The New Official Commercial Solar Panel Cost Guide


by Eric Lam - Published 1/8/2024


Commercial solar panels are an increasingly popular choice for businesses looking to save on energy costs, reduce their environmental impact, and take advantage of tax incentives.

In this comprehensive guide, we will explore the ins and outs of commercial solar panels, including how they work, their cost-saving benefits, factors that affect their cost, and the available financing options.

We'll also delve into the long-term savings and maintenance costs associated with commercial solar panels.

By the end of this article, you'll have a clear understanding of the potential cost savings and environmental benefits of investing in commercial solar panels for your business.

Key Takeaways:

  • Commercial solar panels offer cost savings through reduced electricity bills and potential tax incentives.
  • The size, type, installation, and additional equipment impact the cost of commercial solar panels.
  • Long-term savings can be significant with commercial solar panels and financing options such as leasing, PPAs, and loans are available to make installation more affordable.

What Are Commercial Solar Panels?

Commercial solar panels are photovoltaic (PV) systems designed for the specific needs and scale of businesses, industrial sites, or public and governmental organizations. Unlike residential solar panels, which typically power a single household, commercial solar installations are larger in scale and are used to provide electricity for commercial buildings, factories, office complexes, schools, and other larger facilities. These systems can range from small installations that supplement the existing electrical supply to large-scale solar farms that can power entire operations.

The key components of commercial solar panels include:

  1. PV Panels: These are the most visible part of the system. They are installed on rooftops, open land, or carports and convert sunlight into electricity.
  2. Mounting Systems: These structures support the panels in the correct orientation to maximize sunlight exposure.
  3. Inverters: They convert the direct current (DC) electricity generated by the panels into alternating current (AC) electricity, which is the standard used by most commercial electrical grids and appliances.
  4. Electrical Infrastructure: This includes wiring, switches, and meters required to safely distribute and monitor the electricity produced by the solar panels.
  5. Storage Solutions (optional): Some systems include batteries or other storage solutions to keep excess energy for use when sunlight is not available.

The advantages of commercial solar panels include reduced energy costs, lower carbon footprint, and potentially a positive public image due to adopting green energy. They can also provide a measure of energy independence and stability against fluctuating energy prices.

Financing options for commercial solar projects include direct purchase, loans, solar leases, and power purchase agreements (PPAs), each offering different benefits depending on the organization's financial strategy and objectives.

Given the larger scale and complexity of commercial solar projects, they often require detailed planning and consideration of factors such as local regulations, available space, energy needs, and financial incentives.

How Do Commercial Solar Panels Work?

Commercial solar panels work by converting sunlight into electricity using photovoltaic (PV) cells. These cells are the fundamental building blocks of solar panels and are made of semiconductor materials, typically silicon. When sunlight hits a PV cell, it causes electrons to become excited and move, creating an electric current. This process is known as the photovoltaic effect. Here’s a step-by-step breakdown of how commercial solar panels work:

  1. Sunlight Absorption: Each solar panel consists of many PV cells. These cells absorb sunlight throughout the day. The more intense the sunlight, the more electricity can be generated.
  2. Electricity Generation: When the sunlight interacts with the PV cell, it excites electrons and causes them to flow, creating direct current (DC) electricity.
  3. Conversion to Alternating Current (AC): The DC electricity generated by the solar panels is not directly usable by most commercial buildings or equipment, which operate on alternating current (AC). Therefore, an inverter is used to convert DC electricity into AC electricity.
  4. Distribution: Once converted to AC, the electricity is routed through the building’s electrical panel and distributed to where it's needed within the facility.
  5. Utility Grid Integration: Commercial solar power systems are often connected to the local utility grid. When the system produces more electricity than the facility needs, the excess can be sent back to the grid, often resulting in credits to the business’s utility account through net metering (where available). Conversely, during periods when the solar system does not meet the facility's entire electricity demand (e.g., at night or on cloudy days), the building can draw power from the grid.
  6. Monitoring and Management: Most commercial solar installations include monitoring systems that track energy production and usage, ensuring the system is operating efficiently and allowing for proactive maintenance or troubleshooting.

