Investing in solar reduces commercial building costs

A worker working on solar.

Upgrading a commercial building with a rooftop solar energy system can reduce energy costs and increase a property’s value, offering an excellent Return on Investment.

A rise in a property’s net operating income generally is seen within a year of installing a solar panel system.

By purchasing a system, owners can benefit from the different federal and state incentives. They also can capitalize on paybacks over multiple years and an expected double-digit Internal Rate of Return (IRR), an equation used to assess a project’s viability.

Another option is leasing the roof. Some view this methodology the same as owners having have an “tenant” in a space that is not being utilized. Solar developers are leasing roofs for multi-year terms.

Whatever the case, the revenue from solar lowers the property’s energy bill.

Is solar the right choice?

The first step in determining if investing in solar makes sense is to consider the feasibility. Questions to consider include: Is the roof appropriate for solar panels? Is there enough energy load? How does the utility view and support the concept of solar energy?

Property owners often want to know if installing solar panels will damage the roof. Solar mounting systems are ballasted and placed on rubber sheets so that there is no roof penetration or damage to the roof using installation. In fact, solar panels will extend the life of a roof because the panels block UV lights, which is the number one cause of roof degradation.

Cost is another factor when assessing if installing a solar panel system is cost effective. The cost of installation depends on various factors, such as the size of the system, the experience of the installation team and the time it takes to schedule inspections.

Financing can be handled in a couple of ways: the system can be purchased using cash or bank loans, or a Power Purchase Agreement (PPA) lease can be obtained with a third-party owner.

Energy efficiency and renewable energy loans are secured loans with low interest rates that banks and credit unions offer. A Property Assessed Clean Energy (PACE) loan is tied to the property. If the property is sold, then loan remains with the property and the new building owner assumes the loan. Payback periods vary and the interest paid is linked to loan’s length.

When a system is leased – and a power purchase agreement (PPA) is created – a third party is the owner. In a lease agreement, the building owner pays a fixed monthly rate no matter what the solar system produces. With a PPA, a fixed amount is paid for each kWh the system produces.

Commercial solar projects can take weeks or months, depending on the total number of solar panels, the installation location, the type of building, and many other factors. The weather, the size and experience of the crew, and local regulations from the government and utilities affect the installation timeline. A key to success is to work with an experienced local solar company that knows how to navigate the process.

Murfey Company, a leader in commercial and residential construction, is a trusted partner in developing projects throughout Southern California. For more information, visit