Producing electricity with on-site photovoltaic (PV) systems can have several benefits, including buffering your business from volatile energy costs, lightening your carbon footprint, and demonstrating corporate responsibility. Although PV systems represent a significant asset investment, declining module prices have begun to make the cost of electricity competitive with conventional power in a growing number of areas. In 2014, the installed cost of a midsize commercial-scale PV array, including inverters and balance-of-system (BoS) hardware, was $2.25 per watt of output power. This translates to roughly $0.04 per kilowatt-hour for electricity produced over a 30-year lifetime, which is competitive with many utilities’ business rates. In addition, there are a number of rebates, tax breaks, and other incentives that can reduce the cost of installing a PV system even further.

What are the options?
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A typical PV system contains two main components:

  • An array of PV modules. The array is composed of a series of modules, which themselves are composed of numerous small PV cells. Each cell is made from a wafer of silicon or some other semiconducting material that converts incoming light energy into electricity.
  • One or more power inverters. A power inverter is a power-conditioning device that converts the incoming direct-current (DC) power produced by the PV array into grid-compatible alternating-current (AC) power.
Module types

Although there are many emerging materials and designs for PV cells, those that are the most widely commercialized include monocrystalline and polycrystalline silicon, as well as thin-film modules made from silicon, cadmium telluride, copper indium gallium selenide/sulfide, or organic materials (Figure 1). Each type of PV has benefits and drawbacks. The remaining components of a PV system are collectively referred to as the BoS hardware, and includes the mounting structure, wiring, switches, and metering apparatus that facilitates grid integration.

Figure 1: Types of solar cells
Differences in material chemistry and manufacturing processes lead to variation in the physical properties of polycrystalline (A), monocrystalline (B), and thin-film solar cells (C).
Image of polycrystalline, monocrystalline, and thin-film solar cells

Monocrystalline silicon. This is the base material used in most electronic equipment. It has been a popular PV material for a long time, primarily because it converts solar energy more efficiently than other commercialized PV technologies. It’s been losing its intrinsic advantage, though, because manufacturer quality and processing techniques are becoming more important in determining module performance than the silicon technology selected.

Polycrystalline silicon. Historically, this type of silicon has shown lower operating efficiencies than monocrystalline, which means that more panels are required to generate the same amount of energy. With improved manufacturing processes, however, polycrystalline silicon’s demonstrated operating efficiencies now approach those of similarly priced monocrystalline modules. Polycrystalline systems are typically less expensive than monocrystalline systems on a per-watt basis. In addition to being less expensive, polycrystalline module manufacturing typically wastes less silicon in the process than modules made from monocrystalline silicon, since polycrystalline cells need not be cut at the edges.

Thin-film. This type of module is produced by depositing thin layers of material, one on top of another, rather than simply stringing together individual silicon wafers. For a long time, thin-film has been both the least-expensive PV technology and the least-efficient. Due to the wider variety of materials and manufacturing techniques that can be used to produce thin-film PV modules, however, this technology has attracted a considerable amount of interest and investment, and there have been promising results. In laboratory tests, some thin-film PV technologies are demonstrating operating efficiencies comparable to those of monocrystalline cells. So, although thin-film modules currently account for a relatively small fraction of the global PV module market, this technology’s share of the market is likely to grow.

System design options

Beyond selecting a PV module technology, there are also a number of options for system design to consider.

Stand-alone or grid-connected? A primary consideration is whether to set up a stand-alone PV system or a grid-connected array. When a PV system is installed on or near a commercial building that is already connected to the grid, the array is typically also connected to the grid. Usually, stand-alone PV is reserved for remote applications. The most flexible PV system designs provide for both grid-connected and stand-alone operation, where PV generation can be used to feed into the grid, power on-site uses, and even deliver power to the site if the grid goes down. However, such “grid-independent” PV arrays tend to be considerably more expensive and operationally complex than a typical commercial system.

Microinverters or full string inverters? Microinverters are a relatively new technology to hit the PV market. They are typically designed to handle power produced by one PV module, and they can replace larger string inverters, which convert electricity from multiple panels or a string of panels. Microinverters provide more flexibility in the design, configuration, and operation of PV arrays. Microinverters also improve overall array performance by maximizing the power produced by each module before inverting its output from DC to AC, as opposed to maximizing the average of the total array output, as typical string inverters do. In addition, pinpointing module failures is much easier when each module has its own integrated inverter. That said, this distributed approach to PV power electronics is more expensive for larger systems and is generally more complex.

An alternative approach to the use of microinverters—as a compromise between the use of fully centralized string inverters and fully distributed microinverters—is to add DC power optimizers at each module. These devices improve the DC power profile delivered to a centralized string inverter by helping to buffer peaks and valleys and reduce harmonic distortion, without the need to install individual microinverters. This solution tends to be less expensive than microinverters but more expensive than classic string inverter setup.

Rooftop, ground-mounted, or building-integrated? Although most commercial PV arrays are mounted on rooftops, ground-mounted systems are also quite popular. Deciding factors include proximity to buildings or other structures that might obstruct solar exposure, availability of land, roof access and surface integrity, and cost difference. The cost difference varies from one site to another and there’s no clear winner, so a careful site assessment by a qualified contractor will be necessary to determine the best option at each facility.

