financial benefits. By reducing reliance on traditional energy sources, commercial solar systems help businesses lower their energy costs and carbon footprint.
Benefits of Commercial Solar Systems for Businesses
Investing in commercial solar systems offers numerous advantages for businesses:
- Reduced Energy Costs: By generating electricity from sunlight, commercial solar systems can significantly lower energy costs, providing substantial savings on electricity bills.
- Increased Energy Independence: Commercial solar systems offer a reliable and consistent source of energy, reducing dependence on the grid and protecting businesses from fluctuating energy prices.
- Environmental Benefits: Utilising renewable energy from commercial solar systems helps reduce carbon emissions, contributing to a cleaner and more sustainable environment.
- Improved Public Image: Businesses that adopt commercial solar systems demonstrate their commitment to sustainability, enhancing their public image and appealing to environmentally conscious customers and stakeholders.
Commercial Solar ROI Factors
These are the factors that affect commercial solar ROI:
- System Size: Bigger systems produce more energy and therefore more savings and better ROI.
- Energy Consumption: Understanding a business’s energy consumption is crucial for determining the appropriate system size and efficiency, thereby ensuring it meets the higher energy demands of commercial operations and impacts ROI.
- Location: Places with more sun, like Queensland, will give you quicker returns than places with less sun like Tasmania.
- Electricity Rates: Higher electricity prices means more savings from solar and better ROI.
- Incentives and Rebates: Government incentives like the Large-scale Renewable Energy Target (LRET) and Large-scale Generation Certificates (LGCs) can reduce the upfront cost.
- Installation Cost: The cost of installation varies based on system size and quality, around $1.20 to $1.80 per watt in Australia.
System Size and Location
The size of your commercial sized solar system is a key factor in determining your savings. These systems are typically larger, allowing for more solar panels and increased energy generation, leading to more savings. But you need to balance system size with your actual energy usage to avoid unnecessary spend. Location is another important factor. Sunlight affects how much energy your system can produce. For example, businesses in sunny places like Queensland will get faster returns than those in cloudy areas like Tasmania.
Electricity Rates and How it Affects
Electricity rates have a big impact on how fast you can get your return. Higher electricity prices means more savings when you switch to solar. Businesses that consume a lot of energy during peak times will benefit the most as they can offset those high costs with their solar generated power.
Government Incentives and Rebates
Australia has several incentives for businesses to go solar:
- Large-scale Renewable Energy Target (LRET): Ongoing financial benefits through LGCs for large-scale installations.
- State Rebates: Some states have rebates that can reduce the installation cost by a significant amount.
These incentives are to make solar more attractive by reducing upfront cost and improving ROI.
Installation Cost
The cost of a commercial solar panel system can vary greatly depending on system size, quality of components, and installation complexity. On average, businesses can expect to pay between $1.20 and $1.80 per watt for a high-quality installation. While that might seem like a lot of upfront cost, the long-term savings will justify the spend.
Financing Options
Cash/CapEx
One of the most straightforward financing options for commercial solar systems is the Cash/CapEx model. In this approach, the business pays the upfront cost of the solar power system, allowing them to own the system outright. While the initial investment can be significant, the long-term savings on energy costs can offset this expense over time. Additionally, businesses can benefit from tax incentives and claim depreciation on the system, further reducing the overall cost. By choosing the Cash/CapEx option, businesses can maximise their return on investment and enjoy the full financial benefits of their commercial solar power system.
Commercial Solar ROI Calculator
To get a clear picture of your returns, you need to calculate the ROI of a commercial solar system. Use this formula:
ROI=(Total SavingsTotal Investment)×100ROI=(Total InvestmentTotal Savings)×100
Total Savings includes savings from electricity bill, feed-in tariff income and any rebates or incentives.Total Investments the cost of purchasing and installing the system.
Example
Consider a 100 kW system costing AUD 150,000 with expected annual savings of AUD 30,000:
- Annual Savings: AUD 30,000
- Investment Cost: AUD 150,000
ROI=(30,000150,000)×100=20%
ROI=(
150,000
30,000
)×100=20%
This indicates a payback period of approximately five years.
Commercial Solar Installation
The commercial solar installation process involves:
- Site Assessment: A qualified engineer assess the site suitability for solar installation by checking roof structure, shading, orientation and available space.
- System Design: Based on the assessment, a custom design is created selecting the right panels, inverters and other components.
- Permitting and Approvals: Permits are obtained before installation starts.
- Installation: Panels are mounted and connected to your electrical system.
- Testing and Commissioning: Everything is tested before it goes live.
Commercial Solar Rebates
Rebates are key to reducing the cost of solar installations:
- Small-scale Technology Certificates (STCs): For small-scale systems.
- Large-scale Generation Certificates (LGCs): For larger projects.
Rebates makes solar more affordable for businesses by reducing upfront cost.
Commercial Solar Systems
A commercial solar system includes:
- Solar Panels: Convert sunlight into electricity.
- Inverters: Convert DC into AC electricity for businesses. In business solar systems, proper system design and selecting the right components are crucial to maximise efficiency and reduce long-term energy costs.
- Mounting Equipment: Mounts panels securely.
- Monitoring Systems: Tracks performance and savings.
Commercial Solar Installations
Businesses have three options for commercial solar panels, which differ from residential panels in terms of size, efficiency, and optimal design for energy production:
- Roof-Mounted: Panels are mounted on the roof structure.
- Ground-Mounted: Panels are mounted on stands in open areas.
- Solar Canopies or Carports: Panels are mounted above parking or open spaces.
Each has its own benefits depending on space and business needs.
Beyond Financial Returns
Commercial solar offers many benefits beyond just financial returns:
- Energy Independence: Reduces reliance on grid electricity and protects against increasing energy prices.
- Environmental Impact: Reduces carbon footprint and corporate social responsibility.
- Increased Property Value: Solar installations can increase property value by improving energy efficiency.
Before You Invest
Before you install commercial solar, consider:
- What are your current and future energy needs?
- Check local regulations and incentives that apply to your investment.
- Research installers based on experience, reputation and customer reviews.
- Look at financing options to make the upfront cost more manageable.
Key Takeaways
Here are some essential points to remember when considering commercial solar investments:
Understanding your business’s energy needs and location is crucial for maximising solar ROI.
Leverage government incentives like LRET and LGCs to reduce initial costs.
Calculate potential savings using an ROI formula to evaluate investment viability.
Consider long-term benefits such as increased property value and environmental impact.
By carefully considering these aspects, Australian businesses can make informed decisions about investing in commercial solar power systems. This investment not only promises financial returns but also contributes positively to environmental sustainability and corporate responsibility.