How to Calculate the ROI of Solar Installation for Your Business in 2024

Are you an eco-conscious business owner who wants to opt for energy solutions that can reduce your carbon footprint and give great returns?

In today’s accountability-demanding business landscape, investing in clean energy is not just an eco-friendly move but also a smart financial move. Think about reduced costs, great ROI, and a strong brand reputation.

And what better option to get these benefits than solar energy? Offering a great solar investment return, solar installation can help your business get that competitive edge and take some burden off your pocket. No wonder, the market for solar energy has grown at a staggering CAGR (Compound Annual Growth Rate) of 19.3% in the US over the past five years.

Want to know how beneficial it can be for your business? Calculating the ROI of solar installation can be your best bet. Fret not, you do not necessarily need a business solar ROI calculator, we have you covered. Read along to know all about calculating the ROI of solar installation for your business in 2024.

What To Consider to Understand the ROI of Solar Installation

Talk to any business owner or executives before they make some long-term financial decisions or investments, and they will tell you that calculating the ROI is an essential step that solidifies their intention. When it comes to making energy-related decisions for your business, you cannot sleep on considering the ROI or return on investment. To calculate the ROI of solar installation correctly, here is all you will have to consider:

1. Initial Installation Cost:

The first step when you get down to figuring out the solar investment return involves looking into the upfront cost of getting the solar panel system installed. How much you spend on installation cost exactly will depend on the size and type of installation you choose but the cost includes:

• The cost of solar panels.
• The cost of inverters that will convert the DC electricity you source from solar plates into AC electricity to use in your business.
• The cost you will pay to labor for installation.
• The costs associated with permissions for your business and interconnections.

2. Energy Savings:

Once you are done assessing the installation costs, get straight into energy savings because once those panels are there generating electricity from sunlight, how much it will cut down your utility expenses will depend on your energy consumption. The local sunlight conditions will also matter but here IS how you can navigate calculating the energy savings:

Estimate the Energy Usage of Your Business

To know your solar investment return, get a rough estimate of how much energy your business consumes on average. Look into your utility bills to find out about your monthly energy consumption in kilowatt-hours (kWh) and use this number to decide the size of your solar system.

Calculate Your Potential Savings

After calculating your business’s energy usage, you can easily calculate your potential savings as an appropriately sized solar system can address the energy needs of your business correctly.

Let us say your business consumes some 1,000 kWh every month and your solar system can generate 800 kWh; you can bring down your utility bills substantially. Or you can size up your system for more savings.

3. Tax Incentives and Rebates

While drafting or using a business solar ROI calculator, it is also imperative to know about the tax incentives and rebates in your state:

Federal Tax Credit

For instance, the Federal Solar Tax Credit can allow your business to deduct up to 30% of the installation costs from your overall federal taxes.

Modified Cost Recovery System (MACRS)

Under the federal Modified Cost Recovery System (MACRS), businesses may recover investments in certain property through depreciation deductions. MACRS establishes a lifespan for various types of property over which the property may be depreciated.

Massachusetts Solar Energy Incentives

Additionally, if your business is based in Massachusetts, you can benefit from the incentives your state offers like rebates and net metering programs using which you can boost your savings further. Some commercial solar incentives include:

• Net Metering: Did you know net metering can help your business hold the energy your solar system produces in the grid for later use or even sell it back to electricity providers? Imagine not only addressing your own energy needs but also making profits with excess energy. That is how good solar installation can be for you.
• Solar Massachusetts Renewable Target (SMART): Solar system owners receive a payment from the state for their solar production at a fixed rate per kilowatt-hour (kWh) of solar energy produced.
• Renewable Energy Credit: A REC represents the property rights to the environmental, social, and other nonpower qualities of renewable electricity generation. A REC, and its associated attributes and benefits, can be sold separately from the underlying physical electricity associated with a renewable-based generation source.

4. Maintenance and Longevity

You also need to factor in the maintenance and longevity of your solar system to judge its ROI. Thankfully, solar panels are exceptionally durable, and their maintenance is easy breezy. While the system may make you spend some money occasionally on cleaning and inspection, overall solar systems have a good lifespan, on average 25 years, so you will have consistent energy savings.

How to Calculate the ROI Using a Simple Formula

Now after considering all things, to determine the ROI of solar installation for your business, you can use this simple formula:

ROI( % ) = ( Net Profit/Savings ÷ Total Investment ) × 100

Net Profit / Savings: Net profit or net savings is the total amount of money you can save on your energy bill annually after installing solar panels. Consider factors like reduced billing and any profit your business may make by selling excess energy back to the grid if possible.

Total Cost: The total cost will include the entire cost of solar system installation excluding any applicable tax waivers, rebates, or some financing benefits that your business gets.

Consider a Hypothetical Case Study Example:

For instance, let’s take a small business based in Cape Cod which spends a total of $20,000 to install a solar system after using the incentives. Suppose this solar investment lets the business save $3,000 every year on electricity bills. So, the ROI of solar installation will be:

ROI ( % ) = ( $3,000 ÷ $20,000 ) × 100 = 15%

In this case, the business can get a 15% return on its investment in solar energy every year. And if we calculate the ROI for this business over ten years and assume that electricity rates and system performance remain unchanged, the ROI of the solar installation will be 150%. Isn’t that great?

So, whatever your business may spend, it can get it back after some time. The average payback period for solar panel systems for businesses is generally six to ten years.

Ready to Go Solar?

Now that you’ve explored how solar energy can optimize your operational costs and elevate your business’s sustainability profile, it’s clear that going solar is more than a smart environmental choice—it’s a powerful financial strategy. With the potential for significant savings, tax incentives, and a steady ROI, a solar installation can be a game-changer for your business, helping it stand out in an eco-conscious market and build long-term resilience.

As you move forward, remember that calculating your specific ROI is just the first step. Partnering with experienced professionals to design and install a system tailored to your needs ensures maximum benefits. By investing in solar, you’re not only reducing your carbon footprint; you’re setting a new standard in cost-efficiency and business responsibility.

So, is your business ready to harness the power of the sun? Make the switch to solar energy and let the savings—and the positive impact—begin.