What Is Commercial Solar? A Look at Opportunities, Benefits, and Financing

There’s been an explosion of commercial solar projects built over the past few years. According to the Solar Energy Industries Association (SEIA), there was almost 19 gigawatts of commercial solar installed in the U.S. in 2023, “with about half of all capacity installed since 2020,” as noted in their Solar Means Business report.

So who’s all-in on installing renewables? Big names like Meta, Amazon, Apple, Walmart, and Microsoft are leading the pack. But as we’ll explore in this blog, all kinds of companies both large and not-so-large can take advantage of commercial solar and its benefits.

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Residential Solar vs. Commercial Solar

Before diving into the specifics of commercial solar, let’s first clear up what distinguishes it from residential solar.

Residential solar powers a single home, with the solar panels typically mounted on the roof. Residential systems are sized to offset a portion of a household’s annual energy consumption, saving homeowners money on their utility bill. In states with net metering programs, any energy generated in excess of what’s needed to power the home can be exported to the grid in exchange for bill credits.

Commercial solar systems are meant to power larger buildings such as offices, warehouses, and industrial facilities. A manufacturing plant or 50-story office tower has much higher energy demand than your typical family of four, so to support this, onsite commercial solar systems are considerably larger, ranging in size from 20 kilowatts to multiple megawatts. Commercial solar not only encompasses corporate properties, but also includes government buildings, academic institutions, and nonprofits. Through opportunities like community solar programs, commercial solar owners can share the clean energy benefits of their system with the surrounding area.

While residential and commercial solar differ along the lines of size, application, and purpose, the technology is generally the same. Both types of solar harness the sun to generate clean energy using a variety of components including the solar panels themselves, inverters, mounting and racking systems, and wiring.

Solar panels generate electricity through the photovoltaic effect. Photons of sunlight strike the cells in a solar panel and knock electrons loose. The electrons flow one after the other through the interconnected modules to generate direct current electricity.  

To make the energy compatible for use with household devices or commercial equipment, a device called an inverter changes the direct current (DC) into alternating current (AC) electricity. More and more systems are also integrating battery energy storage systems that store generated energy for later use, like during peak times or in emergencies.  

Types of Solar Installations

Now let’s take a look at the different types of onsite solar installations available for the commercial sector, as well as some of the unique benefits they offer.

Rooftop Installations

Rooftop solar is the most common type of onsite solar installation. The strongest candidates are facilities with flat roofs that exceed 50,000 square feet, making commercial businesses with large office or retail spaces, warehouses, and distribution centers ideal. Ample roof space allows for many solar panels to be installed, enabling the facility to satisfy a significant portion of its annual energy usage and qualify for commercial-scale solar incentives that can help cover installation costs.

Ground-mounted Systems

Another common type is a ground-mounted solar system — an excellent option for companies with unused land. These types of installations are more accessible for maintenance than rooftop solar and allow for easier adjustment of the module positions better to follow the sun's path throughout the year, ensuring optimal energy production. There are also special incentives for ground-mounted solar installations that leverage otherwise unusable land like brownfields, capped landfills, and former industrial sites.  

Solar Carports

A great blend of form and function, solar carports (also called solar parking canopies) provide shade and protection to vehicles while also generating solar energy. They’re constructed similarly to ground-mounted systems, only the solar panels are raised higher off the ground to create overhead canopies covering parking lots or garages. Businesses prefer solar carports because they avoid alterations to the main facility and are a highly visible way to demonstrate sustainability to employees and customers. Electric vehicle chargers can be installed in conjunction with solar carports to accommodate EV drivers’ charging needs.

The Advantages of Investing in Commercial Solar

According to PwC’s 2023 US Large Energy User Survey, business leaders across industries share a common goal: “to build a cleaner, more energy efficient and affordable future for their companies.” There are many ways to achieve this, but most are choosing the same sunny path, strongly supporting solar as a robust business energy solution. Let’s dig into why commercial solar is becoming such a popular option.  

