Commercial solar panels: Costs, benefits & best installers

Updated

Solar panels atop a Target store arranged to look like the Target logo
More than 500 Target stores are now solar powered. In fact, Target has the most solar panel installations among companies nationwide. Image source: Target

Solar power is a low-hanging fruit for businesses that want to cut their operating costs and improve their bottom line. As a handy bonus, switching to solar also reduces their carbon footprint and demonstrates to consumers and stakeholders that their organization is committed to sustainability and the transition to renewable energy.  

An increasing number of businesses, nonprofits, and government agencies have already caught onto this 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.

Are you a business owner or organizational decision maker who’s considering commercial solar power? Or just curious about considering solar power for your organization? This blog will tell you what you need to know. 

We’ll explain the costs and benefits and discuss the best companies for installing solar panels for your organization. 

On this page

    What is commercial solar?

    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? 

    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.  

    This is a far cry from residential solar panels, which are overwhelmingly on the rooftops of homes, and utility-scale plants, which are typically ground-mounted solar farms.

    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 surface
    • Barns and sheds
    • Pergolas, gazebos, and patio covers
    • Carports and parking shades
    • Pole mounts
    • Water bodies such as ponds and artificial lakes (‘floatovoltaics’)

    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 $1.37 per watt as of Q3 2020. This is slightly less than half the cost of systems installed on homes ($2.84). 

    Based on these average cost figures, we can estimate the cost of commercial solar power systems of various sizes:

    Commercial system cost by system size
    System size Suitable for Cost
    15 kW Retail outlet, clinic, etc. $20,550
    75 kW Farm, warehouse, etc. $102,750
    350 kW Factory, hospital, school, etc. $479,500

    Bar chart showing average system 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 2020 Q4. 

    Do bear in the 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. 

    Also keep in mind that the costs listed above are before applying any incentives, which can substantially reduce costs. Check out the following section for more details about incentives and rebates. 

    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 federal investment tax credit (ITC) - more commonly known as the solar tax credit - is equal to 26% of the cost of installing a solar panel system.

    So if you pay $50,000 to install a solar power system, your organization will receive a $13,000 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. 

    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

    Are you a homeowner? See all incentives and rebates for residential solar 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 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 26% tax credit (the rate available in 2021-22), you’ll reduce the asset’s cost basis to 87%.

    Flexible purchase and lease options

    Organizations can choose to finance their solar panels through 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 panjel 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 - in some cases as short as just 2-3 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. 

    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
    • 79% say they are changing their buying preferences based on environmental impact, social responsibility, or inclusiveness 

    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 shiny, new solar panels to power their operations, which depict direct and visible positive change. 

    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.

    Your solar project doesn’t need to be as big as those of the tech and retail giants in order to make a difference. The image below, for example, shows a plant nursery with a small solar array, ingeniously designed to produce clean energy while offering shade to plants and customers alike. 

    Shelves of potted plants covered by a solar panel patio cover.

    Small businesses can also benefit by going solar. Pictured is a commercial solar power installation for a plant nursery business. Image source: SunBlue Energy   

    Solar also can also save money for your home - get a cost and savings estimate

    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: 

    Comparing residential, commercial, and utility-scale 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 300-375 W 300-450 W 375-450 W
    Total space requirements 140-700 sq ft 700 sq ft – 6 acres >6 acres
    Cost per watt $2.84* / $2.49** $1.37* $0.80–$0.94*
    Eligible for 26% tax credit Yes Yes No
    Depreciation tax benefits No Yes Yes
    Permitting time Weeks Months Months to years

    *SEIA average cost figures - Q3 2020

    **SolarReviews average cost figures - March 2021 

    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 as of March 2021:  

    Top 15 commercial solar installers nationwide
    Rank Company name State(s) Rating out of 5.00
    1.  Solar Bear FL 4.97 (409 reviews)
    2.  Arizona Solar Wave AZ 4.92 (219 reviews)
    3. Renova Energy CA 4.92 (361 reviews)
    4.  SunVena Solar LLC FL 4.91 (95 reviews)
    5.  Lumina Solar MD, PA 4.91 (94 reviews)
    6. Positive Energy Solar NM 4.91 (94 reviews)
    7. Harvest Power LLC NY 4.90 (190 reviews)
    8.  Cosmic Solar Inc CA 4.89 (271 reviews)
    9.  Affordable Home Solar CA 4.88 (69 reviews)
    10. Celestial Solar Innovations MD 4.88 (101 reviews)
    11. Solar Centex TX 4.87 (126 reviews)
    12. SUNation Solar Systems NY 4.86 (250 reviews)
    13. All Energy Solar MA, MN, NH, WI 4.86 (302 reviews)
    14. Long Island Power Solutions NY 4.85 (98 reviews)
    15. Mass Renewables MA 4.85 (142 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.  

    You may be wondering about the absence of solar behemoths like Tesla and Sunrun. Both companies failed to feature in this list as their review scores were too low - 2.9/5.0 for Tesla and 1.7/5.0 for Sunrun. They don’t just fare poorly on SolarReviews, but on websites like Yelp, as well. 

    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 $1.37 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.
     - Author of Solar 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.

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