For many businesses who want to install commercial solar panels, the major issue they first need to address and quantify is the potential return on investment. Of course, there is the initial cost of installation versus the consequent lowering of energy bills and greener projected credentials, but you may also be able to sell your excess energy to your utility company under the Smart Export Guarantee. The feed-in tariff (FIT) and the Renewable Levies Exemption (LEC) schemes have both ended for new applicants.
Whether you have small or large business premises, investing in solar panels can have a number of wide-ranging benefits, particularly if you are lucky enough to have a sizeable space available for the development. Solar panels can be placed on any building whether you are on an industrial estate, have an office building in a city or are out in the country on a farm.
The size of space you have available will obviously depend on the approach you take to commercial solar panels. For instance, if you have a large piece of land you may look to rent the space out to an energy company or solar panel installer / investment company, rather than undertake the responsibilities of construction yourself. If you share ownership of a building with other businesses, you might want to collaborate to bring down the costs and provide a more sustainable investment and resulting energy profile.
The return on investment for any business that chooses solar panels will depend largely on a few factors:
- The initial investment or cost of the solar panels.
- The size of the solar panel installation.
- The return through the Feed in Tariffs (if you applied before 1st April 2019) and savings on energy costs over the life of the installation.
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Small Business Solar Panels – Return on Investment
If you operate a small business, then you may well have a limited space for a solar panel installation. The return on investment for such an array will probably be in line with most domestic installations of around 4 kW.
If you have paid for the installation yourself then you can expect to normally start receiving a profit after ten years (once the initial cost or loan has been paid back). An average 4 kW system will cost between £5,000 and £10,000 depending on the type of photovoltaic cells and associated equipment you choose and the price of installation and commissioning.
- Estimated energy: 3,432 kWh per year
- Estimated money back through Feed in Tariff: £168
- Estimated business energy savings: £157
- Estimated export tariff: £79
- Total Income and savings per year: £404
- Payback time (approx.): 10-12 years
Medium/Large Business Solar Panels – Return on Investment
If you have a larger business, then the chances are you could have a lot more space and a more flexible budget in which to install a solar panel array. If you have available land or a substantial section of roof space (for example on an industrial or factory building), the return on investment starts to become significant.
For businesses with a high-power demand and large roof space, the biggest system that is normally installed is 25 kW which can cost around £30,000 to £40,000 but also provides a considerable return on investment. A 20kW system would require, for example, around 140 m² of roof space and would cost about £30,000. On average the Feed in Tariff if you applied before 1st April 2019) would be around £900 per year with a further £1,000 in on-site energy savings (dependent on your type of business and power usage). With the export tariff you would be looking at a financial benefit of approximately £2000 per year, paying back your initials investment in under 8-12 years.
If you have the luxury of land or roof space that is not being used or is suitable, then a larger solar panel installation is a fantastic option. If you choose to finance this yourself then the return on investment, again, is comparable with smaller systems. A 150-kW system would require about 1,000 m² in a suitable location and would cost in the region of £150,000 to £200,000. Feed in Tariff profits and energy savings would amount to approximately £15,000 per year, which, combined with the export tariff, would offer an annual income of £20,000. Payback of the initial investment could be between 10 and 12 years with an estimated lifetime production of nearly half a million (over 25 years). Call our advisers for an informal chat if you are considering this as ROI can vary considerably and is dependent upon many factors.
Other Things to Consider
- Whilst domestic FiTs come tax free, if you are a business installing solar panels, your return on investment will be affected by tax on your profits from energy production.
- Your business may also be eligible for a Renewables Energy Exemption Certificate.
- While smaller solar panel installations will probably not need planning permission, larger arrays almost definitely will, with an initial cost incurred for your application.
The Benefits of Commercial Solar Panels
Apart from the obvious benefit of reducing energy bills and providing a guaranteed income over the next 20 years or so, installing solar panels for your business also increase your green credentials. Many people are in favour of the government and business taking on new eco-friendly technologies and often look to support them. In addition to this, power companies are starting to look at opportunities to boost the national grid with local producers which provides a good deal of future security for what is, initially, a large investment by any company.
Finding the Right Installation Company
When undertaking such a big investment such as installing commercial solar panels you want to be sure that you are choosing the right company to do the job. They will need to have the right credentials and install your solar panels at a competitive price. To find out who in your area can install your solar panels then pay a visit to our online database.
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