July 28, 2020
If you’re considering investing in a solar system, you’ve probably heard all about the fantastic savings associated with going solar, but you may be less aware of the financing process. In particular, you might be asking how to finance a commercial solar system. What kind of incentives & rebates are available for commercial energy consumers looking to install a solar panel system? Is it better to get a loan and purchase the solar system, or should you lease the system? Why should you even consider going solar in the first place? Below, we will seek to clarify everything about commercial solar and answer these questions for you.
Essentially, a commercial solar system offers business owners a guaranteed route to lower operating costs. Thanks to the money saved on your monthly utility bill, you will be able to see savings right away with a commercial solar system. Few investments offer the level of guaranteed returns that a solar system does. When it comes to financing the installation of commercial solar, you can either purchase or lease the system (YSG recommends purchasing), and there are a number of incentives, rebates, and tax credits available to lower the cost of going solar.
Why You Should Go Solar
There has never been a better time to go solar. For a commercial property, a solar panel installation offers immediate results and big savings in the long run. The return on investment from a solar panel installation makes it a smart move for any business owner looking to reduce operating costs. Below are just a few of the biggest reasons for a business to go solar in 2020.
Going solar is the best way to offset your electric bill each month, offering consistent savings.
Solar is a way to safeguard against volatile utility rates across the country.
A solar panel installation can boost property value for both residential and commercial properties.
Going solar is a tangible way to reduce your carbon footprint and contribute to a clean energy future for all of us.
Thanks to the availability of federal and state incentives for going solar, a solar panel system offers an excellent return on investment.
In 2020, the tax credits associated with a commercial solar installation make it a more affordable option than ever before.
Solar panels are extremely durable and long lasting, requiring little maintenance.
How Do You Finance Commercial Solar?
When it comes to financing a commercial solar project, there are two main options—assuming you are not paying for the system in cash. You can either opt to purchase the system, which generally involves a loan, or you can lease the panels. There are advantages and disadvantages to each approach, which we will explore further below.
Furthermore, as projects become larger in scale, and more and more panels are involved in the installation, the financing process becomes more complex. If you’re keen on installing a large-scale solar array involving hundreds of panels then it’s important to work with an experienced developer like YSG Solar.
Solar Loan
Essentially, the big advantage of the solar loan approach is that it provides you with the money to purchase the system outright, meaning you will own all the equipment once the loan is paid off. That is to say, once you own the equipment, your panels are generating free solar energy. An experienced solar installer like YSG can assist you in identifying the best type of loan for your specific solar project. The downside of going solar with the loan approach is the same downside that comes with any loan—you have to make regular loan repayments and make them on time. If you fail to do so, your ownership of the solar equipment could be at risk. However, there are a host of excellent solar loans available so this shouldn’t be a problem provided you are working with an experienced developer.
Solar Lease
The main draw of the solar lease approach is that it offers a very low upfront cost to going solar. You’ll get the same solar savings you would with the loan option, and the monthly payments will likely be lower. Depending on your specific case, you may be able to purchase the equipment following the completion of the lease period. However, we always recommend that you purchase the system rather than lease, as this allows you take full advantage of all the incentives and rebates available for a solar installation. If you merely lease the system, you won’t be able to do this. Additionally, if you decide to relocate while the solar lease is ongoing, the existence of the lease may complicate any property sale.
Solar Incentives, Rebates, Tax Credits
As noted above, if you decide to go for the solar loan option and ultimately purchase the solar system outright, then you can take advantage of a number of fantastic incentives and rebates. New York, in particular, is an excellent place to go solar from a financial standpoint.
Federal Investment Tax Credit: This solar investment tax credit (ITC) allows you to reduce your federal tax liability by up to 26% of the net cost of your commercial solar system. The ITC is not applicable to leased solar systems, only those which have been purchased. Additionally, if your tax liability isn’t enough to claim the entire 26% credit, you can roll the ITC over to the following year. The ITC is one of the best incentives available for going solar in 2020. Details of other taxation benefits relating to solar are available from NYSERDA at this link.
The Megawatt Block Incentive Structure: As part of the NY-Sun program, New Yorkers can take advantage of this dollars-per-watt ($/W) rebate. The Megawatt Block Incentive is available for both commercial and residential solar systems.
New York State Solar Equipment Tax Credit: Another tax credit available to New York solar customers is the New York State Solar Equipment Tax Credit. This allows you to lower your tax liability by either $5,000 or 25% of total solar expenses, whichever amount is lower. Unlike the federal investment tax credit, this one is available for leased solar systems as well and, as with the ITC, it can be rolled over to the next year if your tax liability isn’t enough to take full advantage.
Additional NY Commercial Solar & Business Loans: There are also further loan options available for both New York businesses and nonprofits. Full details of these loans are available at this link, courtesy of NYSERDA and NY-Sun.
The Future of Solar Energy
Going solar has become more and more affordable in recent years thanks to increased support for renewable energy incentives & rebates, as well as improvements in the development of solar technology. Looking to the future, it’s increasingly likely that businesses will be required to meet certain environmental goals. Solar is one of the easiest ways to meet these environmental targets—while also saving money on operating costs. Additionally, a visible, public commitment to green energy can be an important statement and generate a lot of goodwill for a business. 2020 has been a year of upheaval and uncertainty, but a solar energy system can establish a sense of control over your energy costs moving forward.
If you’re interested in developing a commercial solar project, then get in touch with YSG today. Send us an email, or call at 212.389.9215 and we will be happy to discuss all your possible financing options for a commercial solar system. Likewise, if you’re a residential property owner interested in going solar, we will identify the best deal for you.
YSG Solar is a project development vehicle responsible for commoditizing energy infrastructure projects. We work with long-term owners and operators to provide clean energy assets with stable, predictable cash flows. YSG's market focus is distributed generation and utility-scale projects located within North America.
Sources:
https://goingsolar.com/how-commercial-solar-gets-financed/
https://www.nyserda.ny.gov/All-Programs/Programs/NY-Sun/Solar-for-Your-Business/Financial-Support
https://www.energysage.com/local-data/solar-rebates-incentives/ny/