Commercial businesses across the country are now solar powered.
Commercial solar panels are large-scale solar projects primarily used by businesses, organizations, and other large property owners.
It’s more common than you think. In fact, commercial solar is now estimated to account for close to a third of solar power generation in the U.S., after growing in size over 15 times between 2009 and 2021.
Commercial solar systems can cost anywhere between $24,900 and $581,000 – depending on how large of a project it is.
In this blog, we’ll further explain the cost of commercial solar, its uses, benefits, and more.
What is commercial solar?
Schools can install commercial-scale solar systems. Image via Dayton Daily News
Commercial solar is the term used to describe solar panel installations in the commercial and industrial (C&I) sector.
It is a broad category that covers all solar power use outside of the residential segment (solar panels for home) or the utility segment (solar power plants aka solar farms). As such, commercial solar doesn’t just cover businesses, but government organizations and nonprofits, as well.
Examples of businesses and organizations that use commercial solar energy systems installations include:
- Commercial office buildings
- Farms, ranches, and vineyards
- Factories and warehouses
- Hospitals and clinics
- Schools and daycare centers
- Shopping malls and retail outlets
- Parking garages, parking lots, etc
As you can see, there’s a whole spectrum of organizations that can take advantage of solar power.
Where can commercial solar systems be installed?
Here are some of the many locations where commercial solar panels can be installed:
- Commercial building rooftops and awnings
- Ballasted on a flat roof or other flat surfaces
- Barns and sheds
- Pergolas, gazebos, and patio covers
- Carports and parking shades
- Pole mounts
- Water bodies such as ponds and artificial lakes (‘floatovoltaics’)
Given the range of organizations that can use commercial solar panels - and the diversity of locations that they work out of - commercial solar systems are installed in a wide variety of different structures and settings.
Solar projects can be installed on a much larger scale – which can account for a much larger price tag.
How much do commercial solar systems cost?
According to the Solar Energy Industries Association, also referred to as SEIA, commercial solar panel systems cost an average of $1.66 per watt as of 2023. This is almost half of the cost per watt to install on residential projects ($3.27).
Based on these average cost figures, we can estimate the cost of commercial solar power systems of various sizes:
| System size | Suitable for | Cost |
|---|---|---|
| 15 kW | Retail outlet, clinic, etc. | $24,900 |
| 75 kW | Farm, warehouse, etc. | $124,500 |
| 350 kW | Factory, hospital, school, etc. | $581,000 |
Solar installation costs by market segment
Average cost per watt for residential ('resi'), commercial ('non-resi') and utility-scale solar. Image source: SEIA Solar Market Insight Report 2023 Q3
Do bear in mind that the average figures hide a large distribution in prices. For example, cost per watt tends to fall as system size increases, thanks to economies of scale. There are also many other factors that can cause prices to vary, such as location (costs vary by state), type of mounting system, difficulty of installation, and more.
These prices seem a bit intimidating, but keep in mind that these prices are before any incentives or upfront rebates are factored in. Incentives can dramatically reduce the high costs of solar. The section below will go into greater detail about incentives offered for commercial solar.
Commercial solar panel incentives and benefits
There are many compelling reasons for businesses, government organizations, and nonprofits to go solar. Here are the major incentives and benefits of commercial solar panel systems:
- Solar tax credit and other incentives
- Electric bill offset
- MACRS depreciation
- Multiple financing options
- Green credentials
- Quick payback period
We discuss each of these benefits below.
Solar tax credit and other incentives
The Clean Energy Credit - more commonly known as the solar tax credit - is equal to 30% of the cost of installing a solar panel system.
So if your organization pays $50,000 to install a solar power system, it will receive a $15,000 credit when it files its taxes. You can learn more about using the solar tax credit for commercial solar installations in this guide from the Department of Energy; just note that with the passage of the Inflation Reduction Act of 2022 the full 30% tax credit is now available through 2032.
States, utilities, and local governments may provide additional incentives for organizations that go solar. Make sure to check what incentives are available in your area.
