Overview
Solar panels are often installed by business owners looking to lower operating costs and increase their bottom line while creating a positive public perception. Most resources online are dedicated to homeowners searching for answers about solar panels, but business owners stand to benefit greatly from investing in solar energy and perhaps even better than homeowners. This guide goes through the details of what the process looks like for going solar on your business so you can decide if solar is right for your company.
Commercial Solar by the Numbers
Commercial solar is nothing new. Since about 2012 through Q4 2023, demand for solar installations for businesses, non-profits, and government agencies has been growing, with higher interest rates and market uncertainty leading to the segment’s first ever decline in 2024. Despite the 2024 decline, the commercial solar market is expected to grow through the decade fueled by tax relief, increased utility costs, lowered solar costs with improving technology, and potential interest rate corrections. In fact, the US commercial solar market is expected to reach 3,000 MW in 2028 alone
The top 4-states for commercial solar installations have consistently been New Jersey, New York, Massachusetts, and California. But with Pennsylvania’s massive distribution centers and warehouses, the state is poised to make an impact on the overall national market trends. Some of the top valued companies in the country have taken to solar to reduce their costs associated with powering their campuses, servers, stores, warehouses, and distribution centers. In fact, the top 5 companies in the US in terms of installed solar capacity are Facebook, Amazon, Google, Apple, and Wal-Mart. Despite these major corporations investing in solar energy, your company doesn’t need to be in the SP 500 to benefit from the many incentives and overall benefits commercial solar has to offer.
PA Commercial Solar Incentives
Making decisions that can increase the bottom line and lower operating costs is essential in running a business. Solar is an interesting business investment to explore because not only can it lower operating costs, it can also provide tax relief, and even create a source of income.
Solar Tax Credit (ITC)
The Solar Tax Credit (ITC) applies not only to residential projects but applies to businesses as well. For a business however, the Solar Tax Credit works in two ways. The first, as a 30% dollar for dollar Federal Income Tax Credit for a business that either owns the system outright or purchases the system through a loan. Available at a full 30% credit through 2033, this credit is set to ensure the foundation for commercial solar economics for years to come. The second option for the commercial Solar Tax Credit was enacted for businesses that have solar panels installed through a solar Power Purchase Agreement (PPA). Despite not owning the system, businesses with systems that are under 1 MW in size, and are installed meeting certain labor requirements as defined by the US Treasury, can get a tax credit of $.0275 cents/kWh.
MACRS Depreciation
More tax relief can be found for businesses through the MACRS Depreciation. An incentive not available to residential customers and unique to commercial solar projects. The Modified Accelerated Cost Recovery System (MACRS) allows a business to recover the declining value of investments over time and solar is no exception. Federal depreciation allows this accelerated schedule while State depreciation does not.
The depreciable basis for a solar project is reduced by half the value of the 30% Solar Tax Credit. For example, with a $500,000 solar investment, the depreciable basis would be $425,000. In order to determine the value of Solar Depreciation for your business, you would need to apply your Federal and State Tax Rates to the depreciable basis of your solar project.
For a 5-year MACRS schedule, the percentages are:
- Year 1: 20%
- Year 2: 32%
- Year 3: 19.2%
- Year 4: 11.52%
- Year 5: 11.52%
- Year 6: 5.76%
Calculating MACRS Solar Deprecation
Calculating MACRS Solar Depreciation follows a three step basic formula that first calculates the annual depreciation amount and then applies it to both the Federal and State Tax Rates.
- Annual Depreciation = Depreciable Basis × MACRS rate.
- Federal Savings = Annual Depreciation × Federal Tax Rate.
- State Savings = Annual Depreciation × State Tax Rate.
For example let’s take a look at a $500,000 commercial solar project with a 24% Federal Tax rate and a 7% State Tax Rate:
Year | Depreciation Amount | Federal Savings | State Savings | Total Savings |
1 | $85,000.00 | $20,400.00 | $5,950.00 | $26,350.00 |
2 | $136,000.00 | $32,640.00 | $9,520.00 | $42,160.00 |
3 | $81,600.00 | $19,584.00 | $5,712.00 | $25,296.00 |
4 | $48,960.00 | $11,750.40 | $3,427.20 | $15,177.60 |
5 | $48,960.00 | $11,750.40 | $3,427.20 | $15,177.60 |
6 | $24,480.00 | $5,875.20 | $1,713.60 | $7,588.80 |
Totals: | $102,000 | $29,750 | $131,750 |
In this sample $500,000 solar investment the potential tax savings are substantial. Between State and Federal Depreciation, the business stands to save $131,750 over the course of 6 years. Add that to their 30% Solar Tax Credit at $150,000 in this example, and there is $281,750 in potential tax relief over the course of 6 years. That is 56% of the total project cost returned in tax savings alone without even including energy savings and PA SRECs.
