Five Things to Consider Before Making a Commercial Solar Investment

While reducing your power bill certainly makes good business sense, making the switch to solar energy can be a daunting process. I’ve outlined some of the top things to consider before making an investment in clean energy for your business. Let’s get right into it!   

Take Advantage of Federal Tax Incentives   

One of the most impactful financial benefits of going solar is the Federal Investment Tax Credit (ITC), expanded under the Inflation Reduction Act. For systems installed through 2032, the ITC currently allows businesses to claim 30% of total eligible project costs as a credit against their federal income tax liability. The ITC is no longer available for home-owners. 

This means that if you invest $100,000 in a qualifying solar energy system, you may be able to reduce your federal income taxes by $30,000. Unlike a deduction, a tax credit directly offsets taxes owed, making it one of the most valuable incentives available for commercial solar projects.

When evaluating solar proposals, it’s important to clearly understand pre-ITC versus post-ITC pricing. You will be responsible for paying the full, pre-ITC project cost upfront, and the tax credit is realized later when you file your taxes. If proposals only highlight post-ITC pricing without clearly showing the full system cost, it can lead to unexpected cash-flow surprises.

Because eligibility and benefit realization depend on your specific tax situation, you should always consult with your tax advisor to ensure you can fully take advantage of the ITC and any other available incentives.

Understand Depreciation and Tax Brackets  

In addition to the ITC, solar energy systems are considered a depreciable business asset, which can significantly improve project payback and overall return on investment. Most commercial solar systems qualify for accelerated depreciation under MACRS, and bonus depreciation may also apply, though bonus depreciation percentages are currently phasing down and are subject to future legislative changes.

When reviewing commercial solar proposals, make sure the tax basis and depreciation assumptions are accurate and up to date. Overstated depreciation benefits or outdated tax assumptions can create projections that look strong on paper but don’t align with real-world tax outcomes.

A thoughtful review of both tax credits and depreciation—ideally alongside a qualified tax professional—will help ensure your solar investment delivers the financial performance you expect.

Know Your Production Projection  

To calculate the proposed efficiency of a solar array, take the yearly kilowatt hours (energy production) and divide it by the system size in kilowatts (kW) and divide that by 1000.  You should get a number between 1 and about 1.35.  Anything lower than 1 is considered relatively inefficient.  Anything over 1.35 is probably an over projection and may not be a realistic expectation.    

 For example: a 100kW solar array proposal projects that it will produce 125,000 kWh per year.  125,000 kWh / 100 kW / 1000 = 1.25. Look for companies that guarantee the kWh production of the system in clear, understandable terms.   

Get Clear on Financing Options  

Many solar shoppers choose to finance their projects. Some financing models pay higher principal, but over a longer period, which results in lower monthly payments. If you are financing through a solar company, ask them questions about the loan. If your sales representative cannot answer your questions, that should be a big red flag.   

Identify a Local Team Without Subcontractors  

Some companies will subcontract entire projects to installation teams that are not local to your area. Look for a local solar contractor that can be available for troubleshooting and warranty replacements – this is valuable insurance for your investment.  Check online reviews and ask your sales representatives about this very important matter – you’ll be glad you did.   

 The Bottom Line   

Using the tools listed above, you can spot gimmicks and red flags before it’s too late.  A worthy solar installer will have local references who can verify the quality of their work, customer service, and value. Explore these while comparing costs because you just might find that the cheapest option is not all it’s cracked up to be.   

Our team has 17+ years of experience partnering with local businesses to achieve their clean energy dreams and make a solid investment in their bottom line. We don’t engage in pushy sales – just honest, straight-forward advice so you can make a great decision. Interested in getting in touch with us? Click here to get started!