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Solar Energy Pros and Cons: Powering Your Small Business
February 12, 2020

Solar Energy Pros and Cons: Powering Your Small Business

Installing solar panels is a wise choice for many small businesses. They can help you save money and enjoy significant tax credits. They’re better for the environment, which appeals to potential customers and employees. They can even help you make money by selling extra energy to utility companies.

Although it has several benefits, solar energy isn’t a good fit for every business. It’s expensive to set up, and it can be hard to find a trustworthy installer. If your electric bill is low to begin with, the switch might not be worth it.

Keep reading to learn more about the pros and cons of solar energy.

The Importance of Solar Energy

Solar energy is one of the best available energy sources for the environment. Other methods of producing electricity, such as coal and natural gas, have long term impacts on the earth. Those methods lead to carbon dioxide emissions, which contribute to climate change. Solar energy, on the other hand, is abundant, renewable, and sustainable.

The sun is the most abundant source of energy on earth. The energy produced is more than 10,000 times the entire world’s energy usage. Unlike fossil fuels, which will eventually run out, sunlight is entirely renewable.

Over the past decade, the cost of solar power has fallen by 70 percent. Updates to solar panel technology have resulted in more efficient systems. Meanwhile, public support for solar continues to increase.

The job market related to solar power is growing rapidly. The Solar Foundation releases a solar job census each year. At the end of 2018, there were 252,000 solar workers in the U.S. That’s double the number of people employed by the coal industry.

Pros of Solar Energy

What are the pros and cons of solar energy? Let’s start by reviewing the benefits of solar panels.

There are some significant advantages to using solar energy. It can help you lower costs and see an increase in your business’s value. You can attract customers and employees who care about sustainability as you help protect the environment.

Large companies, including Target and Walmart, are enjoying the pros of solar power. A growing number of small businesses are exploring them as well.

Can Lower Electric Bills

By switching to solar energy, you’re likely to see significant savings on your bills. Some businesses see a reduction in energy costs of 75 percent or more. One study found that the average owner of a commercial property paid $2,000 per month for electricity. Survey respondents who installed rooftop solar panels paid just $500 a month.

Once you’ve paid off the cost of purchasing and installing solar panels, your energy is essentially free. The only exception is when there’s not enough sunlight to generate power, such as on overcast days. At those times, you can use regular electricity as a backup. Businesses located in sunny climates are likely to see the most savings.

Battery systems are now available that allow energy to be stored for use when it’s cloudy or dark out. However, they can be expensive.

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Improvements in Business Value

Today, many consumers consider the environmental impact of their shopping habits. Solar panels are one way to show that you’re committed to sustainable business practices. Mentioning your solar panel system in marketing materials and on social media can be a savvy move.

An investment in solar energy may also attract talented employees who care about the environment. A 2019 survey asked workers how a company’s sustainability influenced their job search. 70 percent of respondents said they were more likely to work for a company with a strong environmental strategy. One out of every ten workers said they would take a pay cut to work for an environmentally responsible business.

If you decide to sell your business, having solar panels installed can be a major selling point. A buyer won’t have to install panels themselves and can enjoy savings immediately.

Carbon Footprint Reductions

A carbon footprint is the amount of greenhouse gas produced by an activity. It’s usually expressed as the number of tons of carbon dioxide (CO2) that the activity generates. The average small business produces between 11.6 and 23.3 tons of CO2 annually. These CO2 emissions are directly linked to climate change.

Solar panels reduce your carbon footprint because they produce energy without creating emissions.  The manufacture and transport of solar panels create carbon dioxide, so the panels aren’t entirely carbon neutral.

Once you’re ready to choose a solar panel installer, ask them about their own sustainability practices. In general, the energy used to make these panels is “paid back” within two to three years.

When solar panels need to be replaced, usually after several decades, their components are recyclable.

Earning Back Money On Investments

Solar electricity systems pay for themselves over time. Estimates vary for how long it takes before you’ll begin saving enough to cover the cost of installation. For some businesses, it’s as little as three years. Most solar panel systems last for 25 to 35 years.

