Can Solar Panels Be a Ray of Hope for Your Business?

Small and medium sized businesses across the UK are starting to feel the pressure created by soaring energy prices. This situation is likely to get much worse as businesses face further costs as their existing fixed tariff contracts end. Times are particularly tough for businesses that have already had to deal with the economic uncertainty caused by Brexit and the Covid-19 pandemic. SMEs are most at risk as many of them will be left with little other choice than to pass costs on to their customers, further increasing inflationary pressure.

A recent survey from Tyl by Natwest has revealed that 30% of UK SMEs spend between £3000 and £3,999 on annual energy bills while almost a quarter spend over £4,000 annually. Spending this much on annual energy bills can have a significant impact on a small business and their overall costs. 65% of SMEs are spending up to one-fifth (0.20%) of their total business costs on energy consumption while 8% of SMEs are spending a massive 35-50% of their total business costs.

With energy prices set to rise again from April, it is not surprising that business owners are looking skywards to try and ease the pressure on their budgets by installing solar panels.

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If you are a business looking to save money on your energy bills installing a commercial solar panel system is likely to be a perfect solution for you.

Most businesses are active in the daytime making them ideal candidates for utilising solar panels. If you are not going to use all the solar energy your panels produce during the day, you will need to pair your solar array with a solar battery storage system.

Even small businesses can make substantial cost savings. Thousands of pounds can be saved over the 25-year lifetime of your solar panel system.

Just to clarify, commercial solar refers to systems installed in larger operations in sectors like agriculture and manufacturing whereas business solar refers to systems installed in small to medium sized businesses (SMEs) based in office premises.

Because an SME is more likely to have only limited space for a solar panel system the return on investment (ROI) will probably be closer to that of domestic installations.

If you are operating industrial solar panels, you may be able to sell your excess energy to utility companies for a profit.

However, whether your business is large or small, the benefits of solar panels go far beyond practicality and saving money. If you decide to opt for solar panels, you will also be reducing your company’s carbon footprint significantly.

Your carbon footprint will be determined by the amount of greenhouse gases produced by your actions. Solar energy is renewable and carbon neutral and so installing a solar array would indicate your company’s commitment to green and sustainable practices to the wider world.

How Much Do Commercial Solar Panels Cost

Advancements in technology have led to the cost of solar panels falling substantially in the last decade. Before investing in a solar panel system, you need to take into consideration several factors though, such as the size of your roof, the amount of energy they can produce and the number you will need.

If you are a small to medium sized business commercial solar panels will cost you between £16,000-£70,000, on average. To work out if solar panels are the right option for your business, you need to look at your utility bill to see how much energy your company uses each month and how much your utility company charges you per kW.

Most small to medium sized businesses use 30,000-50,000 kWh of electricity each year. You also need to bear in mind the location of your business in the UK which will affect the size of the system you need and subsequently the cost. For larger systems, a good rule of thumb is to calculate approximately £1,000 per kW plus VAT.

You may be eligible for tax reliefs if you install a commercial solar panel system though this is not possible for businesses such as solar farms that rely on solar energy for their revenue generation.

On 31 March 2021, The Chancellor of the Exchequer, Rishi Sunak, introduced the 50% First Year Allowance (FYA). To claim this tax break, businesses must invest in qualifying plant and machinery by 31 March 2023. Solar Panels are qualifying assets under the 50% First Year Allowance.

This means that by investing in solar, you will only pay corporation tax on your operating profits minus 50% of the value of your solar investment.

Here is an approximate breakdown of the cost of commercial solar panels excluding VAT.

System SizeAverage Cost
10 kW£9,500 + VAT
20 kW£18,200 + VAT
40 kW£35,000 + VAT
50 kW£44,000 + VAT
60 kW£51,000 + VAT

Due to the energy price cap rise of 54% and the huge increase in energy bills there has never been a better time to invest in solar. Rising electricity costs combined with falling panel prices mean the units could pay for themselves far quicker than expected.

As far as installation costs are concerned, a good way of estimating how much you will pay is to calculate £0.2p per watt fitted. This means that it can cost approximately £2,000 (excl. VAT) to install a 10kW system. Obviously, if you are installing a very large commercial system, you may need multiple workers to carry out the installation and the more people required, the higher the costs.

The maintenance costs for solar panels are very low. To ensure maximum efficiency, solar panels need regular light cleaning to remove dust and debris, but you only need to have a professional examine them every 4-6 years.

Do You Need Planning Permissions?

You may need to obtain planning permission before installing commercial solar panels in some situations. For example, if your building or property site is designated as historical or part of a world heritage site you will need to acquire permission.

Grants for Solar Panels on Commercial Buildings

The UK government does not offer any grants for solar panels on commercial buildings currently. The Feed-in tariff scheme closed in March of 2019. However, businesses can potentially experience financial gain from exporting excess energy back to the national grid under the Smart Export Guarantee (SEG) which took effect in January 2020. You must have a smart meter to measure the power exported to be eligible. Though the rates set by suppliers tend to vary they generally mimic wholesale and market prices. You could make a sizeable profit from the excess energy exported from your solar panels.

You may be able to find a company that is prepared to pay for the installation of your solar panel system in return for a percentage of the savings you make. This way your business will benefit from a subsidised rate per unit of electricity you use once the solar panel system has been installed.

There will of course be a few conditions which your company will have to meet including:

1. If pitched your roof should preferably be facing south, be flat or have a shallow pitch.

2. You must be legally able to rent your roof surface

3. You will need to Provide 12 months of electricity bills

4. Your roof must be structurally sound and not be made of asbestos

5. Your company must be established and stable – a credit score will be calculated

6. Finally, your building must be connected to a district network operator (the national grid).

If you are a business owner finding that your energy costs are spiralling out of control, it is definitely worth investigating whether solar panels could help to reduce your bills. A commercial solar system can reduce your utility costs, make your day-to-day operations more efficient and provide tax relief and additional income potential at the same time as reducing the size of your carbon footprint.