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The renewable energy sector, mainly commercial solar, has grown tremendously in the past decade. Factors such as sustainability goals, consumer conscientiousness, decreasing solar component prices, and government incentives have accelerated the ongoing adoption of solar across the commercial and industrial (C&I) segment. Through ongoing research and data collection at SolBId, we have analyzed the potential ROI across different states for a standardized kW DC PV system-sized installation. Reviewing these ROI ratings will give insight to companies with sustainability goals on the projected ROI they can receive when utilizing C&I solar in their sustainability goals.
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Methodology
Key Parameters of the Analysis
- PV System Size: 300kW DC
- Point of Interconnection (POI): Behind-The-Meter
- Orientation: Azimuth of 180 degrees
- Tilt: 10 degrees
- Tax Credit: 30% Federal Investment Tax Credit (ITC)
Variables Analyzed at the Local/State Level
- Annual ‘Medium Office’ Load profile unique per Climate Zone
- Annual Solar Energy production Profile
- Commercial Retail Electric Rates
- State & Federal Corporate Income tax rates
- State & Federal Solar incentives
- Local Solar Energy program (Net Metering, Net Billing, Etc.)
- Local Value of Exported Energy
- Local construction labor costs
Results
The results have been ranked from states with the highest to lowest on ROI parameters over a 25-year lifetime. Each state is given a graded rating as either A (being the best), B, C, and D. Below are what the grades represent.
- States receiving an A have an ROI >150%
- States receiving a B have an ROI >100%
- States receiving a C have an ROI >50%
- States receiving a D have an ROI <50%
C&I Solar ROI Map
Factors Influencing ROI
Many different financial factors are brought into the final ROI rating of each state. Areas such as DC have relatively lower annual generation and higher construction costs, but this surpasses high-generation states in ROI due to a lucrative REC solar incentive market. States such as CA have high-generation potential and high electric costs, giving it a great ROI to system installations. This analysis highlights that all factors need to be considered, from different incentive programs, utility costs, construction costs, and more, to measure expected ROI accurately.
Influencing Factors of ROI
- Local Incentives: Typically, REC markets, rebates, or grant programs can all significantly influence the expected ROI.
- Electricity Rates: A higher rate typically will translate into more savings because of how much solar electricity generation can offset, thus a higher ROI.
- Tax Structures: Corporate income tax rates and the availability of federal tax incentives can impact ROI.
- Energy Generation Potential: The more energy generated through systems, the greater the ROI potential.
Emerging Markets and Future Potential
An area like DC and states like CT and IL appear as high-growth markets for solar investments, pointing to potentially underserved markets ripe for expansion. As other states like TX see continuous rate increases, the market potential will broaden and change.
Conclusion
The landscape of solar ROI across the U.S. is multifaceted. It’s essential to consider the solar generation potential and the broader financial landscape, including local incentives, electric rates, and tax structures. This analysis does not consider the location-specific IRA ITC credit adders up to 20% or USDA REAP grants. Furthermore, other factors, such as the size of the solar energy system and its orientation to the sun, the specific utility, and the rate structure, can all play an important role with regard to ROI calculations.
Businesses looking to invest in solar should employ a comprehensive assessment approach across their entire real estate portfolio, looking beyond just generation potential and the specific grades in this paper. ROI can swing due to multiple and varying factors, and each site should be evaluated. It’s suggested that a portfolio analysis be updated annually. Using a platform like SolBid allows sites to be evaluated once, and the platform keeps the data continuously updated and current to ensure accuracy.
Disclaimer: This article is based on SolBid’s analysis as of 11/10/2023. All investments should be made considering the latest regulations, incentives, and market conditions. Always consult with a local solar expert before making investment decisions.
This structure provides a more detailed and formal presentation of the data. In an actual white paper, the discussion section would dive deeper into trends, exceptions, and external factors (like policy changes) that could influence the results. Also, the methodology would describe the data collection and analysis process in more depth.
