When you think of the best types of businesses that could benefit from solar power, what businesses generally come to mind?
Admittedly, as a solar company, we see advantages for solar in almost every business and building type. Still, one type of business in particular, lends itself exceptionally well to the benefits of solar. Big and small, the approximately 36,000 new and used automotive dealerships around the country stand to reap tremendous benefits from solar energy, especially when it comes to lower operating costs and powering increasingly large fleets of electric vehicles.
Auto dealers often have high energy costs while boasting ample flat roof space that is ideal for solar arrays. This reality, coupled with manufacturing and installations costs reaching new lows while federal and local incentives remain high, means there has never been a better time for auto dealers to explore solar. What’s more, new and innovative financial mechanisms mean, in many cases, auto dealerships can avoid large upfront installation and engineering costs and still see meaningful returns in only a few years.
Solar And Auto Dealerships: A Good Fit
Energy costs can be a car dealership’s third-highest operating expense. Lighting outdoor lots, running technology-enhanced showrooms, and powering service center equipment can accumulate quite a power draw. This demand is why auto dealers consume 18% more energy on average than a typical office building and why dealerships as a whole spend almost $2 billion in electricity costs annually.
Some auto dealers see their hefty monthly electric bill as another fixed expense, but this does not have to be the standard. A solar power system helps drive down those energy costs by enabling more on-site energy production and, thus, optimizing a dealer’s bottom line.
The architecture of auto dealerships is also well suited for effective solar installations. The generally unused, obstacle-free large flat roofs of showrooms and dealer offices can be put to work offsetting the buildings’ energy needs, often with little to no need for modification.
Solar installations are also an excellent way to boost a dealer’s brand. Customers want to patron businesses that share the same values, and eco-conscious customers will appreciate that an auto dealer is committed to helping power the local community using clean, renewable energy. The growth of electric and alternative fuel vehicle sales is a clear indication of automotive buyers’ increasing support for eco-friendliness.
A Nissan dealer in Boulder, for instance, experienced this brand boost after they added solar panels to the roof of its facility. Ted Christiano, the general manager, noted, “Customers are choosing us over the competitors because we are demonstrating our concern for the community and environment by going solar.” Investing in a solar power system sends a statement to any potential customer that your business cares about the environment. Besides the increase in customer traffic, Boulder Nissan dropped its energy use by 20% and charges their substantial Nissan Leaf inventory all with solar power.
Incentives, Subsidies, and Tax Benefits to Sweeten the Deal
Incentives and tax benefits have long motivated the expansion of solar. Since its enaction in 2006, the federal Investment Tax Credit (ITC) has been the most important incentive for the U.S. solar industry, leading to industry growth of 10,000% since its inaugural year. The ITC currently offers a 26% tax credit for commercial and residential solar power systems, but this incentive will reduce to 22% in 2021 before dropping again to 10% in 2022. If considering solar, this is an important year to take action.
Another tax benefit that auto dealers can take advantage of is the Modified Accelerated Cost Recovery System (MACRS). MACRS allows businesses to deduct the depreciable basis of solar energy equipment from their taxes for five years, reducing tax liability and accelerating solar’s rate of return.
An additional option is the Commercial Property Assessed Clean Energy (C-PACE) program. C-PACE program allows dealerships who own their property to finance the upfront cost of energy improvement projects, such as solar power systems. The dealership then repays its improvement costs over ten to twenty years as an add-on to its property tax bills.
The Added Benefit of Solar Carports
One addition or alternative to the rooftop solar you’d expect to see on a showroom roof is solar carports. These are solar-equipped canopies that cover parking areas. Solar carports offer protection from hail, debris, and even lightning strikes, all while working to lower your operating costs.
The asset protection value of solar carports is why they are gaining traction as an effective AND economical strategy for hail mitigation. In 2019, requests for solar carport designs and quotes increased by nearly 400%. This is top-of-mind for auto dealers in the Colorado Front Range, which receives the highest frequency of large hail in North America.
Solar carports can still benefit from the federal Investment Tax Credit as it applies to all hard and soft costs, including steel and construction costs. This makes solar carports economical as an asset protection strategy while you still enjoy the reduced utility overheads. Furthermore, auto dealers may have the ability to negotiate better terms with their insurance providers on their insurance premiums or deductibles thanks to the added protection for their inventory.
However, the application can be costly, ranging from $5,000 – $7,000 per vehicle before tax incentives. The implementation may also take longer, with additional engineering and permitting being the main challenges.
Rooftop solar investments tend to install quicker and have a faster cost recovery, so more auto dealers have been pursuing rooftop systems over carports. For dealerships with serious hail concerns though, the dual function and value of solar carports can be well worth it. The visibility of solar carports compared to rooftop systems is also an essential factor to consider if demonstrating environmental leadership is a priority goal for your dealership.
Solar-Powered Dealership Spotlight: Weld County Garage
The Weld County Garage Buick GMC is a new and used car dealer in Greeley, Colorado. The dealer has a long history in the area and was the first Buick dealership west of the Mississippi. Weld County Garage has always been on the lookout for ways to improve operational efficiency and to stay relevant in its community.
Rooftop solar was one way to meet both of those objectives, and in 2019, they installed a 438-kilowatt system. That was enough to offset around 80% of the dealership’s electricity needs and has lowered peak demand by over 20%.
As put by Grant Nisly, General Sales Manager at Weld County Garage, “One of my roles is to drive high ROI projects that offer long-term benefits to the ownership group and solar just made good business sense. Though I personally have a passion for efficiency, the decision to go solar wasn’t environmental. It was purely financial.”
The time has never been better to evaluate all forms of solar investments and see what solutions will increase your net operating income and set your dealership apart. Schedule a consultation with an IPS Commercial Solar Consultant today to learn how your auto dealership can benefit from solar and energy storage solutions and achieve your operational goals.
About the Author
Maya is a Boulder native recently returning after 11 years of living abroad in Sweden, New Zealand, Australia, and France. She graduated with a Bachelors of Commerce and Management Consulting in Renewable infrastructure and Strategic Partnerships from the University of Technology Sydney. Following her studies, Maya worked to diversify a telecommunications company and was instrumental in a full roll-out of Tesla charging infrastructure on the west coast of Australia. Maya’s passion for nature and environmental conservation led her to focus on all things sustainable. She started a successful organic and plastic-free lip balm brand in Australia called Maya Organics. At IPS, Maya is highly adept at leading commercial projects through to completion, developing mutually beneficial strategic partnerships, and working with clients to maximize financial returns on investments.