Building a Business Case for Solar Energy Investment

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A compelling business case for solar energy investment; balancing costs, benefits, and sustainability goals.

Building a Business Case for Solar Energy Investment

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How we get the energy that we need to do business is changing. Fossil fuels are on their way out, and renewable energy will replace it in the fullness of time. Solar energy is one form of renewable energy is one of the most visible ways in which your company can make this important switch, reduce your energy bills in the future, and even advertise your green credentials to both clients and customers 

The Business Case for Solar Power

Installing solar panels costs money, and this will mean making a business case for making that switch. It is important to remember that the business case for solar power isn’t solely about ‘doing the right thing’. There is a case for doing so which is greater than this alone. 

Return on Investment

If you’re looking at making a business case for solar power, those handling the purse strings will want to know that they’ll be making a return on their investment. On average, commercial solar panels will cost between £16,000 and  £60,000  for the sort of 20kW to 50kW system that a small to medium-sized business might use. The break-even point for various types of system is estimated at between two and six years. A new solar panel system can be considered an investment in the infrastructure of your business. Having them installed will even increase the value of your business release value, and there remain numerous financial incentives which make now the ideal time to make that change. 

Environmental Impact

Doing the right thing is still important! The environmental case for switching to renewable energy isn't in doubt. When fossil fuels–mostly oil, coal and fracked natural gas–are burned, they release large amounts of carbon dioxide, a greenhouse gas, into the air. Greenhouse gases trap heat in our atmosphere, causing global warming. A 2021 report by the Environmental and Energy Study Institute found that increased acid levels in oceans, extreme weather conditions and rising sea levels, as well as them having an exacerbating effect on various health conditions.

Reduced Energy Bills

How much your energy bills reduce as a result of installing solar panels varies considerably according to your specific circumstances, but medium-sized businesses on a 30kwH system may save in excess of £5,000 a year. You may even be able to sell any excess energy that you produce back to the grid.

Brand Reputation

Increasingly, both customers and clients have started to look more closely at the environmental credentials of anyone that they do business with. But this can work both ways, so you’ve got to mean it. Accusations of greenwashing–the practice of falsely exaggerating these claims–can be extremely damaging, and trust can be difficult to rebuild. Solar panels are an extremely visible way of demonstrating to the world that not only do you have strong green credentials, but that you’re serious about it as well. 

Evaluating Your Solar Power Potential

The very first thing that you need to establish if you want to make a business case for investing in solar power is to establish what your solar power potential might be. There are several factors that you’ll want to include in this: 

What’s Your Business Energy Usage?

Comparing your business energy usage against the expected output of solar panel systems will confirm how much initial outlay you will need. 

Where is Your Business Located?

This can get quite specific. Typically, solar panels perform best on south-facing roofs with a slope between 15 and 40 degrees, though other roofs may be suitable too. You should also consider the age of your roof and how long until it will need replacement.

How Much Roof Space Have You Got?

The roof of your premises is the obvious place to put a solar panel installation, but it’s important to establish whether there is enough space on your roof to provide the system that you need.

Do You Need Planning Permission or Any Other Sort of Permission?

In most scenarios, you won’t, but there are some–for example if your premises is a listed building–where you do. If you let your premises, you will probably need the permission of the owner before proceeding. 

These are all obstacles that can be overcome, and the best way to ensure that all potential obstacles are identified as quickly as possible is to undertake an energy audit. This is something that you can do yourself, but you will probably benefit from having a professional auditor carry it out for you. 

Can Solar Panels Generate Enough Energy to Power a Business?

Few businesses don’t benefit from the reduced carbon footprint, savings, and even potential earnings of solar panels. Whether you need only a modest 50kW system or have a business running on a 500kW setup, solar panels are a workable solution. Many larger businesses find they generate excess energy they can then sell back to the national grid.  

