Is solar energy right for your business?

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After yesterday's announcement that Direct Energy and SolarCity have signed an agreement to provide solar electricity directly to businesses, some businesses may be asking "Is solar energy right for my business?" The short answer: It depends on where you conduct business.

On Sept. 3, the U.S. Department of Defense announced a $7 billion contract to buy solar power from a list of 22 firms that will compete for long-term power purchase agreements (PPAs) with the Army. As the largest consumer of energy in the U.S. with a FY2012 spend of $20.4 billion[1] and a mandate to use 3 GW of renewable energy by 2025, the DoD benefits from an economy of scale and purchasing power like no other energy customer.

Most of us don’t have the buying power of the DoD, but can an investment in solar power still make sense for the “average” commercial customer?

State incentives for solar vary significantly across the country and are changing rapidly. The daily sunshine exposure in your area can dramatically affect actual energy produced from a solar photovoltaic (PV) system. And while the federal investment tax credit (ITC) exists (30% of system cost) and PV system prices continue to fall precipitously, if you live in a state with little to no incentives for solar and your local utility’s power prices are relatively low, you may find it difficult to justify a solar investment.

However, if you’re located in an area where power prices are historically high (e.g. California) and/or in a state where incentives are historically lucrative, such as New York, Maryland, Massachusetts and New Jersey, solar power might be a great fit. In these cases, an investment in solar may represent long-term price stability and a hedge against future power price increases, while also providing a degree of power stability through on-site generation. Additionally, if production from your PV system coincides with peak demand on the grid, you may benefit from a reduction in capacity charges. Lastly, if your system produces more than you consume on some occasions, you may also receive “net metering” credits from your utility or energy supplier.

While solar can be a lucrative investment in some parts of the country, it’s important to do your homework to understand the full cost/benefit analysis for a solar investment in your area.

If you want to learn more about solar and how Direct Energy can support your businesses’ sustainability goals, request a consultation.


[1] Department of Defense Annual Energy Management Report, Fiscal Year 2012, published June 2013; http://www.acq.osd.mil/ie/energy/energymgmt_report/FY%202012%20AEMR.pdf

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