Building-integrated PV (BIPV) systems incorporate PV modules as part of the building structure during new construction. These integrated systems do double duty—they serve a structural function in addition to providing power. (Note: In retrofit projects, these are sometimes referred to as building-applied PV systems.) Though these products are typically expensive, they can save some money by eliminating the need to purchase PV components and structural building materials separately. BIPV products include solar shingles, window film or glazing, and facades that allow some sunlight to pass through to provide interior daylighting while harvesting some light and converting it to electricity. PV arrays that are integrated into carports and shade structures are also considered to be in this category as another multiuse approach to deployment (Figure 2).

Figure 2: Solar canopies deliver power and shade
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.
Image of a parking lot with shaded areas fitted with solar panels
How to make the right choice
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For businesses that are planning to install PV systems, there are essentially three major choices that must be made: which equipment to buy, what the size of the system should be, and which installer to hire. In addition, you’ll need to consider where you want to put the system and how you’ll finance it.

Selecting equipment

Development of specifications for quality equipment has largely been completed by organizations that subsidize PV systems, such as the California Energy Commission (CEC).

Modules. When looking for high-quality PV modules, the CEC’s current list of eligible photovoltaic modules is a great place to start. Many utility rebate programs require that the modules used in a PV installation meet the CEC’s or other, similar standards. The requirements for inclusion onto the CEC list are that 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 percent of the module’s nameplate rating. Today’s PV modules typically carry a 10-year warranty, though an operating life of 30 years or more is not uncommon. There is no minimum efficiency standard for PV systems.

Inverters. In addition to complying with all safety and interconnection requirements, the CEC requires that inverters undergo performance testing by a qualified laboratory, and the CEC publishes the results of that testing for each inverter. To make it onto the CEC’s list of eligible inverters, individual models are required to pass UL’s tests for safe operation and interconnection with the utility system, as well as a battery of performance tests.

Along with the classic multimodule string inverters commonly used with solar arrays, microinverters are also now available that can handle DC-to-AC power conversion for individual PV 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 PV modules, today’s inverters also typically carry a 10-year warranty, but inverter lifetimes are about half as long (15 years) as module lifetimes. They therefore must be replaced at least once over the course of a 30-year array life, and the cost of inverters represents about 10 percent of the overall installed cost of commercial PV systems.

Storage. Although electricity storage batteries remain relatively cost-prohibitive for many commercial PV applications, the benefits of adding storage to on-site renewable power generation make them attractive for continued consideration. Storage batteries enable more flexibility for system sizing and grid-interfacing options, opening up the door to strategic power purchasing, peak demand reduction, and electricity resale. Batteries can provide momentary backup power and can also help to buffer the energy used on-site.

But batteries are a much more expensive option than generators for providing backup power during momentary or prolonged outages. And though integrating batteries into an on-site PV system offers potential benefits, it may also require a significantly different, more complex, and more expensive system design than one without battery storage. Storage is more likely to be desirable and cost-effective in applications where backup power generators are already in use; where critical loads are being served; or where electricity prices are high, demand charges are significant, or tiered pricing increases are steep.

When considering the inclusion of storage, it’s important to work with a contractor that has significant experience with both PV systems and battery storage—and such knowledge is not always locally available. Consider evaluating offerings from larger companies—for example, Solar City (now Tesla), Solar Grid Storage, and Kaco—many of which offer storage options for grid-tied PV systems.

Sizing your system

Over the 30-year life of a typical commercial PV system, the amount of money a business saves will depend on a number of factors, including the level of solar resource (how much sun reaches the PV array site), the available space for siting the array, the local utility rates, the availability of financial incentives, and the method and interest rate used to finance the installation.

Given these factors, it’s critical to choose a qualified PV contractor or installer that offers engineering and design services to assist in sizing your system. If there are multiple qualified contractors in the area, consider requesting quotes from two or three different contractors and compare their designs, recommendations, and project costs.

Selecting a qualified installer

As the demand for grid-connected PV systems has risen in recent years, so too has the demand for qualified installers. Many contractors have entered this field with little formal training in PV system design and installation or in the PV provisions of the National Electrical Code. This lack of PV-specific experience increases the possibility that inexperienced contractors will make design or installation errors that negatively affect system performance.

Since 2003, one of the more reliable indicators of solar contractor proficiency has been certification by the North American Board of Certified Energy Practitioners (NABCEP). This certification is conferred on PV installers who pass a rigorous exam that was developed with input from PV-industry stakeholders. Before a contractor is eligible to take the NABCEP exam, which is offered twice each year at many locations around North America, they must demonstrate that they possess the necessary experience or educational prerequisites.

NABCEP certification is widely recognized in the industry as the single most credible indicator (though not a guarantee) of contractor competency. Contractors who have received NABCEP certification are listed in the NABCEP contractor database. Another resource for finding local solar contractors and reviewing their qualifications is Solar-Estimate, a partnership between the nonprofit American Solar Energy Society (ASES) and Seattle-based online tools developer and solar business organizer Cooler Planet.

