What is the ROI for commercial solar panels?

Solar panels on our clients roof - Peerless Plastics

Over the last few years, sustainability has become a bit of a buzzword. However, for most businesses and organisations it is a strategic imperative that can’t really be ignored. Sustainability means many things to many people but, frankly speaking, at some point the question of ‘what’s the financial benefit’ is likely to arise.

This short blog aims to provide insights into the potential financial (and non-financial) benefits of investing in a commercial solar system. We examine the Return on Investment (ROI) and other key considerations to help you make informed decisions that can benefit your operations, the environment and your bottom line.

ROI considerations

ROI quantifies how much profit an investment generates. For commercial solar systems, it is a measure of how much money a business can expect to save compared to the initial investment. For all decision-makers, it is a critical factor in determining the feasibility of implementing solar and so is likely to form (a large) part of your buying decision. A higher ROI means better financial benefits or ‘bang for buck’. Here are some considerations when evaluating your ROI calculations:

1. Cost savings:

One of the primary reasons for investing in commercial solar panels is to save on energy costs. Solar energy can greatly reduce your electricity bills, depending on the size of your system and your energy usage. By calculating ROI, you can estimate how quickly these savings will offset the initial costs of installation and what the financial impact is for your business. We explain this further below.

2. Increased property value:

If you are a landlord or property owner, solar panels can also increase the value of your property. Potential buyers or tenants will typically see the presence of a solar system as a valuable asset, which can enhance your property’s marketability and overall value. Including this uplift in property value is an ‘indirect benefit’ but should typically be included in any comprehensive ROI analysis. Check-out our related blog here.

3. ROI doesn’t tell the full story:

ROI is a financial measure. It doesn’t fully capture the indirect or non-financial benefits such as brand differentiation and improved stakeholder perception. Adopting renewable energy can help many businesses (and their customers) achieve long-term sustainability goals. You can read more about this in a related blog post.

The Cost of Commercial Solar Systems

As part of any ROI calculation, it’s important to understand the costs involved in installing a commercial solar system:

1. Initial investment:

This includes the cost of purchasing the solar panels, inverters, mounting systems, and installation. Prices can vary depending on the size of the system and the quality of the components.

2. Maintenance costs:

While solar panels generally require minimal maintenance, occasional inspections and cleaning are necessary to ensure optimal performance. These costs should be factored into your ROI calculation.

3. Financing options:

The most obvious approach is to self-fund the purchase of the system. However, many businesses prefer to finance or lease their solar systems – often using Power

Purchase Agreements (PPAs), something Eden has expertise in – we’ve also written about that here, in another article.

Electricity savings with solar panels from Eden

Calculating ROI

To determine the ROI for commercial solar panels you’ll need to account for the items listed below. The good news is that if you’re considering working with Eden Sustainable, our proposal to you will include this on your behalf!

1. Determine installation costs:

Calculate the total cost of your solar system, including panels, inverters, mounting, and installation. Don’t forget to include any ongoing maintenance costs.

2. Estimate energy savings:

Review your current energy bills and consumption to estimate how much you’ll save with solar panels. This involves calculating the electricity your system will generate and the reduction in your energy costs. You should also consider how your existing electricity may escalate in the future

3. Factor in Incentives:

Include any applicable government incentives or tax benefits in your ROI calculation. These can reduce your initial costs and enhance ROI.

4. Calculate payback period:

The payback period is the time it takes to recover your investment through savings. Divide the total cost of the system by the annual savings to determine how long it will take to break even. Typically this is between 5 to 7 years for most systems – which is pretty good considering they last for 25 years plus!

5. Evaluate long-term benefits:

Consider the long-term savings, as solar panels typically last 25–30 years. The benefits extend well beyond the payback period, offering continued savings and, importantly, price stability. This last factor is really important and is a very important benefit from having control over your own supply.

If you’re questioning whether commercial solar panels are worth the investment, consider that the long-term benefits often outweigh the initial costs. Solar energy offers a reliable and cost-effective power source, protecting you from fluctuating electricity prices.

What does this mean for you?

Investing in commercial solar panels can be a wise financial move for many businesses. By understanding ROI and assessing the costs, savings, and benefits, you can decide if a commercial solar solution is right for you.

If you’re thinking about making the switch to a more sustainable energy future, then contact us via our website and we’d love to help you unlock the benefits.