Commercial Solar Panels: Installation Costs & Benefits Explained

Commercial solar energy generation has grown significantly, aided by corporations’ desire to improve sustainability along with the extension of key incentive programs. Commercial solar panels can be added to almost any commercial or industrial property, allowing businesses, nonprofits, municipalities, and other entities to produce their own solar power. Let’s explore the key benefits to going solar, types of installations, and common cost factors customers should consider.  

(Related: What Is Commercial Solar?)

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Why Invest in Commercial Solar Panels?

The reasons why organizations should invest in commercial solar panels fall into three main benefit categories:

Economic Benefits

One of the most attractive benefits of installing commercial solar panels is the ability to significantly reduce energy costs by using “free” solar energy to fulfill a substantial portion of your annual electricity demand. In areas with net metering programs, businesses can export any surplus electricity they generate to the grid in exchange for credits on their monthly utility bills. These savings, coupled with government and utility incentives that can greatly reduce installation costs, make solar an incredibly sound investment.

Operational Benefits

Solar panel systems can also improve energy independence, which contributes to the operational health of your business. By generating your own energy on site, you reduce your reliance on utility lines that are prone to damage due to extreme weather events and aging infrastructure. Additionally, solar panel systems are low maintenance. And with warranties and performance guarantees, businesses can ensure consistent performance and financial returns for the life of the system (typically 25 years or more).

Sustainability Benefits

Adding solar to your energy mix instead of relying solely on fossil fuel energy sources reduces your carbon footprint. This is essential for businesses that are racing to meet sustainability goals at the behest of their investors, employees, and/or customers. Investing in sustainability via solar also carries big reputational benefits, as it positions your organization as environmentally responsible in the eyes of the public.

Types of Commercial Solar Systems

Commercial solar panels can be arranged into different configurations to meet the needs of businesses and other types of organizations. There are three main types of solar energy systems:

Rooftop systems consist of solar panels installed on top of a building. Rooftop systems are ideal for commercial customers who have long, flat roofs with ample sun exposure — like office complexes, warehouses, and distribution centers. These types of facilities have sufficient space to install a system large enough to lower their energy costs and participate in most commercial incentive programs.  

In ground-mounted systems, panels are installed on land. They are an excellent choice for organizations that have open and underutilized property, or whose buildings may not be suitable for a rooftop installation. While rooftop panels are limited by the orientation of a building’s roof, ground-mounted panels with tracking systems can tilt throughout the day to achieve better angles in relation to the sun and increase energy production.

Solar parking canopies (also called solar carports) are canopies installed over parking lots and garages that provide shade and protection to vehicles while also producing clean electricity. The advantage of solar carports is that they don’t take up additional space, don’t require modifications to the main building, and are a highly visible way to showcase sustainability initiatives to visitors. Solar carports can also be installed with electric vehicle charging stations to accommodate the power needs of EV drivers.

Cost Factors to Consider With Commercial Solar Panels

When planning a commercial solar panel project, it's crucial to understand the key cost factors involved. There are project elements that will incur costs like installation and maintenance, as well as elements that can reduce costs like energy savings and incentives. Let’s explore some of these cost factors in more detail.

Installation Costs

Broadly speaking, commercial solar panel installation costs can be grouped into two categories: hard costs and soft costs. Hard costs include the hardware and electrical components used to build a solar energy system while soft costs consist of more variable expenses like labor, permits, and developer overhead.

An obvious driver of hard costs is the type of equipment chosen for the solar project. Solar panels for commercial buildings come in different materials, makes, efficiencies, colors, sizes, and ratings — and are available at a range of prices. There are also inverters to consider (which transform the direct-current electricity generated by the panels into alternating current that can be used to power the building) as well as racking systems that are needed to mount the panels in place.

There are also several hard costs that are specific to roof-mounted installations to consider: Panels on flat roofs must be tilted and installed at the appropriate angle to achieve maximum sun exposure, and thus, energy production. Solar panels can be installed on many different roof materials, but each roof type requires different mounting methods and components. Lastly, if a roof is approaching the end of its life, it’s recommended that it be replaced ahead of solar panel installation to save the cost of having to strip and reinstall the solar system down the line.  

In terms of soft costs, labor will vary according to the type and complexity of the installation. But there are also costs to consider both before work is started (like applying for and securing necessary permits) and after work is completed (the all-important system interconnection with the utility). Local utility requirements impact the type of meter you’ll need and if transformer upgrades are required to support the additional power load. The farther the solar panels are from the utility meter, the higher the cost because bridging these longer distances requires more trenching and conduit installation.  

You can read more about the solar installation process here.

Operations & Maintenance (O&M) Costs

Even the highest quality solar systems experience wear and tear over time due to exposure to weather and environmental hazards like dirt and pests. Proactive steps need to be taken to ensure overall system health and maintain optimal energy output.  

To that end, it’s necessary to invest in long-term operations and maintenance (O&M) services, which can be secured from specialized service providers or often from your original project developer. Common O&M tasks include vegetation control to eliminate shading, panel cleaning to stop dirt accumulation, and regular system testing. O&M providers use live system monitoring to alert them to emergencies that require immediate corrective maintenance to keep the system online and operating at full capacity.  

Working alongside O&M, Asset Management optimizes system performance and financial returns — making it another must-have investment for solar owners. Asset management services include monitoring and optimizing energy assets, auditing utility bills, managing incentive programs, ensuring regulatory compliance, and mitigating risks.

Return on Investment & Revenue

As mentioned earlier, solar customers can significantly reduce their reliance on utility companies for electricity, and in turn, slash their annual energy bills. These savings start to compound quickly, allowing system owners to recoup installation costs in as little as five years and enjoy strong return on investment.  

Solar can also unlock revenue opportunities through renewable energy certificates (RECs). The sale of RECs — which are traded and tracked credits representing the environmental benefits of one megawatt-hour of renewable energy — provides an additional revenue stream that can offset the initial installation and ongoing maintenance costs of the solar panels. Certificates can be sold separately or together with the underlying electricity to utilities with a renewable energy mandate or organizations looking to purchase renewable energy to meet sustainability goals.  

Tax Credits & Incentives for Commercial Solar Installations

There are a wealth of incentive programs in place on the federal, state, and local levels to promote the adoption of solar energy nationwide. These incentives lower initial commercial solar panel installation costs in a big way and further improve ROI to make solar financially rewarding for businesses.  

One of the most impactful federal incentives is the solar Investment Tax Credit (ITC), which allows businesses to deduct a percentage of the cost of installing a solar energy system from their federal taxes. In addition to the ITC, companies can take advantage of accelerated depreciation, further lowering taxable income to speed up investment recovery.  

State-specific incentives vary widely and can be combined with federal programs to reduce costs even more. For example, net metering programs, mentioned earlier, are administered at the state level and allow solar customers to receive credits on their utility bills by offloading surplus energy — that is, energy left over after meeting their onsite needs — onto the grid. To learn more about incentives that are available in your area, be sure to check out our Policy & Incentives Hub.  

Ready to Go Solar? Contact PowerFlex

While the list of benefits is long, there is an equally large number of cost factors to consider when installing commercial solar panels. As part of our end-to-end solar solution, PowerFlex simplifies financials so you secure the best possible project economics. Our experts achieve this by identifying the most lucrative incentives in your area and exploring flexible financing models, including options with zero capital expenditure required. Contact us to discover the benefits of PowerFlex solar solutions and get expert insight into calculating and maximizing the ROI of your commercial solar project.