Lower operating costs through electric bill offset
Commercial solar power systems can be designed to offset 100% of an organization’s electricity bill.
Full electric bill offset is particularly easy if you install a grid-tied system, which allows you to export surplus power to the grid and import power to meet shortfalls when needed. Further, if net metering is available, you’ll even earn the full retail rate for the power you export!
Full electric bill offset means:
- Protection against utility rate hikes: As you are producing and consuming your own power, you are less affected by any future electricity price increases.
- Positive cash flow: Many organizations that go solar see this benefit from Month One as the loan repayments (if you financed the panels) can cost less than the bill savings.
- Free electricity: Once your solar panels are paid off, you’re essentially powering your organization for free.
MACRS depreciation
The cost recovery period for solar energy equipment under a modified accelerated cost recovery system (MACRS) is just five (5) years.
This means that businesses will benefit from a large reduction in their tax liabilities in their first five years of owning the asset; this is extremely favorable considering solar panels have a warranted life of at least 25 years.
MACRS can be used in conjunction with the solar tax credit. The project’s cost basis is reduced by half the value of the solar tax credit. So, if you use the 30% tax credit, you’ll reduce the asset’s cost basis to 85%.
Flexible purchase and lease options
The best way to purchase solar panels to get the greatest lifetime savings is to pay them off upfront in a cash purchase. However, organizations also have the option to finance their solar panels in one of three ways:
- Solar loan: You take a loan to purchase the solar panels and make monthly repayments over 5-20 years
- Solar lease (aka renting solar): You pay a solar company a fixed monthly rate (‘rent’) for the use of their solar panels
- Power purchase agreement (PPA): You agree to purchase the power generated from the solar panels at an agreed rate per kilowatt-hour (kWh)
Solar systems bought with a solar loan are eligible for the tax credit; this is not the case with solar leases and PPAs. Solar loans generally offer the best return on investment and are the preferred option for property owners.
Alignment of generation and consumption
Solar power generation and electricity consumption tend to align closely in commercial solar panel installations. That’s because most organizations consume electricity during the day, when the sun is out and solar panels are generating power.
This alignment results in a higher degree of solar power self-consumption. This means that in commercial solar, there is generally:
- Less need for energy storage - a good thing, as battery solutions increase solar’s upfront costs and payback periods
- Increased savings in places where net metering (full retail rate for solar exports) is unavailable
This is in marked contrast with what happens in homes and the grid in general, which see a major spike in electricity consumption after sunset, exactly when solar panel output drops. This imbalance is known as the Duck Curve, and often needs to be addressed with expensive battery solutions.
Quick payback period
The combination of incentives, utility bill savings, and the MACRS depreciation tax benefits means that commercial solar payments can offer a great return on investment - offering an average payback period between three and seven years.
That is a very short payback period, especially considering how long solar panels are designed to last. You can expect your solar panels to last at least 25-30 years, which is the amount of time most performance warranty periods are offered on current solar panel models.
Just keep in mind that you’ll have a shorter payback period with a cash purchase versus financing your panels.
Green credentials
It’s well-known that businesses that listen to what their consumers want thrive - and, conversely, those that don’t are doomed to fail. And when it comes to climate change and the well-being of our planet, the majority of consumers feel very strongly:
- 60% of U.S. adults believe that climate change is a major threat to the nation
- 74% of consumers care about the environmental impact of the products they buy
Companies need to show that they’re responsive to these concerns by demonstrating their commitment to clean energy and sustainability. A great way to achieve this is by installing commercial-scale solar systems. It’s a win-win scenario – organizations can save money on electricity costs while also taking part in reducing their carbon footprint.
Corporate giants like Apple, Amazon, Google, Target, and Walmart have caught on to this fact, and are installing massive amounts of solar capacity while announcing ambitious plans to completely transition to clean energy.
You also don’t need to come from a giant corporation to take part in a solar project. The image below shows ground-mounted solar panels on a farm. They generate clean energy, while also providing shade and protection to the plants!
