If you are considering installing a system of commercial solar panels for your Massachusetts business, you no doubt already understand the importance of putting your money where your mouth is when it comes to showing your dedication to our local (and global) environment.
But at the end of the day, you run a business — so what is the return on investment for purchasing solar panels for commercial buildings here in Massachusetts?
Incentives Make Solar About More Than Energy Savings
Before we take a look at some of the numbers behind what has made installing solar a good business move for companies all over the state, let’s review some of the other ways your business can accelerate the payback period and return on investment through financial incentives and tax credits.
The Federal Investment Tax Credit for Massachusetts Commercial Solar
In 2020, the Federal Investment Tax Credit (or ITC, for short) for both residential and commercial solar is valued at 26% of your total solar installation costs. This will decline to 22% in 2021 — but after that year residential and commercial solar tax credits will differ! Though the residential tax credit will go away in 2022, the commercial solar tax credit will remain at 10%.
Now is certainly the time to take advantage of the tax savings, but rest assured you will always be able to deduct some of your installation costs on your federal taxes for the tax year you installed your system.
Solar Massachusetts Renewable Target (SMART) Program
This program provides a “production-based incentive that is paid directly by investor-owned utilities in Massachusetts to solar electric system owners”. As you’ll see below, the money you can receive from generating solar power can greatly decrease the payback period of your initial solar investment. However, the capacity blocks for commercial are filling up fast or already have a waitlist in some utility districts. You can check the status of your SMART incentive blocks from your electricity provider here.
When a photovoltaic solar system generates more electricity than your business can use, that excess electricity is sent back to the greater grid for use in other homes and businesses. You then receive an energy bill credit, in a process called net metering. In some situations, this can offset the cost of non-solar electricity your business needs to use when the sun is down.
The Modified Accelerated Cost Recovery System (MACRS) allows business owners to depreciate their systems over a span of five years, allowing you to get the maximum tax benefit over time.
The Numbers on Solar ROI
Here is a short case study on a project coordinated by Boston Solar and the general contractor, Callahan/Hoffman Company.
This Massachusetts business utilized every incentive (except net metering) to decrease the initial solar panel cost for their commercial system through the Federal ITC, and shorten the payback period to under 4 years. This Plymouth, MA company bought their system in cash and was able to write off over $100,000 from their federal tax liability for 2019 and would see a MARCS depreciation of over $80,000, making the estimated cumulative net benefit on this 25 year system an impressive $1,223,992! Over the 25 year lifespan of their commercial solar PV system, this Plymouth company would have saved over $200,000 in utility savings. Take a look at the net costs, benefits, investment and ROI on going solar:
Location: Plymouth MA
Financing Type: Cash Ownership
System Size: 180.56 kW
Solar Panels and Inverter: JA Solar & Solaredge
Install completed: September 2019
Net Systems Cost: $340,000
25 Year Benefits
Federal ITC (30%): $101,294
Depreciation MARCS: $83,320
Utility Savings: $227,162
Incentive Income: $812,307
Net Systems Benefits: $1,223,992
25 Year Investment
Payback: 3.5 Years
Net Present Value: $348,774
Initial Rate of Return (IRR): 37%
Added Net Operating Income (NOI): $53,080
Added Property Value (5% Cap Rate): $1,061,607
Total Net Value: $883,408
Greenhouse Gas Reduction
For a system this size here in Massachusetts, the estimated environmental impact is as follows:
|Greenhouse Gas||Year 1||Estimated 25 Years|
|329,882 lbs||6,337,365 lbs|
|Nitrogen Dioxide||107 lbs||2048 lbs|
|Sulfur Dioxide||71 lbs||1357 lbs|
|Particulate Matter 2.5||10 lbs||178 lbs|
The Solar Business is Good for Business
A $340,000 investment that has a 25-year value of $1.2 million is hard to come across. The Net Present Value, or how solar adds value to the business over the 25 year lifespan, amounts to almost $350,000 - that’s more than the initial net system cost investment. Overall, the total net value is worth more than $880,000.
A few words from the owner of the project:
“The solar panels on the roof are like having another tenant paying rent in the building. Only this tenant never asks for anything and pays the rent as dependably as the sun coming up every day. Boston Solar did a great job for us. They provided a very clear pro forma on the costs and returns of the system. They handled all of the permitting with the town and utility company seamlessly.”
When you trust the commercial solar panel installers at Boston Solar, you can rest assured that you are getting the best in the state. As a trusted residential and commercial solar installer, we will make sure you know your options when it comes to finding the most efficient solar panels commercially available, and that your system is designed for the unique needs and goals of your business.
Ready to show your dedication to reducing the environmental impact of your business, while making a financially sound investment? Call Boston Solar for your free quote at 617-858-1645 or get in touch here.