Calculating Commercial Solar ROI: Understanding Our Process.

Commercial solar has excellent returns on investment. While solar technology is simple in concept, calculating the ROI for commercial is complex. At VCT, we are here to simplify the process for you. We consider all of the factors that can impact your solar ROI and have developed a financial model that accurately predicts realistic returns. Transparency in pricing is the cornerstone of our process. 

If you are wondering whether commercial solar is worth it for your business, we can model your system upfront with no cost or obligation. We can give you the confidence that you are making an informed decision to invest in solar. Keep reading to learn more about how we calculate solar ROI. We are with you every step of the way – from the initial design to your completed solar array, and beyond by actively monitoring your system performance to maximize your solar ROI.

Site Analysis

We begin every project with a free site analysis. Every site is unique. No matter your situation, there is a commercial solar solution to meet your needs. Our experience in building hundreds of solar arrays gives us the expertise to design and build the right system to generate returns for your business. In the rare case that your site is not suitable, we will be the first to let you know and explain why. 

The next step is to analyze your building type and its structural capacity to support a commercial solar installation. We use satellite imagery and site visits to understand the details. The size of your roof and its type, such as membrane, standing seam, asphalt, etc. We also look at the equipment that is installed, (HVAC for example) so we know what area is available. This enables us to design your commercial solar system to maintain access and avoid shadows from the equipment overlapping the solar panels. In addition, we also consider nearby structures and tree cover to fully model the potential impacts from cast shadows.

Rooftop solar generally offers the greatest ROI. If your rooftop is unsuitable, however, we also analyze the space available in your parking lot, and the rest of the site layout, to determine your options for solar carports. Solar carports provide excellent ROI and have other benefits that rooftop systems do not. They can provide shade in summer, and watertight ice, snow and rain protection in heavy weather. Parking spaces beneath solar carports can even increase solar ROI by creating premium parking as an additional revenue stream.

Creating a Preliminary Commercial Solar Design

After we understand the layout of your site, the next factor we consider is your power use, both the total amount and any seasonal patterns. By sharing historical data and your utility bills, we can calculate the solar ROI potential of your site. A significant factor in determining solar ROI is what class of power user you are, which varies by province or state.

By combining your power usage with your site’s potential generation capacity, we can design a system to maximize your solar ROI. We design the system to match your energy use. The data you provide ensures that the system is “right-sized” for your needs, maximizing your return on investment with solar. The rate you pay for electricity and the economic models available to you vary between jurisdictions. In some areas you may be able to export power to the grid or sell excess power to third parties. In other areas your solar-generated power may only be used “on site”. 

We provide a visual layout of the preliminary system design. We can also provide 3D rendered images that help you visualize the design in context. This can be extremely valuable, especially if you are not making the final purchase decision. Visual modelling assets enable you to communicate the details of the design to your colleagues and generate buy-in

Lastly, we calculate the expected power production of the system based on the typical number of sun hours at your location. Local weather patterns have a large impact and are factored into the production potential. This production modelling is informed by weather and climate data for your location. We are conservative and are careful to not over-estimate your ROI from solar. Transparency and clear communication are central to our approach.

Calculating the Construction Cost of Your Commercial Solar Design

Now that your preliminary system design has been created, we can calculate the budget needed to build your system. We project the system cost based on typical installation costs for comparable systems of similar size. Having constructed hundreds of systems, combined with our up-to-date market expertise, we provide an “all-in” project price, valid for XX days from the quote date. We fine tune the quote with feedback from a site visit by an electrician or electrical engineer who worked on the design. It is another layer of verification that any hidden costs, such as necessary equipment upgrades, have been accounted for in calculating your returns on commercial solar.

The Levelized Cost of Energy for Commercial Solar

The Levelized Cost of Energy (LCOE) is a way of comparing the price of energy from different sources. It is the cost to produce each unit of energy. For commercial solar, it is often expressed as “dollars per kilowatt hour” ($/kWh) –i.e. the cost of 1000 watts of power delivered continuously for one hour. The LCOE helps simplify financial decision making by including all costs and revenue averaged over the lifetime of the project. LCOE is the energy industry standard and removes the complexity underlying different technologies, levelling the playing field. It is a great way to know at-a-glance that you can achieve returns on commercial solar.

LCOE can be calculated when installation costs are known and are combined with the production modelling. The quickest way to understand the business case for commercial solar at your site is to directly compare the LCOE with your current unit cost for purchasing power.

Financial Modelling Commercial Solar ROI – The Case for Confidence

Details matter. The robust reliability of solar power technology means that systems constructed today will still be in service decades from now. While no one can predict the future with 100% accuracy, we are confident in our solar ROI projections. At the heart of our process are the financial modelling tools we have developed in house – which are constantly refined and checked against real world data. We have built hundreds of commercial solar projects and have modelled thousands of sites. Our financial modelling has proven to have an accurate track record – the data we collect from monitoring our clients’ sites, and our own, agrees with our predictions.

Our financial models consider both fixed and variable costs, and up-to-date market changes, both regulatory and financial. As system owners, we understand your need for confidence. Our solar ROI modelling is intentionally conservative to minimize surprises. We never overstate the business case.

When modelling your solar ROI, this is just a shortlist of key factors we account for, customized to your location and jurisdiction:

• Your current cost of electricity (varies by region, industry) 
• Electricity purchase price inflation (varies by region)
• Cost to connect to your local utility grid (varies by region)
• Cost of removing and replacing the solar array to allow for roof repairs or replacement (if needed)
• Degradation of system productivity over time (typically 80% at the end of the solar panels’ warranty period of 25-30 years)
• Leveraged scenarios
  • Borrowed capital can be used to increase returns on project
• Tax planning (accelerated CCA)
  • Available in Canada in 2024/2025
• Incentive and rebate programs 
  • Varies by region
  • USA – Inflation Reduction Act (IRA)
  • Canada – Clean Technology Investment Tax Credit (CT ITC)
  • Regional and municipal incentives
  • We can help you learn about incentives in your area. Ask us!
• Insurance costs
  • Often forgotten when assessing costs/benefits of solar installs
• Maintenance costs
  • Maintenance, monitoring, and repairs
  • Often excluded when assessing costs/benefits of solar ROI

The Intangibles

Beyond the numbers, there are additional benefits that can increase your returns from commercial solar. While harder to quantify, they can positively contribute to your business, and add value:

The Marketing Value of Being Green

In today’s marketplace consumers are increasingly informed about product lifecycles and are choosing to do business with companies that share their environmental values. Not only can your business benefit from the returns on commercial solar, but you can visibly demonstrate your business’ alignment on their issues of concern.

Making Progress Towards GHG/Carbon Reduction Commitments

Organizations are increasingly aware of the need to be sustainable. They understand the need to act now. As larger energy consumers they understand they can make a positive impact at scale. Many have already set internal goals and targets for reducing their greenhouse gas emissions, as well as deadlines for achieving net-zero energy use, independent of regional and national mandates. Powering their business with commercial solar is one of the quickest ways to meet these goals, while also benefiting from reduced energy costs.

Talk to Us for Your Free Site Assessment

We offer no cost, no obligation commercial solar site assessments. We want you to have all of the information you need to make a great decision about solar. You don’t have to wonder about whether commercial solar is right for your business. You can know the returns on solar before you decide.

At VCT Group we are your trusted partner for commercial solar. We model our projects conservatively to make sure we’re not overpromising. We want our clients to be confident that their system will perform as our solar ROI modelling predicts, or better.

Understanding the ROI for solar is complex. Let us simplify it for you. Talk to us today.