The Financial Payback of Solar Energy: A Self-Storage Hypothetical Reveals Costs vs. Benefits

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By Bob Burson

Whenever I discuss a solar installation with a self-storage owner for the first time, the conversation rarely starts with how much it will benefit the environment. That’s not to say he isn’t interested, but most of the time, he’s more concerned with the practical questions: How much does it cost? How long until the installation pays for itself?

To answer these questions, let’s look at a potential solar-energy installation on a real self-storage facility in California. I’ll draw on true energy data from an existing facility, but the installation itself is hypothetical. 

The most important thing to remember when looking at solar or any other energy solution is every application is unique and should be tailored to fit the specific situation. Some of the things that determine a self-storage operation’s energy profile and, in turn, the best solution are:

  • The facility’s energy use including demand and kilowatt hour (kWh) charges
  • The facility’s hours of operation
  • Where the facility is located, including the utility-service territory
  • The operator’s current rate schedule
  • The age and construction materials of the buildings

The Facility and Installation

Our example facility is a relatively new building less than 10 years old in North Los Angeles County. It’s a two-story building with a footprint of approximately 45,000 square feet and a combined square footage of about 90,000 square feet. It’s a concrete-block building with a standing-seam metal roof and some climate-controlled units.

Since it’s in the Los Angeles area, the facility is in the service territory of Southern California Edison. Its rate schedule is GS-2, which means General Service rate schedule for facilities that have a demand between 20kW and 200 kW. Companies on this schedule are charged for how much power they use, but not when they use the power.  This facility has a combined annual energy cost of $28,131, $21,958 of which is from kW hour charges. This is important to note because solar only reduces kW hour charges, not demand charges.

For this installation, we’re looking at implementing an 83-kilowatt system. A system this size will have a footprint of approximately 7,000 square feet, covering only about 15 percent of the facility’s available roof area. With an installation of this size, you’ll see about 153,000 kW hours of production throughout the year.

Energy Savings and Other Incentives

With this installation, the self-storage operator will see a reduction of energy costs by approximately 76 percent. This will allow him to save a little more than $21,000 per year.

In addition to the cost savings, there are other incentives, including federal and state tax rebates. The most substantial is a 30 percent tax grant available to all commercial businesses. Through this program, companies installing solar can receive a tax credit or grant in cash from the U.S. Treasury Department equal to 30 percent of the system’s cost.

In addition to the tax credit/grant, commercial customers also have the ability to use accelerated depreciation to write off the cost of the installation. The IRS has categorized solar as having a five-year useable life, but it’s actually closer to 25 years. This allows businesses to use a five-year accelerated depreciation on the installation.

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