Commercial Solar Energy Incentives

Incentive Driven Decisions

The Role of Utility Company Incentives in Commercial Solar Energy Purchases

In a world absent of profit margins and the bottom line, most would agree that our energy should come from clean, renewable sources such as the sun.  In reality, environmental benefits play only a small part in a company’s decision to go solar.  In the end it always comes down to the bottom line – does a solar energy investment make sense financially?

There are many factors to consider when determining the financial feasibility of a solar purchase, however one factor unique to solar energy purchases is the monetary incentive paid out by utility companies for the conversion to solar energy production. Being able to maximize the incentive amount paid by the utility can be the ultimate determining factor as to a project’s financial feasibility, therefore, understanding incentive programs is vital.

Commercial solar incentives are offered in two forms.  The first form is an Up-Front Incentive (UFI) available to smaller commercial projects less than 30 kilowatts (kW).  The up-front incentive payment helps offset the initial system costs, which makes solar more affordable for smaller business owners.  The incentive is paid out upon completion of the project, and the exact amount depends on the size of the system.

The second incentive is a Production Based Incentive (PBI) offered for systems over 30kW.  This incentive is paid out over a period of 10, 15, or 20 years and is based on the amount of energy a system produces.  Typically, a solar system purchase reaches its payback period in less than 10 years, so the incentive payout from that point forward goes directly toward the bottom line.

Solar Energy incentives are in great demand due to their financial importance.  Currently, there is not enough incentive money available to accommodate the demand. Therefore, incentives are awarded on a competitive bidding process, and the amount awarded for each incentive is continually decreasing.  So acting quickly to reserve the maximum incentive amount will ensure a greater return on the solar energy purchase, and decrease the role it plays in driving the decision to go solar.

Solar Energy Consultant