Solar is no longer an “up and coming” technology used to generate electricity. It’s a mainstream energy source seen on the rooftops of homes and buildings across America. There are now more than 2 million solar-electric installations nationwide.
Commercial-building owners, ranging from big-box retailers to self-storage operators, have helped lead the transition to solar for many reasons: Consumers demand better sustainability practices, employees pride themselves on working for green companies, and businesses seek to reduce the carbon footprint from their operations. A new concept, “eco-marketing,” has even become a driving factor for some to go green.
But even with all the environmental advantages, financial reasons are often the primary drivers behind self-storage owners deciding to install solar. In an increasingly competitive landscape, they’re looking to maximize return, reduce operating costs, and increase the overall value of their business and property. Solar provides the opportunity to boost cash flow by reducing expensive utility costs. In fact, most self-storage businesses can decrease electricity expenses more than 75 percent by investing in a rooftop solar-energy system.
Electricity is one of the largest operating costs for any commercial building. The U.S. Energy Information Administration estimates that lighting, ventilation and cooling—three vital energy components in every self-storage operation—comprise nearly 50 percent of a building’s electricity use. Meanwhile, the national average for commercial electricity rates continues to increase year after year, slowly driving up the cost of doing business.
A Good Match
Self-storage structures are ideal for solar, with unused rooftops that are often open to the sun. Facilities typically range from one to four stories, making their rooftop footprint much larger than that of taller buildings and providing much more surface for solar panels.
If covered parking is offered, there’s an opportunity to cover the carports with panels. If there’s unused land on the property, an array can be ground-mounted and will provide the same efficiency as if it were on a rooftop. The bottom line is your property is quite possibly a good fit for a solar-energy system.
Incentives and Programs
Depending on the size of the solar-energy system installed, self-storage owners can offset most, if not all, of their electricity costs. In some instances, if the local utility offers favorable policies to purchase power, you can even generate additional revenue by selling your excess clean energy back to the grid for neighbors to use. Through a program called net metering, the utility will purchase that power and redistribute it to surrounding homes and businesses.
It may seem counterintuitive, but some of the states with the best solar-incentive programs aren’t known for their quantities of sunlight. For example, Illinois, Massachusetts and New Jersey are three of the most vibrant commercial solar-energy markets. Geography isn’t destiny, as evidenced by the fact that the financial returns for investing in solar in Illinois will almost certainly be better than investing in the same size system in Arizona. There’s a variety of reasons why this is true, with the most important being generous utility cash rebates and state-level incentives that dramatically reduce the cost of investment.
The cost of solar panels is at an all-time low, making the return on investment (ROI) more attractive than ever. In many areas of the country, self-storage owners can achieve a three- to five-year ROI on a solar system. Additionally, the Federal Investment Tax Credit allows for 26 percent to 30 percent of the total cost to be deducted from federal tax returns, allowing you to use tax benefits toward the payback of the system. You can also depreciate 100 percent of the system cost in year one. Depending on local-utility and state policy, a variety of additional incentives may be available for added cost savings.
Stabilizing energy costs over time for predictable forecasting and planning is another solar advantage, particularly for self-storage facilities that offer climate-controlled units. Having the ability to accurately and consistently plan for a building’s energy use and cost allows you to adjust your unit pricing to remain competitive.
Deciding to Move Forward and Steps to Take
If you’re interested in pursuing solar energy for your self-storage facility, first consider the following questions to determine if it makes sense:
- Is the roof in good condition? It’s important to consider this before installing solar panels. If the roof is older than 15 to 20 years, I’d likely recommend replacing it before investing in a solar array; though, there are some exceptions. For example, some metal standing-seam roofs can last for more than 40 years.
- Will you own the facility for five to 10-plus years? If you plan to sell within the next couple of years, don’t move forward with an installation. While the solar array will increase your property value, you won’t realize the ROI in that time. Also, the federal tax credit won’t fully vest until the end of year five, so you’d be required to pay back the portion of the tax credit that hasn’t vested.
- Is the facility climate-controlled? If not, I recommend installing LED lighting and controls before investing in solar. Installing a solar array may still be a good investment, but energy efficiency should be prioritized first.
- Does the facility have high electric bills? If so, solar can help defray costs.
If you choose to move forward with a solar project, the first and most important step is to find a qualified solar-energy contractor. Evaluating the financing structures and construction process can be complicated and confusing. A highly qualified, experienced developer can successfully manage the progression, from initial consultation through financing and installation, in a simple, streamlined manner.
Get quotes from several contractors to ensure you’re getting a fair price. In fact, it’s best to request fully transparent pricing to ensure the contractor’s equipment, labor, overhead and profit are reasonable and appropriate for the job.
Adding solar to a self-storage facility might not be right for every owner or every building, but the economic and environmental benefits it provides warrant consideration. Maximizing every square foot of the property is vital to any owner’s bottom line, and the roof should be no exception.
Mat Elmore is managing director of Pivot Energy, a turnkey, commercial solar-energy company that’s developed more than 100 solar-energy projects at self-storage facilities nationwide. It provides free analysis to help facility owners determine if investing in solar energy is right for them. Mat leads the company’s business development for onsite solar-energy projects. For more information, call 888.734.3033; e-mail [email protected]; visit www.pivotenergy.net.