Understanding the Investment

The investment that you make in solar panels will come essentially in two forms: initial costs in terms of installation, and maintenance costs. Installation might include costs such as getting a professional energy audit carried out, the price of the panels themselves, and the manpower required to get everything up and running. 

Maintenance costs tend to be low but are real. You’ll need to keep your panels clean if you’re going to get maximum efficiency out of them, and the costs of doing so, while not excessive, should be factored in as part of your calculations. Most solar panel systems will come with a manufacturer's guarantee of somewhere between fifteen and thirty years. When you're doing your initial calculations, check what incentives might be running. There might be schemes local to your area from which you could financially benefit. 

What is the Average Payback Period for Solar Energy Investment in Businesses?

The average payback time for solar energy investment can vary greatly from business to business, but five to seven years is a reasonable ballpark figure for most businesses. 

You can calculate your solar panel payback period by following three steps:

1. Determine Your Solar Expenses

You first need to figure out exactly how much you paid for your solar power system when everything is said and done. Remember, you’re looking for the final price after all taxes and fees and after deducting any solar incentives that allowed you to recoup some of the cost. 

Suppose you paid £30,000 for your system, including taxes and any other fees from your solar provider or municipality. If you recoup £5,000 due to tax credits and solar rebates, it brings your total investment down to £25,000. This is the cost figure to use moving forward.

2. Figure Out Your Annual Energy Savings

Determine how much you normally spend on electricity annually. Add up your monthly payments for one year. Say your monthly electric bill averages £300. That’s £3,600 that you’re paying for electricity per year. That’s how much a solar energy system presumably saves you from paying your utility company annually. This figure is your annual bill savings. 

3. Calculate

To know your solar payback period length, divide your total expense by your annual savings. 

Example: 25,000 divided by 3,600 = 6.94 years. 

Using the figures in steps one and two, your payback period would be more or less exactly seven years. If your solar panels last 25 years, that’s roughly 15 years of electricity savings after breaking even. 

How to Implement Solar Power in a Business Setting

Carry Out an Energy Audit

The first thing you need to do is get a complete handle on your current energy usage. A full energy audit will help you to document it in detail and let you establish exactly what your business needs are. 

Choose a Provider

There’s a variety of different providers out there, so don’t be afraid to contact an array of them for quotes. Don’t forget to include installation costs as well as the material costs of the panels themselves. 

Get your costs written down

Whether you need to persuade anybody else of the case for them or not, it’s important to know how much this is going to cost your business and when you’ll start to see a return on it.

The Installation Process

The amount of time that it takes to install solar panels may vary considerably, depending on the physical side of your premises and other complexities. The provider should be able to give you a reasonable expectation of how long it will take and whether it will cause any disruption. 

Keep Monitoring Everything

To get the best out of a solar panel installation, it’s best to keep an eye on it. If you see your energy bills starting to creep up again, this could be an issue related to your installation and the manufacturers will be able to help while they’re in warranty.

Make Sure They’re Maintained

To ensure that your panels are operating at their maximum efficiency, it’s important to get them cleaned regularly. This may be a task that you wish to undertake, but the costs of doing so professionally aren’t excessive and may offer you greater peace of mind.  

Overcoming Common Misconceptions and Challenges

There are certainly misconceptions and challenges to face when you’re installing solar energy for your business, but what’s the truth of them? 

Solar Panels Only Work in Sunny Conditions

One of the most common misconceptions about solar panels is that they only function under direct sunlight. This is far from the truth. Solar panels are designed to harness both direct and diffused sunlight, meaning that they can generate electricity even on cloudy or overcast days. While solar panels do perform best in sunny climates, they can still produce a significant amount of power in less ideal weather conditions. In fact, some of the leading countries in solar energy production, such as Germany and the UK, have relatively cloudy climates.

