During the process of running a business, entrepreneurs are always looking for ways to reduce costs and become more profitable. One option that many businesses are now considering is investing in solar power. If you’re thinking about solar for your company, is it worth the investment?
Prices Have Fallen
Solar isn’t exactly a new technology, as it’s been used in some capacity for more than 40 years. For the majority of solar power’s history, solar panels have been considered to be very expensive. In the past, many homeowners and businesses could not justify paying so much for a solar power system. However, thanks to economies of scale and improvements in production processes, the prices of solar panels have been falling dramatically. In today’s market, the prices of solar are much more reasonable than they’ve ever been before, and are even cheaper than retail electricity in numerous places.
Another factor that businesses also have to look at when making this decision is what type of incentives they have available to them. Solar power incentives are available in many different markets, although some markets are better than others. For example, anyone who buys a solar power system and installs it in the United States is eligible for a 30 percent federal tax credit. In addition to this tax credit, many utility companies offer rebates toward the cost of the solar power system. In many cases, these rebates combined with the tax credit can pay for a large majority of the cost of the solar power system.
In some areas, solar power system owners can also take advantage of feed-in tariffs. These tariffs make it possible for consumers to get paid from the electric company for the power that they produce. When this is taken into consideration with the other incentives for going solar, many businesses see that it is a proposition that makes good financial sense.
Another financial benefit that businesses can take advantage of is accelerated depreciation. When businesses in the US spend money on equipment, they can depreciate the cost of that equipment, less the salvage value. Accelerated depreciation allows businesses to take the vast majority of that depreciation during the first year and all of it within five years. This swings the balance of this transaction even more in favor of going solar.
Although in some situations businesses can go solar for a reasonable investment, it’s not for everyone. In order to decide whether a commercial solar project is for you, look at the payback period. If the investment is going to pay for itself with electricity savings in a short period of time, then it makes sense to move forward with the project. If the payback period isn’t short enough, then it may not be in your best interests. When looking at payback period, make sure that you allow at least a three to five percent increase in rates each year. With the way electricity rates increase, this gives you a good indication of how fast it will actually pay for itself.
Of course, beyond the simple finances, there is great value in improving your local community, being an environmentally and socially responsible business (and communicating that to your customers), and creating local jobs through local investments. These are harder to quantify, but they should also be considered when deciding whether or not to go solar.
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