PG&E is discontinuing its very solar-friendly A-6 commercial rate in December 2016. For this and several other reasons, businesses who own their own buildings should take a hard look at solar now. By acting this year, new solar businesses will be grandfathered into the solar rate schedule for the foreseeable future.
Many business owners lack information on how solar affects their cash flow and operating costs. The utility is the devil they know, representing a fairly predictable variable cost that is known to rise, but not too much, over time. Solar is often thought of as a luxury capital investment, and has a tendency to be cut from capital budgets due to the apparently high initial price tag.
Both analyses are wrong in several ways. This is how it really works.
Utility energy is expensive, and the rates go up by about 5% per year, which means they double about every 14–15 years. Due to its essential role in making or running anything, businesses traditionally have low price sensitivity with regards to energy. This also explains why alternatives are not routinely considered. Yet, commercial energy rates are at 20¢ per kilowatt-hour, and rise at the aforementioned 5%. Any other resource that rose at twice the rate of inflation would be in for serious scrutiny.
Instead of relying on the utility, many businesses can put a serious dent in their operating expenses by installing a solar PV system. With solar your cost of electricity drops into the 3–10¢ range depending on your tax situation. That should make solar the first choice for any business that uses a fair amount of energy.
For-profit businesses get almost 50% of their solar investment returned in the first year, and can expect a payback period of 4–7 years on the entire investment. The 30% Federal Investment Tax Credit comes back in year one, in addition to bonus depreciation. After you install solar the utility bill, which often is in the low thousands every month, goes away. Once you have solar, that bill, in much diminished form, only comes once per year, adding a fair amount of flexibility to your cash flow (or this one). After the payback period you are literally running your business on sunshine, with its attendant cost savings and publicity windfalls.
Today businesses have access to very cheap money; 2–4% is not unusual. As commercial solar typically has a rate of return in the mid- to high teens, you have a compelling argument for why a solar PV system belongs on the balance sheet.
With new property tax assessed financing options, a company that owns its buildings does not need to lay out a penny for a solar PV system up front. Companies like Ygrene, CalFirst, and Hero offer property-assessed financing, and Sonoma County has its own property tax program known as SCEIP. American Solar has a relationship with Sustainable Real Estate Solutions, a national provider which specializes in commercial PACE financing. This type of financing also grants full solar ownership to the business, thereby preserving all the key financial benefits of solar to the business.