The Liberal Government's Inadvertent Solar Bonanza
Whatever your politics, it's no secret that the Liberal government has been hostile towards renewable energy. So imagine the eyebrows raised in the solar industry when Joe Hockey released his 2015 budget with a $20,000 tax break given to small businesses – which was subsequently extended until 30 June 2018.
Considering that a good quality 10kW solar system will cost about $15,000 (after the "solar rebate"), this $20,000 tax break could turn out to be a big help for savvy small businesses who have been considering using solar to get their overheads down.
Commercial solar systems and the death of your electricity bills
As of the time of writing (May 2017), a good quality 10kW solar system will cost about $12,000 – $16,000 fully installed. A solar system of this size could wipe out the electricity bill of many small businesses. As I've previously mentioned, solar electricity makes a whole lot of sense for commercial businesses because they tend to use their electricity between the hours of 9am to 5pm – aka the ideal times of day for a solar system to generate electricity.
Ultimately, this means that businesses can purchase a solar power system right away, slash their electricity costs more or less overnight, and claim the cost of the system as an immediate tax write-off. Combining the 'rebate', which amounts to one-third the price of a solar system, with the tax write-off, businesses could be purchasing a solar system for less than half of its actual cost. Here's a rough example. As always – talk to your accountant to understand your specific situation.
Example: Buying a 10kW solar power system
Approximate cost of quality 10kW system, fully installed: $22,000
Approximate solar rebate: ($7,000)
Your out of pocket cost of system: $15,000
Approximate immediate 30% tax deduction ($5,000)
Approx cashflow needed for $22k worth of solar: $10,000
Some businesses may not have the money to spare to purchase a 10kW PV system – Which is fine! Even a 5kW solar system can potentially save a business around $2,000 per year on their electricity bills.
The four key things to know before investing in a commercial solar power system
Before you run off and get 3 quotes for a commercial solar system, you should take some time to understand these four points so you can truly get the most value out of a solar system for your business:
1) Understand your electricity bill
Many businesses have ‘unbundled’ tariffs in which they’re charged separately for their energy consumption and peak demand. The solar power proposition in such cases can still be satisfying, but longer paybacks will occur. Make sure your solar company performs a detailed assessment, because solar power doesn’t necessarily guarantee reductions in peak demand.
2) Communicate your electricity habits
Solar power produces the quickest payback when its generation is consumed, on-site, whenever the sun is shining. Power that is exported to the grid is financially less beneficial (due to feed in tariff incentives being below retail electricity rates), so businesses with mostly nighttime consumption of electricity (such as bakeries) aren’t ideal candidates for solar. This also makes it vital to size your system correctly. Make sure your solar company performs an hourly energy balance to ensure your production won’t be wasted by being exported.
3) Select a company with commercial experience
Installing a commercial solar system is more complex than installing household solar. Your solar company should perform a detailed structural assessment of your roof, negotiate the grid connection, arrange finance (if required) and custom-design a high performance system. All of these things are more complex when dealing with a commercial solar job. Make sure that your solar company has sufficient experience with commercial solar systems so that your system doesn’t hit any roadblocks between design and delivery.
4) Choose trusted equipment and suppliers
Good quality solar systems should last over 25 years (and upwards of 35 years if they’re particularly high quality), but if something goes wrong you want to be covered. Choose larger, more established equipment manufacturers with over 5 years’ experience in the industry and make sure that the warranty is honored locally (the last thing you want to do is ship faulty panels to China at your expense!). Make sure that your solar company also has a long operation history so that help will be there if you need it.
If I've managed to convince you to at least explore solar for your business, then you can get up to 3 quotes from commercial solar experts I trust (I'm a Chartered Electrical Engineer, so I'm fussy!) here.
