Producing electricity with on-site photovoltaic systems has its benefits, including buffering your business from volatile energy costs, decreasing your carbon footprint, and demonstrating your corporate responsibility.

Although photovoltaic systems require a significant investment, dropping equipment prices have made the cost of electricity competitive with all other forms of on-site generation, such as wind turbines or fuel-powered generators. In 2018, the installed cost of a midsize commercial-scale photovoltaic array—including inverters and balance-of-system (BoS) hardware—was $1.83 per watt of output power. This cost translates to roughly $0.03 per kilowatt-hour for electricity produced over a 30-year lifetime, which is competitive with many utilities’ business rates. You can reduce your installation cost even further with rebates, tax breaks, and other incentives.

If you’re planning to install photovoltaic systems, you’ll have to decide:

  • Which equipment to buy
  • What size system you need
  • Which installer to hire
  • Where you want to put the system
  • How you’ll finance it

A typical photovoltaic system contains two main components: an array of photovoltaic modules and one or more power inverters. Figure 1 shows an example of a commercial solar system.

Photovoltaic modules An array is made up of a series of modules, which are composed of many small photovoltaic cells. Each cell is made from a silicon wafer (or another semiconducting material) that converts incoming light energy into electricity.

Power inverters A power inverter converts the incoming direct-current (DC) power produced by the photovoltaic array into grid-compatible alternating-current (AC) power.

Figure 1: Diagram of a commercial solar system

In addition to the array and inverters, the other elements of a photovoltaic system are called the BoS hardware. This hardware includes all the components that help with grid integration, such as the mounting structure, wires, switches, and metering apparatus.
Drawing of a commercial solar system. The solar panels on the roof send energy to the combiner. The combiner sends energy to the inverter, which converts DC currents produced by the solar panels into usable AC current. The inverter sends the current to the transformer, which transforms inverter output voltage to utility voltage. The transformer sends the current to the safety switch, and the safety switch sends it to the main electrical panel. The main electrical panel buys and sells current from and to the utility grid. A data acquisition system connects to the safety switch and works with a dashboard kiosk to monitor system performance.

What are the options?

Module types

Although there are many new materials and designs for photovoltaic cells, monocrystalline silicon is the most widely available. You can also find thin-film modules made from silicon, cadmium telluride, copper indium gallium selenide or sulfide, or carbon-based organic materials (figure 2).

Figure 2: Types of solar cells

Depending on your needs, monocrystalline panels are better suited for rooftops because they’re more energy and space efficient (A). Thin-film solar cells are a better option if you have large, open spaces that often reach temperatures over 95° Fahrenheit (B).

A. Monocrystalline panels

Photograph of monocrystalline panels installed on a pole.

B. Thin-film solar cells

Photograph of an array of thin-film solar cells in a big, open field.

Each type of photovoltaic panel has benefits and drawbacks. Monocrystalline solar panels offer the highest efficiency of all solar panels—between 15% and 20%—and take up less space; however, they’re more expensive than thin-film panels.

Thin-film panels provide 10% to 16% efficiency, but they’re less expensive. Although they perform better in hot temperatures, they tend to degrade more quickly than monocrystalline panels and often come with a shorter warranty. Thin-film panels can make sense if you have a large space—though you’ll need to buy more of them to make up for their lower efficiency.

System design options

Microinverters and full-string inverters When selecting an inverter, you should look at its:

  • Durability and warranty conditions
  • Efficiency over time (also known as a duty cycle)
  • Ease of integration and use with your entire solar system (especially if you’re using batteries or microgrids)

Microinverters are designed to handle power produced by one photovoltaic module; they can replace larger string inverters, which convert electricity from multiple panels. Microinverters provide more flexibility in the design, configuration, and operation of photovoltaic arrays. They also improve overall array performance by maximizing the power each module produces before inverting its output from DC to AC, instead of maximizing the average of the total array output, as typical string inverters do.

Consider microinverters if you want to start with a small photovoltaic system or if you’re going to keep track of each panel’s performance independently—it’s a more flexible approach. However, there are two main drawbacks when dealing with the power electronics:

  • They’re generally more complex to set up and configure
  • The electronics will be more expensive in a larger system

While string inverters are an older technology, they’re still a good option. If you’re starting with a large system and don’t need to increase the size over time—and if you want something simple and budget-friendly—string inverters are a good choice.

Modern smart microinverters can notify you of specific problems, easing troubleshooting. In California, building code now requires modern smart microinverters.

Modified and pure sine wave inverters Modified sine wave inverters get the job done in most circumstances but may damage sensitive equipment or run less efficiently. Modified sine wave inverters are cheaper but provide a dirtier electrical signal (meaning it can damage sensitive electronics due to voltage and frequency variations). Keep in mind that motors, compressors, and pumps will also run hotter and wear out faster with modified sine wave inverters. Pure sine wave inverters operate via more-accurate and cleaner electrical signals (meaning they’re better for sensitive equipment such as computers).

