What Is Commercial Solar Installation? A Look at Uses, Costs, Benefits, and More

According to the Solar Energy Industries Association (SEIA), commercial solar installations are steadily growing in popularity, with a 17% bump in installation volume from 2023 to 2024 alone. But what is commercial solar installation, exactly? What can it be used for, how much does it cost, and, most importantly, is it worth it? In this guide, we’ll explain all of that and more so you can decide if installing solar on your commercial building or property is a good option.

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What is commercial solar installation?

Plain and simple: commercial solar installation is the process of installing photovoltaic (PV) equipment on commercial buildings or properties to provide clean, affordable electricity. 

Just like residential solar arrays, commercial solar applications include panels and inverters to generate power and convert it to usable electricity. They can also include solar batteries, EV chargers, and other add-on products, depending on the purpose and scale of the system.

How does a commercial solar system work?

A commercial solar system uses solar panels to collect sunlight and generate DC electrical current. That electricity is then converted to an AC electrical current via microinverters or inverters, which the building can then use for electricity rather than pulling power from the grid. Any solar electricity your building uses results in savings on your electrical bills. 

Electricity from solar panels must be used as it’s generated or it will be sent to the electricity grid. If you generate less solar power than your building consumes, you’ll still have to use energy from the grid, but it will be less than if you didn’t have solar. 

Any excess solar electricity generation is sent to the grid through a bidirectional electrical meter. Depending on where your commercial property is, that excess power could be “lost,” or you may get compensated for it with bill credits for future use. If you install a storage system, excess generation from your solar panels can be stored for you to use later instead of getting sent to the utility. 

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How much does commercial solar installation cost?

According to the most recent data available from the SEIA, the average cost per watt for commercial solar installations is $1.46. You can use this average to get an estimate for your project if you know roughly what size commercial solar installation you need.

System size	Project	Average cost
1–5 kW	Parking meters and exterior lights	$1,450–$7,300
50–100 kW	Small commercial buildings, schools	$73,000–$146,000
100–250 kW	Mid-sized buildings	$146,000–$365,000
250–500 kW	Hospitals, warehouses, factories	$365,000–$730,000
>500 kW	Industrial parks, shopping malls, or large campuses	$730,000+

Commercial solar installation costs vary more widely than residential installations because there’s more variability in the use case and system size for commercial applications. You could pay under $1,000 for something like a single pole-mounted panel to provide power to a parking meter or flood light, while a larger rooftop system with batteries to power an entire warehouse building could total over $500,000.

In most cases, you won’t know what size solar array you need for your purposes, so it’s best to have a solar installer who handles commercial solar applications assess your property and project and design a system that will suit your needs.

4 factors affect commercial solar installation costs

There’s such a large range when it comes to the cost of commercial solar because there are many factors that can have an impact on your total. Here are four of the biggest features that will impact commercial solar installation prices:

• System size: System size is the biggest cost factor to consider when pricing out a commercial solar array. A small, 1- to 2-panel system to run exterior flood lights will cost a tiny fraction of what a 500 kW array that powers an entire building will total. Ultimately, the more panels you need, the higher your material and labor costs will be.

• Installation location: Where you install your panels will affect the type of mounting equipment you need and also the labor involved in setting up your array. Rooftop solar installations are the most popular, but there’s even some variability there, depending on the slope of your roof, the type of roof you have, how your panels get attached, and more. 

• Add-ons: On-site storage can add tens of thousands of dollars to your system costs, but it might be necessary for projects on hospitals where outages can be catastrophic. Adding other options, like EV chargers in parking lots, can also significantly drive up installation costs, as can custom additions like solar carports.

• Available incentives: Much like with residential solar applications, you can take advantage of federal, state, and local solar incentives to make your system more affordable. For example, the federal investment tax credit (ITC) can effectively reduce your installation costs by 30% by providing a solar tax credit for that amount. 

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Where can commercial solar panels be installed?

Commercial solar panels can be installed on rooftops or as ground-mount systems, just like residential arrays. Commercial solar panel installations come with some additional options. 

Building owners can install panels on carports or on the roofs of parking garages for large-scale solar projects. For small, dedicated power for exterior lighting or parking meters, commercial panels can also be pole-mounted.

Rooftop solar arrays are the most common option, but many commercial buildings have flat roofs that don’t pitch toward the sun for optimal energy absorption and energy production. 

Luckily, it’s possible to install special angled racking systems on flat roofs to get the panels to lie at the ideal angle toward the sun, making them just as beneficial as they are on pitched residential roofs. Building owners can also maximize solar electricity generation by using sun-tracking racks that turn panels toward the sun automatically throughout the day.

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What are the pros and cons of commercial solar installation?

Installing solar on your building comes with some appealing upsides, but there are also some important drawbacks to consider.

Advantages of commercial solar installations

• Reduced operating costs: One of the main reasons building owners consider going solar is the reduction in electric bills they’ll see. Commercial solar panels can offset a good portion or even all of your electricity consumption, which means savings each month on utility bills.

• Positive consumer opinion: Customers and clients who care about the environment may have a more positive opinion of companies that align with their own beliefs about climate change and renewable energy.

• Available incentives: Federal and state governments, and even local municipalities and utility companies, offer incentives for solar conversion that can boost your long-term savings when converting to solar.

• Additional tax savings: Businesses can receive additional tax savings by using the modified accelerated cost recovery system (MACRS), which allows you to accelerate depreciation on assets like commercial solar power systems in the first five years to reduce taxes even further.

• Environmental benefits and sustainability: Of course, one of the most significant benefits is the reduction in your building’s carbon footprint. Converting to solar reduces pollution, emissions, and your contribution to climate change.

Disadvantages of commercial solar installations

• High upfront cost: Commercial solar applications can be extremely expensive, sometimes topping $500,000 for large-scale installations with on-site energy storage. Clean energy systems often pay for themselves over time, but the upfront cost can be a major barrier to entry.

• Space requirements: Solar panels, batteries, and other PV equipment take up space and need direct access to sunlight. If you don’t have available roof space or a convenient, sunny place to install ground-mount panels, solar may not be an option for your building.

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Are commercial solar installations worth it?

With a potentially astronomical price tag, most commercial property and business owners will, understandably, ask if commercial solar installation is worth the investment. Provided your solar power system is sized properly for your needs and installed by a reputable solar contractor, your array will pay for itself and then provide net savings over time.

Average commercial solar savings are difficult to estimate due to project variability, but with rising electricity costs and favorable solar incentives for commercial applications, commercial solar installations are almost always worthwhile.

There are a few things to consider that can help you decide if it’s a good option for your building.

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Should you go solar in your building?

It’s impossible to say with certainty if solar is a good option for your commercial building because there are so many factors that affect cost, long-term savings, and the benefits you’ll see. While solar is worth it for most commercial applications, you should consult with a local solar company to get an estimate for system size, cost, and savings over time to see if it’s a good fit.