Generating your own electricity will significantly reduce the amount of energy your business purchases from the national grid, writes EvoEnergy’s Jordan Mawbey.
Cash flow management is essential for any small business, which means every overhead must be accounted for, and every investment carefully considered.
Deep cuts to the government’s Feed in Tariff (FiT) have understandably raised questions over the viability of solar power for small businesses and its ability to provide a good return on investment (ROI), but it’s still very much possible for small company owners to make good financial returns if buying a solar PV system outright.
Since the FiT cuts, it makes more financial sense to match system size to onsite electricity consumption. Businesses that have a high energy demand and are fighting against expensive electricity unit prices with their energy suppliers make perfect candidates for solar.
System sizes are also dependant on your premises’ roof space, orientation, construction and shading however a typical system for a small business would be around 50 kWp or above.
This equates to approximately 200 solar panels – typically covering around 350 square meters – and costs in the region of £45-50,000. Despite the FiT cuts, small businesses can still see an ROI of around 10-12 per cent, with payback in seven to ten years.
Some solar power for small businesses will also require a fully maintained system installed at zero cost via a power purchase agreement (PPA).
In this scenario, an investment company would fund and own the system and sell the green energy back to you at a fixed rate cheaper than your existing energy supplier for up to 30 years.
Generating your own electricity on-site will significantly reduce the amount of energy you purchase. Consequently, businesses will see large energy bill savings typically around £4,000 per year in addition to generating income through the feed-in tariff in the region of £2,000 (based on a 50 kWp system). Of course, high energy users could see much greater savings.
In conjunction with the financial benefits, a solar PV system also helps small businesses create a new, or contribute to an existing, corporate social responsibility (CSR) strategy.
By generating your own free, green electricity, a small business can take huge steps to becoming a green leader in their industry by significantly reducing their carbon footprint.
For many, it’s not just the financial and environmental benefits that make solar an attractive proposition. For the last few years now, even more so in the dark winter months, the reality of power shortages on the grid is a significant threat that many businesses could be forced to go offline with the government turning down the power (brown outs) in certain areas.
For businesses that rely on a consistent uninterrupted operation, a solar PV system can give them the energy security and independence they need for business continuity.
If your company is considering a solar PV installation, or for those that already have one installed, an operation and maintenance (O&M) service is essential to ensure your system continues to deliver maximum benefits year on year.
With the panels sitting out of sight on the rooftop, at a minimum firms should seek to service the system at least once per year.
For larger systems, an O&M contract is recommended to provide additional proactive remote monitoring of equipment that can allow maintenance teams to identify and remedy any issues promptly.
Most trusted installers will offer at least a one-year workmanship guarantee. However, particularly in more complex systems, technology can defect and these issues need to be identified quickly to avoid you losing generation and ultimately, slowing down your return on investment.
Most technology equipment such as solar panels and inverters has anything up to a ten year guarantee to cover any defects or under performance.
Inevitably, the deep FiT cuts in January have slowed down solar deployment across the UK on both a domestic and commercial scale.
However, the appetite for solar is now returning as businesses see that the viability of solar technology is still as true today as it was prior to the cuts and driven forward by the political and social pressure on businesses to be more green.
Together, the falling cost of solar technology and the rising cost of electricity is neutralising the dependency on government subsidy.
Energy is no more just a business commodity, but a means for a business to become more competitive and energy independent with a correctly implemented solar strategy.
Jordan Mawbey is a manager at EvoEnergy
Your employees have access to confidential data – Here’s why it pays to protect it
Sign up to our newsletter to get the latest from Business Advice.