We recommend investing in pure sine wave inverters for commercial installations to save on any potential headaches that could arise from using modified sine wave inverters with electronic equipment. When it comes to the cost of the rest of solar equipment, it’s too much of a risk for a small gain.

Additionally, look at your inverter’s total harmonic distortion (THD) rating. THD is an indicator of power-quality output and will be listed on the inverter’s spec sheet. Solar contractors recommend choosing a pure sine wave inverter with THD of 5% or less.

Rooftop, ground-mounted, and building-integrated arrays Although most commercial photovoltaic arrays are mounted on rooftops, ground-mounted systems are also popular. You’ll have to consider how close the system will be to buildings or other structures that might obstruct solar exposure, as well as availability of land, roof access, surface integrity, and cost difference. Have a qualified contractor perform a site assessment to determine the best option at each facility.

Building-integrated photovoltaic (BIPV) systems incorporate photovoltaic modules as part of the building structure during new construction. These integrated systems do double duty—they provide power and serve as structural elements. BIPV products include solar windows, window film or glazing, and facades. You can find solar canopies that allow some sunlight to pass through to provide interior daylighting, while also harvesting light and converting it to electricity. Though BIPV products are typically expensive, they can save some money by eliminating the need to purchase photovoltaic components and structural building materials separately.

Solar windows generate power through films, coatings, specialized glass, transparent silicon panels, and opaque thin-film panels spaced between the panes of glass. Transparencies and heat transferred vary by product, which affects heating load in cold seasons and cooling load in hot seasons.

Solar canopies are another multiuse approach and have recently become popular. They can be more expensive than roof-mounted panels but offer more benefits: shade for cars, charging for electric vehicles (EVs), and a demonstration of environmental leadership to show that your organization is forward-thinking (figure 3).

Figure 3: Solar canopies simultaneously deliver power, shade, and EV charging

Large, open parking lots can be a great location for solar panels. Shade from the panels offers an added benefit to drivers, and, because the panels are more visible than roof-mounted arrays, they make a clear statement about the building owner’s commitment to renewable energy.
Photograph of a solar canopy in a parking lot. The solar panels are providing shade for cars.

How to make the right choice

Selecting equipment

Organizations that subsidize photovoltaic systems, such as the California Energy Commission (CEC) have helped complete development of specifications for quality equipment.

Modules You can find a list of high-quality photovoltaic modules on the CEC’s PV Modules web page. Many utility rebate programs require that the modules used in a photovoltaic installation meet the CEC’s standards or other similar standards. To be on the CEC list, modules must be certified by a qualified test facility to meet Underwriters Laboratories (UL) Standard 1703—Standard for Safety for Flat-Plate Photovoltaic Modules and Panels—and manufacturers must submit electrical test data demonstrating module power output to be within 10% of the module’s rated capacity. Today’s photovoltaic modules typically carry a 10-year warranty, though an operating life of 30 years or more isn’t uncommon. There is no minimum efficiency standard for photovoltaic systems.

Inverters Not only does the CEC call for inverters to comply with all safety and interconnection requirements, but it also requires a qualified laboratory to conduct performance testing on the inverters. The CEC then publishes the results of the testing for each inverter. To make it onto the CEC’s list of eligible inverters (available on the Go Solar California Inverters web page), individual models are required to pass UL’s tests for safe operation and interconnection with the utility system, as well as other performance tests.

Because there are a lot of renewable energy sources on California’s energy grid, the CEC now requires that all inverters be smart inverters, since they communicate more dynamically with the grid. This is important for California’s modern grid needs; although smart inverters are more expensive to install, they serve as a tool to help grid operators maintain and balance grid stability.

Along with the string inverters commonly used with solar arrays, you can find microinverters that can handle DC to AC power conversion for individual photovoltaic modules. In installations with a high likelihood of future expansion—or those that have unique configurations—microinverters may be desirable, though they also tend to be a more expensive option.

Like most photovoltaic modules, today’s inverters typically carry a 10-year warranty, but inverter lifetimes are about half as long (15 years) as module lifetimes (30 years). You’ll have to replace them at least once over the course of an array’s life, and according to National Renewable Energy Laboratory’s US Solar Photovoltaic System Cost Benchmark: Q1 2018, the cost of inverters represents about 25% of the overall installed cost of commercial photovoltaic systems.

Storage Although electricity storage batteries remain relatively cost-prohibitive for many commercial photovoltaic applications, the benefits of adding storage to on-site renewable-power generation make them attractive to some facility managers. The main driver of battery adoption in commercial facilities is demand charge. By using batteries to store energy during off-peak hours, commercial customers can draw energy from their battery bank during peak hours to help save on higher demand charges.

When considering storage, it’s important to work with a contractor that has significant experience with both photovoltaic systems and battery storage.