Commercial solar panels not only provide a sustainable energy source but also offer significant financial benefits over time, including reduced utility bills and potential incentives from government and environmental programs.

What Are the Benefits of Commercial Solar Panels?

Commercial solar panels offer a multitude of benefits, encompassing economic, environmental, and social advantages. Economically, businesses experience significant savings on energy costs over the lifetime of the solar panel system, which directly impacts their bottom line. The initial investment in solar technology is often offset by reduced electricity bills, various government incentives, rebates, and tax benefits designed to encourage renewable energy adoption. Moreover, solar energy can protect businesses from volatile energy prices by providing a stable and predictable cost of electricity.

Environmentally, adopting commercial solar panels substantially reduces carbon footprint and greenhouse gas emissions, contributing to a cleaner, more sustainable planet. Solar energy is a clean, renewable resource that decreases a business’s reliance on fossil fuels, thereby reducing pollution and environmental degradation. This shift to green energy sources aligns with growing environmental awareness and consumer demand for environmentally responsible practices.

Socially, companies that invest in solar energy often enhance their public image, showcasing a commitment to sustainability and corporate responsibility. This can lead to improved customer loyalty, attracting environmentally conscious consumers and even employees who want to work for companies with green credentials. Additionally, solar projects can create local jobs, supporting the economy and contributing to the community’s development.

Overall, commercial solar panels represent a smart investment for businesses, delivering financial savings, environmental benefits, and enhancing a company’s reputation. This makes solar energy not just a path to sustainability but also a strategic business decision in today’s increasingly eco-conscious market.

What Are The Tax Incentives?

Several tax incentives have been available to encourage the adoption of solar energy in commercial settings in the United States. These incentives are designed to lower the financial barriers to solar investment and make renewable energy more accessible to businesses. The specifics of these incentives can vary over time due to changes in legislation, so it's important to consult current resources or professionals for the most up-to-date information. Key tax incentives have included:

  1. Investment Tax Credit (ITC): One of the most significant incentives for commercial solar energy systems has been the Investment Tax Credit, which allows businesses to deduct a percentage of their solar investment from their federal taxes. As of my last update, the ITC offered a deduction of 26% for solar systems that began construction before the end of 2022, with plans to decrease to 22% in 2023 before settling at 10% for commercial projects and phasing out for residential projects by 2024. However, legislation can change, so these rates may have been updated.
  2. Modified Accelerated Cost-Recovery System (MACRS): Under the MACRS, businesses can recover investments in certain property through depreciation deductions. Solar energy systems are eligible for MACRS, allowing businesses to depreciate the cost of the system over a five-year schedule, which can significantly reduce the net cost of the solar project.
  3. Bonus Depreciation: At various times, bonus depreciation has been available as an additional incentive, allowing businesses to take an immediate deduction of a percentage of the cost of the solar energy system in the first year it's placed in service, on top of the regular depreciation schedule.
  4. State and Local Incentives: Besides federal tax incentives, many states and local governments offer additional incentives for solar energy. These can include further tax credits, property and sales tax exemptions, rebates, and performance-based incentives such as feed-in tariffs or solar renewable energy certificates (SRECs).

It's critical for businesses considering solar investments to explore the specific tax incentives and other financial benefits available in their location, as these can substantially impact the overall economics of a solar project. Consulting with a tax professional or a solar financing expert is advisable to navigate the complexities of solar investment incentives and maximize the financial benefits.

What Factors Affect the Cost of Commercial Solar Panels?

The cost of commercial solar panels is influenced by various factors, including the size of the system, the type of solar panels chosen, and the associated installation costs, making it essential for businesses to consider these elements when planning solar energy integration.

