We talk to businesspeople in Pennsylvania every day about the benefits of solar energy. While most Americans would like the U.S. to use more solar energy (as many as 89%, according to Pew Research), Pennsylvanians tend to have three unfounded biases about solar energy that lead many to believe solar might not be for them.
Myth #1: PA solar grants have gone away, so solar no longer “works” in the state.
FACT: Prices have come down so much that solar works without PA incentives.
Solar prices have dropped so dramatically in the past five years that “all-in” costs, net of incentives, are now significantly less than they were just a few years ago. System prices have dropped 70% since the PA Sunshine Program was available for businesses, meaning your savings potential are higher today than they were then.
Myth #2: Solar is good for the environment but not for my bottom line.
FACT: Solar economics are great for business.
1) Incentives still cover the majority of the costs today. These include the Federal Investment Tax Credit (ITC), which covers 30% of the project cost, and the Modified Accelerated Cost Recovery System (MACRS), which allows for depreciation over five years (for an asset that should last more than 30 years) and leads to another 30-40% of the project cost coming back in the form of reduced tax payments;
2) The value of the electricity generated from the free fuel from the sun is 6 to 10 times the value of the net investment and operating cost of the array. This takes into account maintenance costs which are extremely low for solar clients since solar involves no moving mechanical parts;
3) Solar arrays create electricity at an effective cost of approximately $0.03 to $0.04 cents per kWh for the next 20 to 30 or more years. Most businesses are paying $0.06 to $0.10 per kWh today depending on their location and that will increase over time.
4) When structured correctly, solar projects are cash flow-positive in the first year. Most businesses invest 20% of the cost of the project and borrow the rest of the required funds. They receive the 30% ITC as well as 60% of the depreciation value in the first year and are therefore cash flow positive within a few months, and throughout the project.
Myth # 3: With recent increases in the supplies of natural gas, there is less need to worry about the possibility of future energy price increases.
FACT: The U.S. has become a net exporter of natural gas, and this is driving up domestic prices as they move towards higher international price levels.
While the recent fracking boom has led to an increase in natural gas availability — and a resulting downward pressure in energy prices over the past 10 years — prices started to move up in 2016 and most experts are predicting continued increases in domestic prices. New export facilities of liquefied natural gas in the U.S. have led to the country becoming a net exporter of natural gas for the first time in 60 years. Overseas demand for natural gas — where prices can be 400-800% higher — will drive our domestic energy prices higher for years to come:
As longer-term expectations are that electricity prices will significantly rise — because natural gas is the leading source of electricity generation in the U.S., using solar energy to lock in effective rates of $0.03 to $0.04 per kWh for the next 30+ years provides a great opportunity to reduce and create predictability in a key operating cost for many businesses.
Most businesses are still not aware of the significant cost effectiveness of solar today and are not currently evaluating this potential due to the outdated biases outlined above. If you have any questions (or lingering doubts) on the financial arguments in favor of solar, please reach out to us at RER Energy Group. We will be glad to provide a no cost evaluation for your facility on how the ‘fuel from the sun’ can provide you with meaningful savings for your business or organization for the next 30 or more years as well as positive cash flow in the first year of the project.
About RER Energy Group
RER Energy Group is an industry leader in providing cost-effective, high-quality solar systems throughout the United States and Latin America. The company has developed more than 55 megawatts of solar energy, obtaining over $30 million in grant proceeds for commercial, industrial, agricultural, municipal, and non-profit customers. For more information, visit www.rerenergygroup.com.