Solar depreciation phases out by 2027, so the time to act is now on getting the full financial benefits for your business.
Solar Renewable Energy Certificates (SRECS)
In Pennsylvania, SRECs are an important financial incentive for commercial solar projects. An SREC is earned each time a solar installation produces 1,000 kWh (1 MWh) of electricity. SRECs are meant to represent the clean energy generation from a solar installation and support the Utility Company in meeting Pennsylvania’s Alternative Energy Portfolio Standard (AEPS). The AEPS mandates utility companies in Pennsylvania meet renewable energy quotas, and SRECs purchased from solar generators can help to meet their quota.
SRECs can be sold by the business on the open market or through a brokerage (for a small fee). The price of an SREC is determined by the supply and demand in the Pennsylvania SREC market. The current market price of a PA SREC is $31.25 (As of 1/27/25).
Calculating SREC Income
The first calculation you will need to know is how many kWhs the solar system is expected to generate each year. Using the example of a $500,000 investment, the price may be on average around $3.00/watt.
- System Size: $500,000 (system cost)/$3.00 (system price per watt) = 166.666 kW (system size)
- Annual Production: 166.66 kW (system size) x 1.2 (estimate production factor): 200,000 kWh (annual production)
- Annual SREC Revenue: 200,000 kWh (annual production) x $31.25 (SREC price) = $6,000
From the calculations above, we can assume that the solar investment will earn a minimum of $6,000/year in current market conditions. SRECs are typically earned for the life of a commercial solar system (25-years). Without calculating system degradation and assuming the set market price of $31.25, this sample commercial solar installation in Pennsylvania would net the business $150,000 through its “lifetime.”
Mitigating financial liability is key to forecasting and making profitable business decisions. The variables in the samples to consider are the system’s performance over time and the fluctuation of PA SREC prices. To better forecast assuming market fluctuations, we can make the same calculations above and apply an SREC price of $50 for the high and $20 for the low. Generating an annual income of $10,000/year and $4,000/year respectively.
Commercial Solar Net Metering in Pennsylvania
Net metering is a billing policy that allows commercial solar installations in Pennsylvania to pay the net of their energy usage each month and offset future electric costs by feeding excess solar electricity back into the grid.
Once solar is installed on a commercial building, a digital, bi-directional meter will be installed which tracks the net difference in solar electricity fed into the grid and electricity pulled from the grid.
For example, an office building with rooftop solar panels is closed during a sunshine filled weekend. In this case, more solar is likely being produced than the building needs and the excess energy is sent to the grid for a billing credit. Conversely, come Monday the office is using peak power but it is dark and stormy. On this day, if less solar is being produced than the building needs, energy will be drawn from the grid.
Net Metering rolls over month to month with an annual true up in Pennsylvania occurring in June. At this point, any unused credits will be paid out to the building owner at a lower avoided cost rate.

Calculating Net Metering Savings
Let’s take for example the sample 166.6 kW solar system producing 200,000 kWhs annually with a retail electric rate of $0.12/kWh. In this example the building itself demands 216,000 kWh annually.
- Calculate net monthly usage: 18,000 kWh (building consumption) – 16,667 kWh (solar production) = 1,333 kWh (net usage)
- Calculate monthly bill after solar: 1,333 kWh (net usage) x $0.12 = $160
- Calculate monthly savings: $2,160 (electric cost before solar) – $160 (cost after solar) = $2,000/month
From the calculations above we can see that commercial solar Net Metering is the way that a business reduces its electrical spend through solar regardless of when the solar electricity is produced and regardless of when the building uses electricity.
Demand Charges and Net Metering
Net metering offsets electric usage but it does not offset demand charges for the building which charges for times of peak usage and not total energy use itself. Solar however, can help lower demand charges when the solar panels are producing electricity during peak demand times. For example, if your peak demand occurs during sunny hours, solar can reduce the amount of grid electricity needed, lowering your demand charge.

Conclusion
Investing in commercial solar in Pennsylvania can offer a powerful opportunity to reduce costs and increase long-term financial stability. With the ITC, MACRS Depreciation, SRECs, and Net Metering, an accelerated return on investment is possible. For many commercial solar projects, the ROI can often be achieved in as little as 5-years. After the payback, the business stands to enjoy free energy for the lifetime of the solar system while hedging against future rate increases. As energy costs continue to rise and while these financial incentives remain in place, now is a great time for businesses in Pennsylvania to explore solar.
Ready to take the next step? Contact us today to find out how a commercial solar project can impact your business.
Disclaimer: This article is intended to provide general information about commercial solar and does not constitute tax, financial, or legal advice. Solar incentive policies are subject to change based on federal and state regulations while eligibility and financial benefits may vary depending on your specific business. Please consult with your tax expert about whether or not your business can qualify for commercial solar incentives and financing.