Compared: residential, commercial, and utility-scale solar energy
Many of our readers have knowledge about solar panels for homes, or even about solar farms, but are less familiar with commercial solar.
Here is how commercial solar compares to other segments of solar:
| Residential | Commercial | Utility | |
|---|---|---|---|
| System size | 3-10 kW | 10 kW-1 MW | >1 MW |
| Typical panel size | 60-cell (39" x 66") | 60-cell (39″ x 66″) / 72-cell (39″ x 77″) |
72-cell (39″ x 77″) |
| Typical panel wattage | 300-400 W | 300-450 W | 375-450 W |
| Total space requirements | 140-700 sq ft | 700 sq ft – 6 acres | >6 acres |
| Cost per watt | $3.25* / $2.60 - $3.25** | $1.64* | $0.96-$1.08* |
| Eligible for 30% tax credit | Yes | Yes | No |
| Depreciation tax benefits | No | Yes | Yes |
| Permitting time | Weeks | Months | Months to years |
*SEIA average cost figures - Q2 2023
**SolarReviews average cost figures - 2023
If you want to learn more about residential solar installations, do check out our blog or our advanced solar calculator, which can tell you everything you need to know about installing solar panels for your home, including cost and savings figures.
Best commercial solar companies
Over the years, SolarReviews has compiled the best online resources for unbiased consumer reviews of solar companies.
Based on their review scores, here are the most highly-rated solar companies performing commercial solar installations:
| Rank | Company name | State(s) | Rating out of 5.00 |
|---|---|---|---|
| 1. | Affordable Solar Roof & Air | FL, TX | 4.96 (420 reviews) |
| 2. | Arizona Solar Wave | AZ | 4.95 (347 reviews) |
| 3. | Renova Energy | CA | 4.93 (399 reviews) |
| 4. | Lumina Solar | MD, PA | 4.92 (352 reviews) |
| 5. | Synergy Solutions LLC | NH, RI, MA | 4.90 (90 reviews) |
| 6. | Solar Energy World | DE, FL, MD, NJ, PA, VA | 4.88 (507 reviews) |
| 7. | Stellar Solar | CA | 4.85 (185 reviews) |
| 8. | Harvest Power LLC | NJ, NY | 4.81 (221 reviews) |
| 9. | Shine Solar, LLC | AR, LA, MO, OK | 4.77 (580 reviews) |
| 10. | Solar Bear | FL | 4.74 (702 reviews) |
| 11. | Solar Power of Oklahoma | OK | 4.74 (45 reviews) |
| 12. | Long Island Power Solutions | NY | 4.72 (131 reviews) |
| 13. | Shinnova Solar | KS, MO, NE | 4.69 (35 reviews) |
| 14. | Purelight Power | IA, KY, MT, OH, OR | 4.68 (84 reviews) |
| 15. | Renu Energy Solutions | GA, NC, SC | 4.68 (219 reviews) |
When calculating review scores, SolarReviews gives higher weightage to more recent reviews, to ensure that review scores give a more accurate reflection of the company’s current performance. You can read more about our rating system here.
Key takeaways
- Commercial solar - also known as Commercial & Industrial (C&I) Solar - describes the use of solar energy by a range of different organization types, including businesses, government agencies, and nonprofits.
- Commercial solar systems cost an average of $1.66 per watt, or roughly half the price of residential systems.
- Organizations going solar enjoy many benefits and incentives: the solar tax credit, electric bill offset, MACRS depreciation, a quick payback, and green bragging rights.
- SolarReviews has compiled a list of the best commercial solar installers based on consumer reviews.
Zeeshan Hyder
SolarReviews Blog Author
Zeeshan is passionate about promoting renewable energy and tackling climate change. He developed these interests while studying at beautiful Middlebury College, Vermont, which has a strong focus on sustainability. He has previously worked in the humanitarian sector — for Doctors Without Borders — and in communications and journalism.