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Considering Solar Power? Here’s what you need to know

Solar panels and wind turbines

When considering commercial solar power systems, it's essential to familiarize yourself with key terms and concepts. When it comes to evaluating the financial benefits of commercial solar panels, certain tax credits and utility incentives are available. Through recent corporate regulations, new businesses can face mandatory clean energy initiatives. Whether it's because you have to pivot to make your business more sustainable, or simply because you are interested in understanding how to save money, let’s outline some commercial solar vocabulary. Below is an overview of the most widely used technical, financial, and regulatory terms for industrial solar power systems. 

Technical and System Terms

  • Net Metering: A billing mechanism that credits commercial solar energy system owners for the electricity they add to the grid.

  • Power Purchase Agreement (PPA): A financial agreement where a developer installs, owns, and operates a solar system on a customer’s property; and the customer purchases the electricity generated at a predetermined rate.

  • Interconnection: Interconnection involves linking transmission lines between utilities or between a utility and an end-user, enabling power to be moved in either direction. It’s usually necessary to connect a solar system to the local utility grid. 

Performance and Measurement Terms

  • Kilowatt (kW) and Megawatt (MW): Units of power used to describe the capacity of solar installations. 1 MW = 1,000 kW.

  • Kilowatt-hour (kWh) and Megawatt-hour (MWh): Units of energy representing the amount of electricity generated or consumed. 1 MWh = 1,000 kWh.

  • Balance of System (BOS): All components of a PV system other than the panels and inverters, including wiring, mounting structures, and other electrical components.

  • Tilt Angle: The angle at which solar panels are installed relative to the ground, affecting their exposure to sunlight and overall energy production.

  • Grid Parity: The point at which the cost of solar electricity is equal to or less than the cost of electricity from the grid.

Financial and Regulatory Terms

  • Solar Investment Tax Credit (ITC): A federal tax credit that reduces the cost of installing solar systems by allowing businesses to deduct a portion of the installation costs from their taxes.

  • Depreciation (MACRS): The Modified Accelerated Cost Recovery System allows businesses to recover investments in solar systems through tax deductions over a specified period.

  • Renewable Energy Certificates (RECs): Tradable certificates representing the environmental benefits of generating electricity from renewable sources. One REC is created for every megawatt-hour (MWh) of electricity generated.

  • Interconnection Agreement: A contract between the solar system owner and the utility company that outlines the terms and conditions for connecting the solar system to the grid.

  • Levelized Cost of Energy (LCOE): The average cost per unit of electricity generated over the lifespan of a solar energy system.

  • Inflation Reduction Act (IRA): This act provides billions of dollars in green energy tax credits to help consumers buy electric vehicles and companies produce renewable energy. The aim is to cut the nation's carbon emissions.

  • Commercial Property Assessed Clean Energy (C-PACE): This is a financing structure in which building owners can borrow money for energy efficiency or renewable energy and make repayments via an assessment on their property tax bill.

These are just a few of the terms you will come across when considering solar for your facility. Understanding these terms will help you make informed decisions when considering a commercial solar power system. Don’t hesitate to ask your local solar provider for clarification of these or any other terms you may have a question about. Ambiguity over a term shouldn’t be the reason that keeps you from implementing what could be a cost-effective project for decades to come. Find out more commercial solar terms in our Glossary.

Help us, Help you Understand. 

At Smart Roofs, we walk each of our partners through the entire process to help you keep money in your pockets. Offerings include commercial solar system design, rooftop & ground mount solar PV, carports, EV chargers, batteries, solar farms, and more. Reach out for a business energy audit and find out how much you can save with our all-in-one energy suite.


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