When discussing the prospect of using solar energy at a self-storage site, most facility operators understand that it saves money. Where it gets complicated lies in understanding how it saves money.
This article explains the benefits of installing a solar-energy system in self-storage, helping owners determine if the choice is right for their operation. The benefits relate not only the technology itself, but to the way a facility operator pays for electricity, a facility’s connection with the utility, and the local and national incentives designed to encourage the adoption of solar energy.
To understand what’s involved in a solar installation, you must first know how the system works. It’s made up of three basic components: the solar panels (modules), one or more inverters (depending on system design), and the racking system used to mount the panels.
The panels collect sunlight and create direct current (DC). The DC is transported to the inverter, where it’s converted to alternating current (AC). The electricity grid and everything attached to it operates on AC, which is transported to the facility’s main service panel and distributed to provide power wherever needed.
To better understand how solar energy benefits a commercial customer like a self-storage facility, you need to know how the utility companies charge for power. In most cases, the utility issues a demand charge and a kilowatt-hour (kWh) charge. The charge for the amount of power a customer needs at any point in time is called a demand charge. The utility will also charge for how much of that power the customer uses over time—a kWh charge.
Using solar panels will not reduce the amount of power a self-storage facility needs at any point, but it will reduce the number of kW hours purchased from the utility company. In the case of self-storage, the kWh charges can be a significant portion of facility’s bill, sometimes as much as 75 percent. This high proportion of kWh charges allows solar energy to have a significant positive impact on the bottom line.
Net Energy Metering
Net energy metering (NEM) is absolutely vital for solar to be an effective energy solution. NEM is a system that allows a utility customer to use the utility grid like a battery to “bank” kW hours when they’re not being used. Essentially, it allows the customer’s meter to run backward and build credit with the utility company. When the customer starts drawing again from the utility, it will first use its credit prior to incurring new charges.
NEM is widely used and, in some cases, mandated by state government. In fact, there are only three states that do not have some form of NEM available.
Being able to build credit with the utility allows a self-storage facility to mitigate its electric bill through solar power, even though the sun isn’t out all the time. When installing a solar array, a contractor will account for the ability to use NEM and design a system that produces more power than the facility needs at any one time to take advantage of banking kW hours.
The goal of the contractor’s design is to produce enough kW hours during the day so the facility can rely on banked hours when the sun is down. Since banked hours can carry forward from month to month, this cycle can be used to offset lower winter production with high summer production.
There are several incentives on the state and federal level that make the installation of a solar array an appealing option. Currently, the most effective incentive is a 30 percent tax credit or grant available to all U.S. commercial customers. Through this program, companies installing a solar-energy system can receive a tax credit or grant payment for 30 percent of the cost of the system.
In addition, commercial customers have the ability to use accelerated depreciation to write off the cost of the installation. The IRS has categorized solar equipment as having a five-year useable life, when in fact it is 25 years. This allows businesses to use a five-year accelerated depreciation on the installation.
State incentives can vary greatly depending on your location and utility service territory. Your solar contractor should be able to explain the incentives for your state and how they apply to your proposed system. A great resource for information about various state programs is dsireusa.org.
How solar works as a viable energy solution isn’t just tied to the technology. There are several other factors that have a direct affect on how well it will work for your facility. The more incentives available in your area, the quicker the system will pay for itself. By being aware of what’s needed beyond the technology, you can be prepared to work with a qualified installer to find a renewable energy solution that works with your company’s goals.
Bob Burson is the director of business development for DL Energy, an energy-efficiency and solar-integration company that provides custom-energy solutions for the commercial industry. For more information, call 661.310.7245; visit www.dlenergy.net.