October 14, 2024 Commercial Solar Power, ROI Solar
How to maximise the ROI of solar power
Unpredictability or stability? Pollution or sustainability? Dependence or self-sufficiency?
For many business owners across the UK, there is an urgent need to secure a low-cost source of electricity that frees them from the volatility and costs of the fossil fuels market.
For those same leaders looking to be the masters of their own energy supply, that source will be solar power.
Not only is it the least expensive source of electricity per kWh — even among renewables — but it’s also one that can guarantee them a swift return on their investment.
In this blog, we’ll explain what ROI means in the world of solar power, what factors influence the ‘payback’ period, and small steps that you can take to encourage your system to deliver a positive ROI even more quickly.
What does return on investment mean in the context of solar power?
With a well-designed solar power system, you can make savings by generating electricity independently of the grid. Over time, these savings will add up until they ‘pay back’ the initial cost of buying parts and installing the system.
Our Director, Paul Shearin, gives a more practical example:
“If we say that a system will deliver a return on investment in 4 years, you will slowly see your bills decrease in the first three years. By the fourth year, the savings you have from generating enough of your own electricity will equate to the total cost of the system you installed.”
However, more than simply ‘breaking even’, the savings you make by producing energy with a solar power system are back in your business’ hands after four years (the ‘amortisation period’).
Paul goes on to explain that “as a typical solar power system lasts 20-25 years, you could expect to be in a cash-positive position for 16-21 years”.
We explain how ROI is calculated in more detail in this blog.
Will every solar power system provide a positive return on investment?
A positive return on investment is one major incentive for businesses to install a solar power system – most businesses will save by divesting (even partly) from fossil-fuel-generated electricity.
However, the time that it takes to reach the ‘break-even’ point depends on several factors, mainly:
- Your local climate conditions (which affect the amount of sunlight you receive)
- Your solar power configuration (your panel orientation and roof pitch, for example)
- When you are using power (whether your solar usage and battery storage enable you to avoid using grid energy at peak time, and therefore avoiding peak time rates)
- Your current electricity rates.
In general, it takes less time for commercial solar power systems to reach this point (as little as 3.5 years) than it does for household systems (on average, 14-22 years).
Most importantly, when installing solar panels with Innasol, none of this is hidden — you will know what your expected return on investment period is well before you commit to an installation.
Can you influence how quickly a solar power system will pay back?
It’s important to know that solar systems are designed to be as efficient as possible for your most common energy usage patterns.
In fact, your usage habits (which Innasol collects via half-hourly data on your system’s electrical loads) are used as a baseline to calculate your system’s ‘performance ratio’ (your system’s potential maximum output versus your predicted actual output) and therefore your payback period.
However, you can adopt certain habits that will optimise your energy usage, which amount to smaller or greater changes. These include:
1) Timeshifting
As we have mentioned, if you can avoid using grid energy at peak times (evenings) by relying on energy stored in the daytime, you will avoid incurring peak time rates.
However, if you don’t have battery storage available, the most efficient way to use energy is to use it when generating it — in the daytime.
For a concrete example, night work patterns — such as a care home doing laundry — would shift these activities to the daytime to make use of solar energy.
2) Repurposing surplus energy
Although a lot is made of ‘Smart Export’ tariffs or guarantees provided by utility companies, the incentives for doing so are less attractive than they used to be under the defunct Feed-in Tariff (FIT).
To this end, powering heat pumps with excess energy produced by solar is a better use of surplus energy than selling it back to the grid — and it’s far cheaper than using grid energy.
The same goes for using a PV diverter switch to heat water in your hot water tank for storage, or power your employees’ or visitors’ electric vehicles, which is an attractive incentive for sustainable companies and those in eco-tourism.
3) Remove any obstructions from panels
Lastly, although solar panels have a long lifespan (20-25 years) and require very little maintenance, their efficiency is affected by dirt, grime and shade. Simply put, making sure they are washed and free of anything that can obscure them will ensure they perform optimally.
These habits can help you deliver even more efficiency out of your solar panels, but a best-in-class solar power system should be designed not only for your normal energy usage, but also for your normal working habits.
That’s why Innasol’s design-led approach to solar power ensures that solar delivers the maximum power from the sun for the minimum cost with a swift payback. This depends on delivering a high performance ratio — in excess of 90% in some installations.
Remember, you can’t break even with grid energy, much less control what you spend on it. Solar power can be the backbone of your business’ energy security strategy. To find out more about how to get a sustainable ROI on solar power for your business, simply contact Paul and his team or call 01621 892613.
