Why Solar Panels Will Save You So Much Money Down the Road
Reduce Operating Costs
Improvements in technology have increased the efficiency of the silicon solar cells that are used in solar panels. This increased efficiency means that new solar panels are able to generate greater amounts of power. Installing solar panels means that you can reduce your organization’s overall utility bills. This reduction in operating costs can be further maximized by allotting cost savings into other efforts to improve energy efficiency throughout your facilities.
It’s no surprise that utilities are a fluctuating cost for an organization, with many power companies instituting rate increases annually. Installing solar panels allows you to reduce your dependence on the grid and hedge against these price fluctuations. This can help stabilize your utility spending.
The tax benefits that come from installing solar panels is a key reason you’ll save so much money down the road. The Federal Investment Tax Credit (also sometimes called the solar investment tax credit) is the most popular incentive for installing solar panels. The ITC allows an organization to claim 30% of the total cost of purchasing and installing solar panels. This credit is applied directly to the organization’s federal taxes, reducing tax liability.
Another tax benefit that you can take advantage of by installing solar panels is accelerated depreciation. Solar panel installation is eligible for MACRS, or the Modified Accelerated Cost Recovery System. This system allows you to bring the value of the asset, in this case the solar panels, to zero much before the end of its useful life. This increases the asset’s benefit to the organization’s bottom line and also hedges against finance surprises down the road.
A third tax benefit of installing solar panels is that the maintenance fees associated with them can be claimed each year on the organization’s taxes. This is reported as a direct expense and work to reduce the overall income that must be claimed on taxes. While this is beneficial to an extent, solar panels are relatively low maintenance, so this amount may not have a substantial impact on the bottom line.
Less dependence on the grid means you minimize the negative impact it has on your business. In other words, installing solar panels and having your own energy source minimizes the chance of having a power outage. This is especially true if an investment is made in a storage system for the solar power generated—protecting the organization from shortages due to fluctuations in sunlight or outages in the traditional power grid. Protecting your organization against a power outage is a key benefit of installing solar panels given how much a power outage can cost a business in terms of missed opportunities, employees being unable to work, and loss of product (for those that require refrigeration).
Add a Revenue Stream
While this does not actually save you money per se, installing solar panels at your facilities can actually turn into an additional revenue stream for your business. This is because you can sell the excess power generated by the solar panels to the power company. The size of solar panels installed, the amount of power generated, and your organization’s energy needs will all influence that amount of money that can be brought in with this new revenue stream.
Another point to make note of is that the installation of solar panels can help bring in additional sales and investors. So not necessarily saving you money, but instead bringing you more money. This is because installing solar panels helps you achieve your goals associated with any ‘going green’ policies within your organization.
Take a Look at the Big Picture
Ultimately, the decision to install solar panels depends on your organization’s overall goals and objectives in the short-term and especially the long-term. If the overall goal is to save money, in the short run installing solar panels is not going to be the right decision. However, if you can handle the upfront cost associated with this initiative, you can experience savings down the road.
It’s important to note that while the decision to install solar panels does affect the financials of an organization, it may also meet the other initiatives set for the future of the company. Therefore, any discussion of pursuing such a project should incorporate all the different aspects of the company’s long-term goals and plans.
Meet the Author
Nikki Kingsley, Marble.com