Energy Cost Savings

A solar system saves you money in several ways. With utility rates rising every year, a solar energy system stabilizes costs against fluctuating energy prices throughout its 25-year lifespan. Every system has a payback date — a threshold when it’s generated enough electricity to cover its costs, and from then on produces free energy for the business. In addition, solar generation often naturally coincides with peak grid demand, enabling reliance on self-generated power instead of drawing from the grid when daily electricity prices are at their highest.  

Corporate Sustainability

Two-thirds of U.S. adults say large corporations are doing too little to reduce the effects of climate change, Pew Research Center found. Pressure from the public, plus sector net-zero goals and ESG reporting requirements, are putting businesses on alert that they need to take more decisive action to fight climate change. Investing in commercial solar energy supports sustainability goals by providing 100% clean energy, reducing a company’s carbon footprint and achieving emissions targets.  

Energy Independence & Security

In 2020, U.S. customers experienced two power outages a year totaling eight hours of power interruption and costing businesses a whopping $150 billion. Onsite solar energy generation, often coupled with battery energy storage, ensures energy security for businesses by providing a reliable supply. This reduces dependence on utility lines, which are increasingly strained and prone to failure due to competing demand, extreme weather events, and aging infrastructure.

Financial Incentives & Tax Credits

“The Inflation Reduction Act, through provisions on transferability, direct pay, and the various adder credits, will lead to growth in emerging commercial markets,” SEIA forecasts. This expected increase in commercial solar development is because the typical return on investment for a solar system has been shortened to 5 to 8 years thanks to the extended federal tax credit, various state rebates, and five-year accelerated depreciation.  

At a minimum, projects less than 1 megawatt can receive a 30% federal investment tax credit, while sites located in low-income, tribal areas, or targeted energy communities can receive additional credits worth up to 70% of the project’s cost. To see what additional incentives might apply to your project, check out PowerFlex’s Policy & Incentives Hub to learn more about programs available in your area.

Commercial Solar Cost Factors & Financing

Factors such as system size, permitting fees, and local utility and electrical safety requirements all can significantly influence the price of a solar energy system. Type of installation can also be a factor; a rooftop or carport system requires more design and engineering work than a ground-mounted system.

Despite the many factors that influence costs, industry analysts and researchers have observed some consistent key trends in solar adoption over the last decade. Solar panel prices dropped aggressively from 2008-2013 and have since settled into a gentler pattern of annual decline, Berkeley Lab’s annual Tracking the Sun study found.  

Still, a solar energy system is a significant investment. Luckily, there are several flexible financing options that businesses can take advantage of to fund their project:

• Direct Ownership: The customer pays for the solar energy system outright, which allows them, as system owner, to take full advantage of federal and state incentives that can provide tax credits and rebates.
  
• Leasing: The customer leases their system from a system owner (such as a bank) with no upfront capital layout and a buy-out option at the end of the lease term (typically 6-10 years). The lessor benefits from the tax advantages of the solar project during the initial years, while the business uses the generated electricity in exchange for a fixed monthly payment.
  
• Power Purchase Agreement (PPA): A third-party developer (like PowerFlex) installs, owns, and operates the system on the customer’s property. The customer pays no upfront capital for the system and agrees to purchase all the energy produced for 15 to 25 years, typically at a lower per-kilowatt-hour rate than the local utility.

PowerFlex’s End-to-End Solar Solutions

If you want to get started with a commercial energy project of your own, you need a partner like PowerFlex that offers comprehensive end-to-end solar solutions. We support you through each stage of the solar project lifecycle, including design, permitting, incentive support, installation, and asset management.  

We can also help you get the most out of solar by integrating a PowerFlex energy storage solution that maximizes energy cost savings, in addition to implementing electric vehicle chargers that leverage clean solar energy to power fleet EVs. Most of all, these assets are optimized through our adaptive energy management platform PowerFlex X™.  

Ready to maximize your climate impact and minimize costs with commercial solar energy? Contact PowerFlex today and one of our experts will find the right commercial solar solution for your business.