Over the past 15 years, local, state, and federal solar incentives have provided financial fuel for businesses to initiate and expand their renewable portfolios. Anything from tax credits, rebates, renewable energy credits, and the ability to accelerate the depreciation of these assets are all available for businesses that use renewable energy.
The Risks and Rewards of Going Solar
These incentives combined with the drive for clean energy initiative has led to high-profile, big-box retailers installing rooftop solar array after array on their facilities across the country. Were these roofs the best candidates for solar? The reality was that these rooftop solar arrays were being installed on buildings where the lease term outlasted the roof itself by five years or more. These companies engaged in long-term leases which most often contained clauses with big penalties for early termination. Many found themselves in a financial bind, faced with not only the exorbitant cost of replacing a roof but with additional fees from the leaseholder. So, what should a company consider when installing rooftop solar? First, there’s the issue of deciding how to pay. Do you finance? There are three common options to consider:
- Ownership: Pay for all equipment and labor, then own, operate, and maintain the asset. The initial cost is high, but you’ll realize the financial incentives yourself and usually experience a payback period of well less than 10 years.
- Lease: Engage a third-party solar developer or financial institution and lease the asset. You will usually have no out of pocket expenses, but the leaseholder realizes the financial incentives instead of you.
- Power Purchase Agreement (PPA): This option generally includes a third-party solar developer who pays for, then owns, operates, and maintains the asset. The building owner will have no out of pocket expenses, but simply agrees to a PPA contract, and purchases the energy produced at a fixed cost for 15-20 years. The developer again enjoys the available financial incentives.
After payment, it’s important to consider your roof assets themselves and how they fit into the big picture:
- What’s the feasibility of the roof including the age, condition, and life expectancy?
- What are the contractual terms including penalties and fees?
- How do you plan to balance your sustainability and economic goals?
- What’s the best timing for the project?
- What’s the best way to protect the roof during a construction project?
But what if it’s already too late? What if you are looking at anywhere between $350,000 and $800,000 in cost to remove and replace the arrays to perform roof replacements per facility. And you have 250 facilities, and a total of at least $88M to remove these arrays to extend their remaining service life. But did all these roofs really need replacing? Can the company engage in an ongoing maintenance plan that would ensure the roofs’ remaining service life would meet or exceed the accompanying solar contract? With our unique system knowledge, analytics, and expert roofing consultants, we can tell you the answer is ‘yes’.
The net savings per facility would be around $300,000. And while not every roof could be saved, the savings will more than offset costs on the failing roof systems. We use this strategic approach and view to assess all our client situations and assets. We are here to help you identify all of your options and the financial implications of each of those options. In the meantime, you can do the little things such as regular maintenance and working with a roofing consultant to keep the roof clear of debris. You also need to identify and repair damages as they are identified. By extending the life of the roof as much as possible, it will be easier to find a sustainable solution when needed.