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October 15, 2016

Why Solar is the Fastest Growing Industry in the U.S.

The Business Case for Solar Power in 2017

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Today, business owners in Illinois pay 9-14 cents per kWh (in some states this rate can be 20 cents or more). By installing solar power, you can bring the effective cost of electricity down by 60-75%. Commercial and industrial facilities that spend thousands of dollars a month on electricity can save tens of thousands of dollars a year by going solar.

Solar is the fastest growing industry in the U.S. in 2016 for three reasons:

1) Technology prices have dropped substantially. The price of solar panels has fallen 60% in the past five years. See this graph to appreciate how steep the decline has been.

2) Electricity rates go up 3-4% on average each year. In ten years this means electric utilities cost 30% more.

3) There are really generous federal and state incentives. There is currently a 30% Federal Incentive Tax Credit (ITC) and accelerated depreciation known as MACRS that make going solar much more affordable now (both of these may be temporary – a reason to act soon).

Three Ways to Go Solar (including zero down options)
There are three ways to enjoy solar power savings. All of them will greatly reduce your utility bills, create jobs, and green the economy. Remember, solar is the fastest growing industry in the U.S. today.

I. PPA (Power Purchase Agreement) – You put a solar power system on your rooftop (or empty lot) that is owned by a 3rd party. Your business is the host. You make a long term agreement to purchase the power from that system at a fixed rate that is a fraction of your normal electric rate. You lock in this low rate for 20 years which gives you confidence that you will save for the long term; the alternative is a market rate that will go up 3 to 4% per year on average so locking in a fixed rate generates serious savings. It takes no money down to get a PPA. You just need a sunny roof and the authority to install equipment on it. Your business can realize savings of up to 75% on the cost of electricity.

II. Lease Agreement – Similar to a PPA, but you’re paying to rent a solar power system on your roof (that a 3rd party owns and leases to you for a monthly rent). The rent may increase at 1% or so over time, depending on the terms of the agreement (a so-called ‘escalator’ of 1% typically). The solar system produces electricity that you sell back to the grid (called net metering) and this makes your electricity cheaper, and the savings stack up to thousands of dollars over time. At the end of the lease (7 yrs. typically) you have the option to buy the system or return it. You realize significant savings similar to a PPA. You pay no money down for this option.

III. Purchase a Solar Power System – You invest in a solar PV system that generates 80-100% of your electricity needs. Like any capital equipment purchase you can finance the purchase, and you take full advantage of tax benefits including the 30% Federal Incentive Tax Credit. If you buy a $100K system, you get a $30,000 tax credit; on top of that you can take accelerated depreciation called MACRS on the equipment for up to 50% of the value of the system in the first five years). Talk to a CPA, this is real money. If you include a battery storage system that allows you to sell electricity back to the grid day or night and the savings increase even more.

When you purchase a solar power system, you typically have up-front costs in the form of a down payment. For residential and small commercial systems, you can get zero down financing. Once you pay off the loan, you own the system for the rest of its useful life and it produces virtually free power for you. Buying a system is attractive for both short and long term savings and this option generates twice the overall savings compared to PPA or Lease options. See this chart for a savings comparison of PPA/Lease vs. Purchase options.

Additional Resources:
Economics of Solar – Where Does Going Solar Make Sense?
Interactive Map of Commercial Solar Projects
Work in the Solar Industry – Join My Crew!
Order a Solar Savings Assessment for your home or business
Recent Press from Bloomberg, Fortune, and the Harvard Business Review about the Solar Industry
Learn about State and Local Incentives in your State – DSIRE by North Carolina State University

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