Solar Plus Energy Storage Solutions Offer Industrial and Commercial Building Owners Protection From High, Volatile Energy Utility Costs

By Sam Tormey

Commercial and industrial buildings and facilities today are responsible for roughly half of the energy consumed in the US and therefore represent a particularly lucrative customer segment for companies specializing in green initiatives and technologies. However, even as the green technology market has made energy-saving solutions more widely available, only some solutions have proven themselves powerful enough to effectively shield owners from unsustainably high energy and utility costs.

Solar plus energy storage is one such solution that has become increasingly practical for helping commercial and industrial building owners deal with overwhelmingly steep or volatile utility costs, particularly as prices have come down and efficiency has improved among solar production and energy storage technologies over the past decade. Buildings leveraging solar plus energy storage, a behind-the-meter solution for the commercial and industrial building segment, allow owners to regulate when and how they consume solar energy generated on-site.

With a solar plus energy storage model, owners use the solar power generated on-site at intervals when grid consumption is at its highest, greatly mitigating their exposure to high energy prices, utility rates, demand charges, and increasingly common grid outages.

But just how lucrative are solar plus storage installations?

For starters, solar plus storage installations actually present building owners with entirely new revenue streams. Among major energy consumers in particular, Demand Response (DR) programs offered by utility companies earn many building owners tens of thousands of dollars over several years just for reducing their grid energy consumption during peak demand periods. While buildings can reduce their energy demand using traditional means, like raising thermostats in the summer or using energy-efficient appliances, the energy independence afforded by a solar plus storage system even more dramatically improves owners’ income from DR programs.

Beyond revenue from Demand Response programs, the general cost-savings associated with solar plus storage installations have also been appealing for many building owners. According to solar and renewables writer Travis Hoium of the Motley Fool, summer peak rates for Southern California Edison’s territory are $0.38 per kW-hr, while off-peak rates are $0.13 kW-hr. By using stored energy generated on-site during peak hours, building owners in Southern California can take advantage of the $0.25 per kW-hr cost savings to reduce their summer energy utility bills by up to 65% depending on their storage capacity and usage.

Besides the obvious benefits of saving on utility costs, the additional capital made available means building owners can double down on energy-saving initiatives, further enhancing their savings and improving revenue from DR programs. Protection from peak demand pricing and DR revenue can enable building owners to finance digital transformation projects aimed at improving their systems for monitoring energy consumption, or a switch to more energy-efficient appliances and building construction.

While the up-front costs associated with solar plus storage solutions are not insignificant, a growing number of financing opportunities exist today for discerning building and property owners to maximize short-term utility bill cost savings. Property-assessed clean energy (PACE) financing, for example, is a method of financing available to commercial property owners in which a property tax assessment can be used to pay off a loan on a solar system. According to PACENation, a non-profit advocating for the opening of PACE financing opportunities, PACE financiers have delivered more than $1.5 billion in funding across 2,400 commercial projects in 14 states since 2009. While commercial projects accounted for a majority of the allocated financing, industrial projects still received more than $86.5 million in PACE financing in that period. Meanwhile, available to all businesses in the US are Business Energy Investment Tax Credits, which provide tax credits for up to 26% of the cost associated with solar installations.

Among building owners, solar plus energy storage has become a particularly timely solution as well. As existential uncertainty looms for businesses large and small amid the coronavirus pandemic, commercial building owners especially have to think critically about innovative ways to cut operational costs in the event their tenants are forced to shutter. While empty buildings might consume less energy, some energy is still needed to power HVAC, emergency lighting and other critical systems. As the pandemic’s impact on the economy and businesses extends into the summer months, a solar plus storage installation may provide owners greater control in increasingly uncertain times.

As solar and energy storage technologies continue to improve and up-front installation costs continue to fall, solar plus storage solutions, in combination with traditional methods of energy conservation, should be top-of-mind for building owners interested in curbing utility costs.