In some areas, you can sell excess solar energy back to your utility company. This process, which is called net metering, means you could see additional profits from your solar panels.

In addition to other savings, you could be eligible for tax credits. Many states offer credits as an incentive to switch to environmentally-friendly solar power.

The Solar Investment Tax Credit (ITC) is a federal incentive program. For 2020, the ITC will allow businesses to claim a credit of 26 percent for installing a solar energy system.

Cons of Solar Energy

While it has several advantages, solar energy doesn’t work for all businesses. If you’re considering installing panels, you’ll need to consider potential disadvantages of solar energy.

The initial cost is one of the main concerns business owners have when they consider solar panels. While solar energy eventually pays for itself through lower electric bills, it can take a few years.

Aside from the cost, other issues include the type of roof your business has and access to reputable installers.

Solar Doesn’t Work For All Roof Types

Some type of solar panels will work for most roofs. However, depending on your roof type, there may be a much higher cost for installation. A roof with a steep slope will require additional care when installing panels. A completely flat roof, on the other hand, may have issues with drainage.

Rooftop solar panels work best on south-facing roofs. Certain obstructions can get in the way, such as chimneys or skylights. If there are trees or other buildings surrounding your roof, your panels won’t get as much sun. You might need to supplement solar energy with another source.

If your roof needs repairs in the near future, installers recommend completing them before installing panels. The cost of roof repairs or replacement, plus the cost of panels, is prohibitive for many businesses.

Keep in mind that if rooftop panels aren’t a good fit, there are also ground-mounted panels. However, your property might not have the space to accommodate them.

The Initial Purchase Comes At A High Expense

The cost of solar panel installation varies based on several factors, such as your business’s size and energy needs. Another factor is the type of system you install.

For the average business, the upfront cost of solar panels is about $18,000 before any tax credits. This estimate is based on a price-per-watt model, which many solar companies follow. The average cost per watt in 2020 is $2.96.

In addition to the panels and the design and installation, you’ll need to consider the cost of solar permits.

If you decide to move to a different location, it’s unlikely that you’ll be able to transport your solar panels. You would be looking at another expensive purchase to outfit your new location with panels.

Lower Electricity Costs Means Lower Savings

Depending on your location and the type of business you run, your electricity bills might already be low. If that’s the case, the savings from solar energy won’t be as significant. It would take longer to offset the initial cost of purchasing and installing solar panels. For some business owners, it’s not worth the high upfront cost.

With coal or natural gas energy, there are steps you can take to lower your bills. You might decide that these measures make more sense than implementing an entirely new energy source. For example, replacing your office equipment with energy-efficient models makes a big difference.

Difficulty Finding Installers

Working with a reputable installer is crucial when adding solar panels. Improper installation can lead to inefficient panels and may even cause damage to your roof.

If your business is in a remote or rural location, it can be harder to find an installer. If there aren’t many options in your area, you might discover that solar companies are charging inflated prices. Or, you might find a reputable option with affordable rates, only to learn that their schedule is completely booked.

A legitimate solar installer should be licensed and insured. They should also offer a warranty in case there are issues during installation. Perhaps most importantly, they should have a track record of quality work and happy customers. It’ll take some time and research to find the best person for the job.

Our Final Thoughts on Solar Energy

We recommend carefully weighing the pros and cons to decide whether solar power might work for you. Reach out to some local solar companies to get an estimate of the upfront cost. They can also help you estimate when your savings would begin to offset the cost of the panels.

If solar isn’t a good fit now, it might be worth looking into in a few years. New technology, government incentives, and public support continue to make solar energy more accessible and affordable.



Frequently Asked Questions

How do solar panels work?

Solar panels use photovoltaic cells to absorb the sun’s rays. Then, they convert those rays into direct current (DC) electricity. An instrument called a solar inverter converts the DC electricity into alternating current (AC) power for your building.

Is solar power reliable?

Solar panels can still generate energy when it’s cloudy, just not as much. There are batteries that save power for use when it’s dark out, but they can be cost-prohibitive. For these reasons, many businesses stay connected to their local power grid to use as a backup source.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].