Solar as a Service: A Building Upgrade with an Instant Payback Period
28th Feb 18
Cameron Quin

When considering upgrades for commercial buildings, property management companies weigh costs against benefits. The payback period is a common financial metric due to its simplicity: it is calculated by dividing the upfront cost of a project by first-year earnings or savings. For example, assume you pay $60,000 for a 50-kW commercial solar power system, which will generate 80,000 kWh per year. If your electricity supplier charges 25 cents/kWh, you save $20,000 per year and get a payback period of three years.

However, the concept of solar as a service makes it possible to deploy a photovoltaic system at zero upfront cost, and still get savings from the first month of operation. Instead of purchasing a commercial solar array, you sign a contract called a Power Purchase Agreement: the photovoltaic system is owned and operated by the supplier, while you pay for the electricity delivered. A three-year payback period is good for an asset that lasts more than two decades, but an instant payback is even better!

How a Solar PPA Provides Immediate Savings

Assume that, instead of spending $60,000 for the 50-kW commercial solar power system in the example above, you receive electricity through a PPA at only 60% of the price charged by your local energy retailer: 15 cents/kWh. If the system delivers 80,000 kWh per year, you would be paying the solar PPA provider $12,000, instead of paying $20,000 to the local energy retailer. In other words, your company gets $8,000 in first-year savings without committing any capital upfront. Keep in mind that pricing and energy generation vary by project, but this example demonstrates how the concept of solar as a service works.

There is another financial benefit beyond saving $8,000 per year without investing: the $60,000 that would have otherwise been spent on the commercial solar power system are available for the company. This capital can be simply reinvested, or it can be used for other building upgrades that reduce energy expenses further. For example, you can consider upgrading all lighting fixtures to LED, or replacing your air-conditioning equipment with more efficient units. This way, your company is not only paying less for electricity thanks to solar as a service, but is also using less electricity in the first place.

Solar as a service offers another benefit that is difficult to quantify in monetary terms: technical expertise. If your company owns a commercial solar power system, you must either train the maintenance staff to service the installation, or must hire additional technicians with previous experience in solar power.  On the other hand, operation and maintenance are the responsibility of the system provider with solar as a service, and this includes any equipment replacements or warranty claims. Although solar panels are rated for 25 years, components such as inverters and batteries need a replacement in around 10 years; however, you don’t have to worry about this if a qualified company is servicing the photovoltaic system as part of a solar PPA.

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Cameron Quin

28th Feb 18
Cameron Quin

Cameron Quin has been heavily involved in business development from an early age. After founding and selling two online companies, Cameron found a strong passion for renewables and the opportunities it brings for the commercial and industrial sector. Sharing the possibilities of solar and the knowledge from the Solar Bay team is his favourite pastime.