Solar Panels are Inefficient

Some believe that solar panels have a low-efficiency rate, which reduces their ability to generate enough electricity. This is a misunderstanding of how solar panels work. While it is true that solar panels have an efficiency rate that is less than 100%, no energy conversion process is 100% efficient. Solar panels are designed to capture sunlight and convert it into electricity, but they do not convert all of the sunlight they receive. Factors such as the angle of sunlight, temperature, and the type of solar panel technology used can affect the overall efficiency. Commercially available solar panels are highly efficient and can provide more than enough power to meet the needs of a home or business.

Solar Panels are too Expensive

Many believe that installing a solar panel system is a costly investment that is out of reach for the average homeowner or business. However, the cost of solar panels has significantly decreased in recent years, making them much more affordable and accessible. There are also various financing options available, such as solar loans and leasing programmes, which allow homeowners and businesses to install solar panels with little to no upfront costs.

Furthermore, government incentives, tax credits, and rebates can further offset the expenses associated with solar panel installation. When considering the long-term savings on energy bills and the positive environmental impact, investing in solar panels can be a financially sound decision.

Solar Panels Require Extensive Maintenance

Some are hesitant to invest in solar panels because they believe that they require frequent and costly maintenance. This is another misconception that needs to be debunked. Solar panels are designed to be durable and require minimal maintenance over their lifespan. In most cases, regular cleaning of the panels to remove dirt, dust, or debris is sufficient to ensure optimal performance. Solar panel manufacturers provide warranties and guarantees, which further alleviate concerns about maintenance costs. 

Solar Panels are not Aesthetically Pleasing

With advancements in solar panel design and integration, solar panels can now be seamlessly incorporated into the architecture of a building. There are various mounting options available, including roof-mounted panels, solar canopies, and even solar skins that can match the visual aesthetics of a property.

Solar Panels Are Not Suitable for All Types of Roof

Solar panels can be installed on a wide range of roof types, including asphalt shingles, metal roofs, and flat roofs. The orientation and angle of the roof can affect the efficiency of solar panels, but experienced solar installers can assess your roof's suitability and recommend the best installation options. In some cases, adjustments or reinforcements may be necessary to ensure a secure and efficient installation. It is always recommended to consult with a professional solar installer such as us who can evaluate your specific roof and provide expert guidance.

Solar Panels Do Not Work in Cold Climates

Solar panels can perform better in cooler temperatures. While solar panels rely on sunlight to generate electricity, they do not require extreme heat to function efficiently. The conductivity of solar panels improves in cooler temperatures, allowing them to convert sunlight into electricity more effectively. Snow can reflect sunlight and enhance the overall performance of solar panels. 

Solar Panels Cause Roof Damage and Leaks

When installed properly by experienced professionals, solar panels can actually protect and extend the lifespan of a roof. Solar panel installation involves mounting the panels securely on racks or brackets which are attached to the roof. These mounting systems are designed to distribute the weight of the panels evenly and minimise any potential damage. The area where the panels are mounted is typically sealed to prevent water penetration. Before installing solar panels, a thorough inspection of the roof is conducted to ensure its structural integrity. 

Case Studies

Of course, businesses have been installing solar panels for several years already, so here are a couple of examples of companies and their experiences: 

Ringwood Retail Park

This commercial area, funded by the New Forest District Council, was opened in July 2023. They have a 74kwh array consisting of 176 panels which has been estimated to reduce CO2 emissions by around 13 tons per year while delivering an electricity cost saving of almost £18,000. 

Medhurst Communications

IT company Medhurst Communications had a 30kwh array installed at their premises, and the benefits have been immediate. They;’re on track to reduce their CO2 emissions by  16,000kg while also saving almost £4,500 a year in electricity bills. Their estimated profit over twenty years for this project is almost £150,000!

There is a clear case to be made for your business to make the switch to solar energy. It is a cleaner energy which, for a relatively modest initial investment, can save your business money, futureproof you against increasingly volatile wholesale markets and enhance your brand reputation. By presenting the commercial, and reputational advantages of this technology, your business could also start reaping these rewards.

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