The Case for Solar in Manufacturing Operations
If you work at a manufacturing center, logistics hub, or warehouse operation, the value of installing a solar energy system has never been stronger. Escalating utility rates and decreasing solar system costs, in addition to attractive local and national incentives, have led hundreds of American manufacturers to embrace solar energy to reduce operating expenses, limit cost variability, and demonstrate environmental sustainability.
Evaluating Your Facility for a Rooftop Solar System
When evaluating the viability of solar for a manufacturing facility, it’s important to know the size of your rooftop; the larger the roof, the better. Rooftop space of 100,000 square feet or more usually offers an opportunity to offset the vast majority of electric bills with solar technology.
As with any solar consultation, an assessment of the condition of the roof itself should take place early in the process. An older structure may need replacing before the solar construction begins, which could impact the economics of the project.
The consultative solar evaluation process should also include a close examination of the customer’s utility bill and analysis of the energy use and demand profile. How does the company use its power? Is the business subject to high demand charges, including peak charges during the summer months? Does the business operate around the clock or just one shift daily?
Solar design engineers will carefully examine electric bills and the rates the industrial customer is currently paying. With an efficient solar design, there’s often the possibility of switching to other utility rates that will provide more savings once a solar system is installed.
For example, if a facility has a fairly flat demand curve and reaches its peak energy consumption after the sun goes down, then installing solar has less of an effect on the customer’s demand profile. Some utilities like Pacific Gas & Electric (PG&E) and Southern California Edison (SCE) offer rate codes that provide a discount on demand charges in exchange for increased summer peak energy charges. If the business owner is able to purchase a solar PV system that offsets most of the site’s summer peak, then switching rates could be advantageous and actually increase the value of solar.
Solar Financing Options
The choice of financing and the ownership status of the buildings are critical elements of any industrial solar consultation. There is a wide range of options available to potential customers: from power purchase agreements (PPAs) to leases, and from loans to cash payments. Whether the industrial building is owned or leased by the prospective customer also affects how the deal is structured.
REC Solar offers a range of commercial solar financing solutions including a solar PPA backed by Duke Energy, which is a great fit for businesses looking to conserve capital. We work closely with each company on a case-by-case basis to determine the best financing options given their particular situation and tax appetite. Our goal is to provide your business with the most financially beneficial and environmentally responsible solar system.
Commercial Solar ROI & IRR
We often receive questions about the internal rate of return (IRR) or return on investment (ROI) for an industrial business that goes solar. The answer varies depending on the size and output of the system, utility rates, location, and financing package. However, the bottom line is that a commercial solar installation – costing just pennies per kilowatt-hour – will often be much cheaper over the 30-year lifetime of the system than grid power. And of course, your business is under no obligation to commit until you’ve confirmed the numbers.
For example, a hypothetical 1 MW solar system located in PG&E’s service area, purchased with cash at $2 million and a 6% discount rate, would generate between 1.7 and 1.8 million kilowatt-hours of clean electricity per year and provide an IRR of about 17.4%. Put another way, the system would pay for itself in about five years and potentially add hundreds of thousands of dollars to a company’s annual operating profit.
Last, but certainly not least, solar can play a major part in helping industrial companies (and their vendors) reduce harmful emissions and to clean up their energy footprints. Let one of our commercial solar experts take a look at your facility and see how solar technology could help your business’ bottom line and our planet.