Commercial Solar – A Win/Win for Landlords and Tenants

Adding a solar system to a commercial property offers enormous benefits to landlords and tenants. It’s a tax-saving win for landlords who can also benefit from an additional income stream. And it’s a money-saving win for tenants who will pay much lower utility bills. How? Let’s take a look at a typical commercial solar rental scenario:

illustration of an office building
Joe runs a small manufacturing business and rents a 10,000-square-foot building. Last year he paid $21,900 or an average of $1,800/month in PG&E bills.
His total usage for the previous 12 months is 88,000 kWhs (kilowatt hours).
That means Joe pays an average of 24.8 cents/kWh for power.
If the owner of the building were to install a solar system, the numbers would look something like this:

Offsetting Joe’s energy usage of 88,000 kWh’s/year would require a 53 kW (53,000 watts) solar system. The cash price of the installed roof mount solar system comes to $143,000. The owner would then get a federal tax credit of $42,900 for the year the system is purchased. If the entire tax credit can’t be used in year one, it can be carried back one year and forward for up to 20 years until the tax credit is used. 

This brings the system cost down to $100,100.

Besides the 30% tax credit, the building owner can also depreciate the cost of the solar system over six years. Based on a Federal tax rate of 32% and a state tax rate of 11.3%, this would mean an additional $52,652 in tax savings.

Now the cost of the system is down to $47,448.

The building owner can then make an agreement with the tenant to sell the power created by the solar system at a discounted rate.

This rate can be locked-in for as long as the tenant remains in the building, encouraging the tenant to stay in a long-term lease. Over the years, as PG&E rates go up, the tenant’s fixed rate saves them more and more money.


If the building owner charges 18 cents/kWh, that would come to $1,320/ month or $15,840/year. The tenant would save over $480/month in year one and even more money each year. Even if the landlord charged 20 cents/kWh, that comes out to $1,466/month of additional income for the landlord, and the tenant would still save $334/month in year one.

illustration of solar array

With the 30% Federal tax credit, equipment depreciation, and income from the tenant, the solar system would be paid off in less than four years. Once the initial investment has been recouped, the power sold to the tenant becomes extra income. That’s an additional $1,320/month (or more) with little to no expense.