Benefits of Commercial Solar
As a business owner, it is essential to look out for opportunities to keep costs to a minimum. Increasing efficiencies is the prerogative of all businesses, but what if it’s possible to do so while still running a sustainable business?
Installing a commercial solar PV system for your business can provide a significant advantage, including cost savings, financial stability, fulfilling renewable energy goals, and enhancing your firm’s environmental image.
3 Major Reasons for Your Business to Go Solar
- Financial Stability and Cost Control
Not only are rising prices unpredictable, but there are seasonal shifts in energy prices (summer and winter months) that can make it difficult for a company to successfully control its electricity expenses. Because the sun is a 100 percent renewable source, your system will generate power exactly when you need it, reducing your dependence on the grid and supplying you with greater control and stability over your energy bills.
- Government Incentives
Businesses can install solar systems that are significantly supported under the government’s solar rebate scheme. Depending on the location of your business and the type of the system installed, the rebate might cover up to 50% of the entire cost of the system. The rebate scheme is divided into two categories:
- Small-scale Technology Certificates (STCs) – for solar panel systems ≤ 100Kw: These provide an upfront reduction of up to 50% off the original cost of a system.
- Large-scale Generation Certificates (LGCs) – for solar panel systems > 100kW: These certificates are offered to businesses considering installing a system of 200, 300 or greater kW capacity on an ongoing basis until 2030. Over the life of the system, the net present value of these LGCs might pay up to 60% of the upfront cost.
- Tax Incentives for business
Business owners can also take advantage of the tax benefits that come with installing solar panels. For everyone who qualifies for depreciation, commercial solar offers a 20-year tax advantage. For small-medium businesses, there is an accelerated depreciation for any asset purchase. It’s also possible to claim the instant asset write-off straightaway, rather than over a period of years.
Commercial Financing Options
- Solar Operating Lease
An operating lease is the most common finance solution for two main reasons:
- It is an asset that produces income, and
- The taxation department ruling stating solar must be depreciated over 20 years
With an operating lease, the asset is owned by the finance company and does not appear on your balance sheet, offering you added financial flexibility to continue to purchase more assets to operate your business. Even with the new IFRS 16 accounting requirements, solar is one of the few assets where an operational lease will continue unchanged, providing you with significant financial benefits.
- Chattel mortgage
As a business, you can purchase the goods from us and bring the solar asset onto your asset register providing the finance company a mortgage over the Asset. In your next BAS statement, you can claim 100 percent of the GST paid on the purchase price, gaining a GST refund that can cover a few monthly payments.
A Chattel Mortgage is commonly used when the purchase price is lower than $30,000 to take advantage of the tax laws for small asset purchases. With this provision, the entire asset can be written off in a single year (subject to ATO guidelines).
- Power Purchase Agreement (PPA)
Larger solar arrays may now be installed with production guarantees because of the availability of robust solar technology.
A commercial solar PPA takes advantage of these guarantees and sets an agreed price per kilowatt produced, utilizing a pure financial arrangement in which a business organization agrees to acquire all of the electricity produced by an installed solar system. This is often 45 to 70% less than the current grid pricing.
Solar Finance Is Much More Than an Interest Rate
The first question we are typically asked is “What is your interest rate?”
While the interest rate is an important part of a finance package, selecting the right commercial finance product to support the financial needs of the business, is just as important.