Renewable energy for commercial buildings: is on-site or off-site the right choice?
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While there's an increasingly strong business case for using renewable energy, it's not always feasible to add solar panels to a commercial building.
But there are off-site alternatives to rooftop solar that allow commercial buildings to reduce their environmental impact and their utility costs.
Some businesses may have buildings that don't lend themselves to an effective solar installation because of small footprints, shadows or other reasons. Off-site renewable energy sources can support corporate sustainability programs and connect with employees, customers and other stakeholders.
Off-site renewable energy
Energy from renewable sources -- solar, wind, biofuels etc. -- can be used to offset power from the grid. An off-site renewable energy source is directly connected to the grid and energy sold at the current market rate. An organization can incorporate the off-site plant into its energy purchasing strategy.
One of the main advantages of off-site renewable energy is flexibility.
An owned installation size can be sized to meet the building's needs. Ground-mounted systems can be constructed on inexpensive land and serve multiple locations.
Or energy purchased from a third-party source can be adjusted to meet the goals of the program. The energy output is not limited to the size and scope of an on-site installation at an individual facility. The off-site facility essentially becomes a long-term renewable power contract.
However, using an off-site system means the organization won't be able to take advantage of the savings from any incentives and rebates or a reduction in demand-based charges.
On-site solar installation
Installing solar modules on a facility has several benefits, including reducing demand-based utility costs and access to incentives. There are two primary approaches: direct ownership or third-party ownership using a power purchase agreement.
With direct ownership, the building owner invests in the system and reaps the benefits such as reduced utility costs and federal tax incentives, including depreciation. However, the owner is responsible for all costs for design and engineering, equipment, installation and maintenance. Currently, the solar Investment Tax Credit (ITC) allows organizations that invest in qualifying solar projects to receive a credit against their income taxes. Through 2019, the solar ITC is equal to 30 percent of the amount invested in an eligible installation. However, that the ITC steps down to a 26 percent tax credit in 2020, 22 percent in 2021, and 10 percent after 2021.
Find out more about state incentive programs at dsireusa.org.
Under third-party ownership, the building operator enters a long-term power purchase agreement (PPA) with an energy supplier. In this case, the energy could come from solar or wind farms, or from a dedicated renewable source. Usually, the energy supplier is responsible for installing and maintaining the system. The developer will also capture any tax benefits of ownership, but the building owner receives the savings from reduced energy demand.
If you're considering an on-site solar system for your building, there are several things to consider.
Location. Systems can be mounted on the roof as well as on parking canopies and other facilities. Depending on the building, a roof may need to be reinforced or renovate to ensure the panels won't have to be removed to repair the roof.
Shade. A shading analysis will ensure the location you are considering doesn't have shadows that would fall on the panels during peak production time.
Land. If the building is not suitable, ground-based systems or parking canopy mounts are other options.
How does renewable energy pay off?
Installations behind the meter -- usually on-site -- offset both energy and demand based utility costs. Because peak solar power generation typically coincides with peak power usage, the solar power can offset higher peak time energy charges. Every kilowatt-hour produced on site helps reduce those peak demand costs.
According to utility AEP, solar power effectively decreases the all-inclusive energy price on a per kWh basis, resulting in a 50 percent or more effective reduction in the kilowatt per hour cost.