Logo - Business Development Bank of Canada - BDC
Energy management Article | 10-minute read

How to estimate the financial and environmental impact of switching to solar power for your business

The sky’s the limit when it comes to solar savings and environmental impact
men looking at a small solar panel

Solar energy technology has seen massive technological leaps in the last few decades.

David Kelly is the founder and CEO of SkyFire Energy, a solar construction and engineering firm. Speaking from experience, he says that increasingly cost-effective solar energy systems, combined with emerging tax incentives and rebates, are only making the switch to solar more enticing.

Despite the upfront costs, Kelly says the long-term savings potential is the number-one reason clients switch to solar.

Here are some questions to help you figure out if installing solar panels is right for your business.

Does your building have the space for solar panels?

Before you start digging into the finances to see if switching to solar makes sense for your business, you need to ask yourself the very basic question: Do I have the space?

Solar panel setups require sun-facing surfaces like rooftops, external walls or parking lots. If your company doesn’t own its building or outdoor space, or does not have a lease agreement that would allow for solar panels to be installed, then solar is not a viable option at your current location.

But if you can go solar, you need to ask three follow-up questions:

  1. What available space do you have? If your roof or walls cannot support the additional weight of the solar setup, you may need to do some structural upgrades before you get started.
  2. What is your building’s electrical capacity? If your building’s breaker panel isn’t big enough to accommodate your new generating capacity, you may need to either upgrade it, or limit your solar supply.
  3. How much energy do you use—and how much do you hope to produce? If your new system generates more power than you need, you will need to confirm that you can either store it in a battery bank, or sell it back to the grid.

How much do solar panels cost in Canada?

If your building allows for a simple, rectangular setup that doesn’t need to go around chimneys and vents, then your install will be easier and cheaper than a more complex design.

However, the upfront costs that come with switching to solar can be daunting. This is why Kelly says it’s important to have a good sense of the numbers before transitioning.

To produce your own solar electricity, you’re going to need to consider two main costs:

  • System set-up costs, including consulting, any necessary structural upgrades and engineering, and actual solar hardware costs.
  • Maintenance costs, including cleaning. Solar maintenance costs can be fairly negligible if you pay attention to how your modules are performing and wash them when debris like construction dust and bird droppings piles up.

Although the upfront costs may rattle prospective solar converts, Kelly eases these concerns by dividing the cost over 25 years—that’s how long most panels are under warranty for, and how long each one can be expected to produce energy for free.

Kelly uses SkyFire Energy’s own setup as an example.

The company’s two-storey Calgary building is decked out with solar module window awnings and a rooftop array that together produce 18 kilowatts of energy per hour. At the company’s average install rate of $3.50 per watt, that’s $63,000 upfront in system installation costs.

Divide that by 25 years of energy production, and you get an amortized electricity bill of $2,520—assuming your business is using all of the power and not selling any back to the grid, in which case your bill could be even lower.

The cost of self-made solar power

Follow this simple calculation to see if solar makes financial sense for your business:

[Current annual power bill] – [Solar set-up costs + maintenance] / 25 years of energy production = net savings

Solar can deliver a levelized cost of energy that’s generally cheaper than grid power delivered to a building in most jurisdictions across Canada today.

It’s important to note that energy rates vary widely across Canada, so solar may not be as financially enticing in all provinces. For example, running a 60-watt lightbulb in Edmonton can cost nearly three times as much as it would in Montreal, making an Alberta-based solar project more financially exciting than one based in Quebec (which has cheaper hydroelectric power).

Similarly, provinces use different compensation schemes to pay for solar-power generators. If your solar power system is connected to Ontario’s grid, for example, and you generate more energy than you use, your utility provider will give you credit on your bill for any power you send to the grid. However, that credit expires after 12 months. When the same situation occurs in British Columbia or Alberta, the utility provider must pay you for any credits older than 12 months.

What incentives or programs are available to help you switch to solar?

There are currently many financial loans, grants and incentive programs to help Canadian businesses make the switch to solar. In the 2023 federal budget, the Government of Canada announced tax credits for individuals, businesses and Indigenous communities who install solar setups.

A proposed Clean Technology Investment Tax Credit (ITC) will help businesses that install their own solar setups write off a portion of the costs of the equipment (panels, batteries for power storage, etc.). The tax credit would dwindle from 20-30% (2023-2033) to 15% (2033-2035), meaning federal financial incentives are peaking right now to promote clean energy solutions.

Here are a few other provincial programs for you to consider:

  • Manitoba Tax Assistance Office Green Energy Equipment Tax Credit—covers solar thermal energy systems purchased for use in Manitoba starting in 2009. Purchasers who install specified solar heating equipment in Manitoba qualify for a refundable 10% Green Energy Equipment Tax Credit on the eligible capital costs.
  • Alberta Solar Offset—turns your clean energy into verified carbon offset credits and sells them in this market, returning income to you, the system owner, once per year.

What are the environmental benefits of switching to solar energy?

A solar energy system’s environmental impact can be broken down across three stages of its lifecycle: manufacturing process, producing life and recycling process.

Manufacturing.
The Intergovernmental Panel on Climate Change (IPCC) reports that solar modules can offset the energy required to make them within the first two years of operating. Of course, depending on where your panels are produced, the GHG footprint may vary based on the source of energy used to produce them.

Producing life.
On its own, your operational solar energy system will not emit any GHGs. That said, water and soap if you need to clean your modules should be considered in your environmental assessment, though their impacts will likely be negligible.

Recycling process.
An IPCC report says that between 80 and 96% of the materials used in a solar panel can be recycled. As with the manufacturing process, the bulk of a panel’s environmental impact at this stage is tied to the type of energy used in the recycling process.

Across these three life stages, a solar energy system’s lifetime emissions work out to between 30 and 80 grams of CO2 emitted per kilowatt hour—about half the Canadian average of GHG emissions tied to generating electricity.

Consult the table below to see if switching to solar makes environmental sense for your business.

Average GHG emissions related to electricity generation, by province or territory
Province or territory CO2 equivalent / kilowatt hour
B.C. 7.6 g
Alberta 590 g
Saskatchewan 580 g
Manitoba 1.1 g
Ontario 25 g
Quebec 1.5 g
Nova Scotia 760 g
New Brunswick 290 g
Newfoundland and Labrador 24 g
Yukon 100 g
Northwest Territories 180 g
Nunavut 800 g
Canada 110 g
Source: Canada Energy Regulator, Provincial and Territorial Energy Profiles.

Making an informed decision

Switching to solar takes time, money and effort. That’s why Kelly recommends that business owners look to first make their buildings and processes as energy efficient as possible and then consider installing solar panels. Consider conducting an energy audit to outline your current energy use and identify low-cost areas where you can save energy (and therefore money).

Once you’ve done an audit and implemented strategies to improve your business’s energy efficiency, you will have a clearer sense of what size solar energy system will suit your needs.

You can also consult our step-by-step guide on how to install a solar energy system for your business.

You’re not alone in your solar journey. BDC can help you assess your options so you can make an informed decision if you choose to switch to solar.

Your privacy

BDC uses cookies to improve your experience on its website and for advertising purposes, to offer you products or services that are relevant to you. By clicking ῝I understand῎ or by continuing to browse this site, you consent to their use.

To find out more, consult our Policy on confidentiality.