System size plays a crucial role in determining the overall cost of commercial solar panels. Larger systems typically require more panels and complex installation, leading to higher expenses. The type of solar panels selected significantly impacts the initial investment. Monocrystalline panels, known for their high efficiency and longevity, generally come at a higher upfront cost compared to polycrystalline or thin-film options.

Installation costs are another important aspect to factor in. The complexity of the installation, such as retrofitting existing structures or incorporating tracking systems for optimal sun exposure, can significantly affect the overall expenses. The location and accessibility of the installation site can also influence the installation costs, as remote or difficult-to-reach sites may require additional resources and labor.

How Much Do Commercial Solar Installations Cost?

The cost of commercial solar installations can vary widely depending on several factors, including the size of the system, the type of solar panels used, the complexity of the installation, and geographic location. Generally, the cost is measured in dollars per watt ($/W) of installed capacity.

In May 2023, the average cost for commercial solar panel installations in the United States ranged from $1.50 to $3.50 per watt, before any tax incentives or rebates.

For a more concrete example, installing a commercial solar system might cost anywhere from $75,000 to $350,000 for a 100 kW system, which is a common size for small to medium-sized businesses. This range can fluctuate based on the specific requirements of the installation, such as the need for structural reinforcements to the roof, electrical system upgrades, or the incorporation of advanced technologies like bifacial panels or solar tracking systems.

The significant upfront cost is often mitigated by the potential for long-term savings on energy bills, as well as the availability of tax incentives, rebates, and financing options that can substantially reduce the net cost. These financial mechanisms are designed to accelerate the return on investment (ROI) for commercial solar projects. For instance, the Investment Tax Credit (ITC) can reduce the cost by a percentage of the system's price, and depreciation benefits through MACRS can further improve the financial return.

Given these variables, it's important for businesses considering solar installations to conduct a detailed cost-benefit analysis, taking into account their energy usage, the available space for solar panels, local sunlight patterns, and the specific financial incentives available in their area. Consulting with a solar installation company can provide a more accurate estimate tailored to a business's particular needs and circumstances.

How Much Do Commercial Solar Panels Cost?

Commercial projects often benefit from economies of scale, meaning the cost per watt can decrease as the size of the project increases. This is because larger purchases may qualify for volume discounts, and the fixed costs of installation and permitting can be spread over a greater number of panels.

For a ballpark figure, a commercial-grade solar panel with a capacity of around 300 to 350 watts might cost between $210 and $525 per panel before any discounts or incentives. Keep in mind, the total cost of a commercial solar installation includes much more than just the panels. It encompasses inverters, mounting hardware, wiring and electrical components, labor for installation, permitting fees, and potential structural modifications to the installation site.

It's also essential to consider the panels' efficiency and warranty terms, as higher-efficiency panels might cost more upfront but can generate more electricity over time, potentially offering better long-term value. Given the rapidly evolving nature of solar technology and market dynamics, prices can fluctuate, so obtaining recent quotes from suppliers or installers is crucial for accurate budgeting.

Solar FAQ:

Q1: What are commercial solar panels? A1: Commercial solar panels are photovoltaic systems designed for businesses, converting sunlight into electricity. They're efficient, sustainable, and can be tailored to a business's unique energy needs.

Q2: How do commercial solar panels work? A2: These panels use photovoltaic cells to convert sunlight into electricity. This direct current (DC) is then converted to alternating current (AC) through an inverter, powering commercial operations.

Q3: What are the benefits of commercial solar panels? A3: Benefits include cost savings on electricity bills, tax incentives, a reduced carbon footprint, and enhanced brand reputation through sustainable practices.

Q4: What factors affect the cost of commercial solar panels? A4: Factors include the system size, type of solar panels, installation complexity, and the location of the installation site.

Q5: What are the financing options for commercial solar panels? A5: Options include leasing, Power Purchase Agreements (PPAs), and loans. Each offers different benefits, like minimal upfront costs or ownership of the system.