Solar panels have become increasingly affordable for small and medium-sized businesses, but there is a lot to consider before committing to a serious investment.
Energy bills are difficult for small firms to predict as they are not protected by the domestic energy price cap, which makes solar a serious option for those looking to control their overheads.
Installing panels on the roof of an office, shop or warehouse can reduce the amount of electricity needed to be purchased from the grid and make future bills easier to forecast. Seeing a return on that investment, though, depends on many factors.
Solar may suit your business if you own your premises or have landlord approval, use most of your electricity during the day, have a large, unshaded roof, which is in good condition, you expect to stay in the building for several years, can fund the upfront cost and want to reduce long-term exposure to energy prices.
It could be less suitable if you rent short-term premises, your roof needs repair or replacement, your daytime electricity use is low, the building is heavily shaded, you are likely to move soon, or cannot get landlord, insurer or grid approval.
The business case for solar panels has changed in recent years because, even when electricity prices fall, many SMEs remain exposed to contract renewals, standing charges, network costs and wider market swings.
Solar panels do not remove that entirely, as most businesses will still need to buy electricity from the grid, especially in the evening, in winter or during periods of heavy use. But every unit of electricity generated and used on-site is one a business doesn't need to import.
Reputation-wise, cutting emissions can also help a company meet sustainability targets, strengthen tenders and appeal to customers who want to buy from more responsible businesses.
Commercial solar payback periods are often estimated at around five to ten years, although some high-usage businesses with suitable premises may see a faster return.
SMEs should ask installers to present the expected annual generation, annual savings, export income, maintenance and finance costs, as well as how much electricity the system is expected to generate, before committing.
Also, businesses need to look carefully at the full cost, including panels, inverters, scaffolding, design, installation, monitoring, grid connection requirements and any electrical upgrades.
If the business adds battery storage, the upfront cost will rise again, though a battery can help a business store electricity generated during the day for later use.
The best approach is to ask installers for two projections: one with battery storage and one without. That makes it easier to see whether the extra cost is justified, and to decide if the overall numbers work.
