Michigan is one of many states prioritizing the development of clean energy sources, including commercial solar roof systems. According to the Michigan Economic Development Corporation, the state is No. 1 in the nation for Inflation Reduction Act projects and has spent hundreds of millions of dollars on incentives for clean energy development. The state is even considered one of the top five most aggressive pursuers of clean energy in the country, thanks to its plan for a 100% clean energy standard by 2040. Installing a solar roof is the easiest way for most businesses to become part of this initiative.
While it’s understandable to focus solely on the initial cost of installing a solar roof system, it’s also important to evaluate your return on investment for this type of project.
There’s no one “right” way to calculate the ROI of a commercial solar system. It’s all largely a matter of subtracting relevant costs from the total potential for energy savings provided by the installation. For example, you could keep it as simple as:
Solar Roof ROI = Lifetime energy savings provided by the system – Lifetime cost of the system
However, you’ll need to calculate all of the incentives and savings that come from the system for accurate results. For a simple ROI calculation to give you an idea if a solar system is right for your business, consider starting with:
Solar Roof ROI = Lifetime cost of electricity from your current utility company – Lifetime cost of system
You can always make the formula more complex by adding fine-tuned costs and savings. Either way, the goal is to calculate all of the money you can save by installing a solar roof, then subtract all relevant costs related to installation and maintenance. Having a rough idea of the ROI of the system you’re considering allows you to work out how many months or years it’ll take for the solar roof to pay for itself.
There are many factors that influence the upfront installation cost of a commercial solar roof. In fact, it’s often hard to get an accurate quote for this kind of system that doesn’t include a wide range of potential prices. They can cost anywhere from $40,000 on the low end to over $500,000 on the high end. However, these prices are before tax credits and other incentives are factored into the total. Some of the factors that influence the total cost include:
First, the size of the system and the size of the property largely determine the base price. Large facilities with high power demands will obviously need a more expensive solar power system. Trying to undersize the system to save money will only increase wear on components or risk damaging your equipment.
The roof’s condition also significantly affects the installation costs, especially if repairs or reinforcements are needed. If the roof doesn’t have great sunlight exposure, you may also need to spend more on extra framing to lift the panels high enough to capture more light.
The types of panels you choose also affect the total cost. Lighter panels that reduce the need for roof reinforcement tend to cost more per square foot, while they may or may not offer the conversion efficiency you need.
Lastly, don’t overlook the labor costs required for installation. Labor for solar roof installation is generally broken down into preparation work, frame installation, panel placement, and finishing steps. You’ll need a highly skilled crew for the placement of the panels and the wiring to connect them all to the inverters, but the other steps don’t necessarily require as much expertise. Finally, factor in all of the relevant permits that are required for this kind of work in your local area. Your county or city likely requires between one and four inspections before the system is ready to switch on and use, with each inspection involving a fee.
At the federal level, two types of tax credits are available for businesses and other non-residential projects like nonprofits and local governments.
The first type is known as an investment tax credit (ITC), and it reduces the federal income tax liability by a percentage of the solar system cost for the tax year of installation.
The other type is called a production tax credit (PTC), and it’s a per kilowatt-hour credit applied for the first 10 years of the system’s use. It’s based on the amount of power generated and is adjusted annually for inflation. You can generally only qualify for one of the two types of credits, so you may need to discuss these options with your company’s accountant to determine which option is the best fit.
Aside from federal tax credits, you may qualify for a range of local utility rebates and county-level tax credits. Michigan currently exempts the 1.54% commercial property tax rate on all businesses that install solar power systems on their buildings. This program is open to all systems under 150 kW in size. If your system is effective enough to produce more electricity than your business needs for daily operations (no larger than 550 kW), you can earn money back by selling it through a net metering program with your local utility provider. Michigan has a strong net metering system that supports the solar roof owner’s right to turn a profit from their production.
One challenge that makes it hard to pin down the exact ROI of any solar system you install is the volatility of local electricity rates. There are a number of major producers, such as DTE Electric Company and Consumers Energy Company, and a number of smaller alternatives, like Tri-County Electric Cooperative. Each company or cooperative sets its own rates per kilowatt-hour and can change those rates multiple times over the course of a year. High electrical rates will make your solar roof more valuable with a high ROI, while drops in utility rates will mean that it takes a little longer to earn back what you’ve spent installing it.
Your facility’s current energy usage also determines whether a solar roof will have a good ROI for your company. Low energy use means that a solar system will provide relatively little value compared to installation and maintenance costs. If your current manufacturing or heating equipment runs on a fuel source that isn’t electricity, upgrading your facility to be completely electrical could make a solar roof more valuable for you.
Solar roofs also need plenty of maintenance to keep producing a steady level of electricity, even as light levels change over the course of the year. As with all solar panels, these roof systems must be cleaned every six months to prevent dust, debris, and leaves from blocking light absorption. The placement on the roof can make this process harder and more expensive than with ground-mounted panels. The solar system also needs a thorough annual inspection to catch signs of damage and issues with the wiring. Don’t forget to account for the cost of this maintenance work when calculating the ROI of the system.
At Solar Micro Grid Systems, we understand how important it is to know if the switch to solar is worth it. If you’re interested (but hesitant) in making the switch, you can fill out our solar savings estimate form today, and one of our experts can calculate how much money you could potentially save based on your average utility bill cost and average kWh usage. Click here to learn how much you could save!
Ready to take control of your power? Contact us for more information on our suite of comprehensive solutions and for a free, no-obligation quote. Act now and start saving sooner!