Sizing your system

Over the 30-year life of a typical commercial photovoltaic system, the amount of money a business saves will depend on a number of factors such as:

  • Level of solar resource (how much sun reaches the photovoltaic array site)
  • Available space for siting the array
  • Local utility rates
  • Availability of financial incentives
  • Method and interest rate used to finance the installation

Choose a qualified photovoltaic contractor or installer that offers engineering and design services to assist in sizing your system. If there are multiple qualified contractors in your area, consider requesting quotes from two or three different contractors and compare their designs, recommendations, and project costs.

Selecting a qualified installer

The North American Board of Certified Energy Practitioners (NABCEP) has been certifying photovoltaic installers since 2003 and developed its rigorous exam with input from photovoltaic-industry stakeholders. Before a contractor is eligible to take the NABCEP exam, they must demonstrate that they possess the necessary experience or educational prerequisites, such as completing three to five solar installations and earning 58 hours of solar trade course credits. For more information, see the photovoltaic installation professional requirements on the NABCEP Board Certifications web page.

NABCEP certification is widely recognized in the solar industry as the most credible indicator (though not a guarantee) of contractor competency. Contractors who have received NABCEP certification are listed in the Board Certified Professionals Directory.

Another resource to find local solar contractors and review their qualifications is Solar-Estimate, a web-based solar cost and savings estimator affiliated with NABCEP, the National Renewable Energy Lab, and the Solar Energy Industries Association.

Siting a solar array

Some businesses place photovoltaic arrays on parking lot canopies, atop pole mounts, or on racks in open fields, but the majority site them on rooftops. In general, a flush-mounted array on a slanted roof will be the least expensive option; a ballasted array that’s angle-mounted on a flat roof will be more expensive and have a larger footprint.

Don’t size and site a photovoltaic array to use all available space. Rather, size it to provide the best economic scenario for your business and to fit appropriately within the available space.

Determine the condition of the existing roof If you’re able to assess your roof ahead of time, you may end up ruling out roof-mounted options, or determine you need to repair your roof before going through with a solar contractor bid.

Have contractors perform a site assessment The solar contractor you select for the project will perform the site assessment and recommend the best location for the array, given the desired size or use case. They’ll estimate the amount of solar energy available to your location.

Important criteria contractors consider when selecting the location for a commercial photovoltaic installation are how much sun exposure the site has, the condition of any of the site’s building surfaces, and the presence of any objects that will shade the array. Regularly prune back trees that may cast shade on your panels to maintain the original area of sun for your photovoltaic system, especially for systems mounted at ground level.

Financing a solar installation

Capital and operating leases are among the most popular financing options. Many organizations use power purchase agreements, which enable business owners to establish contracts for the sale of future power generated at their facility. They can sell to a utility, another third-party aggregator, or a financial vehicle such as a yield co (a company formed to own operating assets), which effectively treats future anticipated power production as a tradable resource.

Whichever financing structure you settle on, you should size the solar array in such a way that either the monthly payments for the system—including any applicable maintenance fees or taxes on avoided utility expenses—are lower than the avoided costs (the electric bills) or the yields on power traded exceed system costs. The ideal financial investment plan should break even in under 30 years and include all anticipated lifetime costs, such as replacement inverters and modules and maintenance costs.

For a comprehensive, in-depth guide to financing solar projects, see StandardSolar’s Commercial Solar Financing Ebook. You can find solar financing options and information on REC Solar’s Financing Services and HelioPower’s Solar Financing Guide web pages.

What’s on the horizon?

Solar panels have come a long way in the past decade. Installed costs have decreased as the market has matured and solar has become an established technology. Thanks to innovative financing options such as solar leasing—as well as policy rebates, credits, and incentives from several states—solar panels have become viable not only in regions with plentiful sun such as the South but also in regions in the Northeast, especially when storage is included.

The US Department of Energy is funding university projects to increase inverter quality. These projects are working to develop new power electronics and device designs that will extend the life of inverters from 15 years to match modern solar panels’ lifetimes of 20 to 30 years.

Although utility-scale solar has dominated the market over the past decade, commercial and residential sectors are showing signs that they’re shifting to distributed photovoltaics in the future. With recent increases in community-scale solar projects and federal investment tax credits for utility-scale solar running out in July 2019, we may see utility-scale solar projects pause or even give way to community projects. However, depending on future policy, there could be more room for utility-scale solar down the road.

Three large forces have affected the energy industry:

  • Utilities see energy customers less as ratepayers and more as active participants in the entire energy ecosystem. Customers want energy independence, and utilities will have to find ways to give it to them.
  • Innovative regulators and policymakers in states like New York have been promoting and incentivizing the transition to distributed, dynamic energy systems.
  • Future-thinking utilities have been leading the way on the transformation of the grid, as demonstrated with utility storage projects initiated in the Southwest and East.

Utilities will continue to evolve their relationship with solar over the years.

Who are the manufacturers?

Many companies—including these leading manufacturers—produce photovoltaic panels, inverters, battery storage, and other photovoltaic system components.




Neither this list nor any mention of a specific vendor or product constitutes an endorsement or recommendation by the authors, nor does any content in the Business Energy Advisor constitute an endorsement or recommendation, explicit or otherwise, of the technology-related programs mentioned herein.

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