Siting a solar array

Some businesses place PV arrays on parking lot canopies, atop pole mounts, or on racks in open fields, but the majority are sited on rooftops. Important criteria to consider when selecting the location for a commercial PV 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. These are all factors that the solar contractor will take into account when sizing a system to develop a quote.

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. A PV array should not be sized and sited to use all available space. Rather, it should be sized to provide the best economic scenario for the business and to fit appropriately within the available space.

Estimate the available solar resource. Solar resource refers to the average annual amount of sunlight that reaches a given site. The greater the solar resource, the more energy a particular PV array will generate. One of the most powerful and simple tools to help with this type of site evaluation is a free online tool from the National Renewable Energy Laboratory called PVWatts. This tool allows you to quickly estimate system output throughout the year based on geographic location and system setup.

Determine the condition of the existing roof. It’s vital for businesses to be apprised of the condition of their roof prior to installing a PV array because once the array is in place, the cost of any necessary repairs will be substantially greater. So if the existing roof is in poor condition, the time to address that problem is before the array is installed.

Minimize the impact of shading. When an individual cell within a module or an individual module within an array is shaded, its output will be reduced—and typically to a much greater degree than simply the proportion of the area that’s shaded. This can be an even larger problem for some polycrystalline modules because of the way they’re built—their panels effectively shut down when heavily shaded or covered with snow. When siting an array, the contractor will assess the local “solar window” for it, effectively estimating the unshaded region of sky at different times of the year.

Measurement tools and software made by companies such as Solar Pathfinder and Solmetric are available to help PV array owners and contractors estimate the solar window for a proposed or existing array. They can also predict or measure performance throughout the year. Proper and regular tree maintenance can help maintain the original solar window for a given PV system, especially for systems mounted at ground level.

Financing a solar installation

Finance mechanisms can play a significant role in determining the cash-flow scenario and net present value for commercial PV systems. Capital and operating leases are among the most popular financing options. Another often-used option is power purchase agreements, which enable business owners to establish contracts for the sale of future power generated at their facility, whether to a utility, to another third-party aggregator, or even to a financial vehicle such as a yieldco, which effectively treats future anticipated power production as a tradable resource.

Whichever financing structure you settle on, the solar array should be sized 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 amortized system costs. And of course, the ideal financial investment plan should break even in fewer than 30 years and include all anticipated lifetime costs (such as replacement inverters and modules and maintenance costs).

What’s on the horizon?
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By all accounts, the PV industry is expected to continue growing at a rapid pace. Within the last 10 years, installed costs of solar have plummeted sharply, dropping from $6 or $7 per installed watt to just over $2 per installed watt. These lower costs have helped fuel exponential growth in market uptake: The installed solar power generation capacity in the US in 2014 was 15 times more than it was in 2009—that’s the single largest growth in installed capacity for any electricity-generating technology.

Policy drivers. The most direct and responsive ways that government and utilities have been helping facilitate PV market growth are through tax incentives and rebates. As the North American PV market continues to mature, utility incentives and even feed-in tariffs are likely to be phased out, since many are not structured to provide a business advantage for the utility. The total monetary amount of incentives will decline in the long term as the cost of PV systems continues to drop. By the time PV generation becomes directly cost-competitive with conventional electricity—in some regions such “grid parity” has reportedly already been reached—there should be little need to use tax breaks or utility programs to promote PV purchases.

Currently, federal, state, and local incentives range from sales tax waivers on new PV equipment to income tax write-offs. To find out what policies and incentives apply in your area, check the North Carolina Clean Energy Technology Center’s Database of State Incentives for Renewables & Efficiency, which provides incentive information for any jurisdiction in the United States.

Technical drivers. Rising prices for high-grade silicon will continue to motivate the improvement of polycrystalline silicon modules—and thin-film even more so. New thin-film solar cell technologies, including those made with organic materials and dyes, are expected to leave the labs and enter the commercial marketplace. Research institutions and the solar industry have funneled millions of dollars into developing new thin-film technologies and production methods. Those investments are beginning to pay off because thin-film technology—which can be engineered into sheets nearly as thin as paper—has made huge strides in efficiency, production volumes, and cost reduction.

But despite widespread industry enthusiasm, thin-film technology has yet to shake up the PV market the way analysts anticipated. The extent to which it will affect the industry in the future also remains uncertain, though it will likely continue to gain wider market share as new technologies and designs are made available and costs continue to decline.

Economic drivers. Cost has traditionally been the largest barrier to widespread adoption of PV generation. Thankfully, with current commercial costs hovering around $2.25 per installed watt, the PV industry has already exceeded both of the economic goals set by the Solar Energy Industries Association: $4.65 per installed watt by 2015 and $2.33 per installed watt by 2030. In this economic environment, it’s likely that PV systems will be able to reach grid parity across the US considerably sooner than expected.

Who are the manufacturers?
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Many companies—including these leading manufacturers—produce PV panels, inverters, battery storage, and other PV system components.




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