Rown of large solar panels outside of a corporation’s warehouse to collect renewable solar energy.

Why Business Is Embracing Solar and Energy Storage


Companies that use solar energy have reduced energy costs, promote renewable efficiency, and have extra protection against outages.

Renewable solar energy for businesses has grown at accelerated rates in recent years, with middle market firms increasingly likely to adopt solar power, creating profitable opportunities for both the end users and the power companies that supply them. Companies have recently expanded their solar usage by installing batteries to store power for use at night and during blackouts.

Industry experts forecast tremendous growth in the U.S. solar power sector, which expanded from roughly $2.5 billion in 2014 to around $21 billion this year, according to research firm IBISWorld. Solar is currently top of mind in boardrooms, as it represents half of all new electricity-generating capacity added in the U.S. in 2022, the Solar Energy Industries Association said.

In addition, as the financial benefits of solar energy grow more attractive to businesses, many companies are doubling down by adding lithium-ion batteries, which are relatively small and can be configured to fit a container or other tight storage space. The batteries are popular because they can charge and discharge more times than other such technologies, such as lead-acid batteries, and maintenance is less of a factor.

The increasing deployment of solar energy systems and batteries is being driven by a long-term trend of declining cost per kilowatt and, most importantly for many companies, the chance to eliminate the price volatility that has become the norm for fossil fuel-generated energy.

Solar and wind energy were not always attainable by midsize companies because of the substantial upfront capital costs, but the growing adoption of power purchase agreements, in which commercial solar producers sell energy to end users, reduces the initial financial burden and the need for local installations. Moreover, community solar projects also are becoming more common as state and federal governments passed legislation incentivizing renewable energy adoption.

"There is a strong business case for new renewable energy because it’s an easy way to fix and predict a business’s operating expenses," said Richard Butler, Group Head of Energy, Power, and Renewables at Fifth Third Bank. "Solar power allows a company to better manage its profit and loss statements."

Of course, businesses and their boards also are under pressure to include action on the environment as part of their overall environmental, social, and governance (ESG) strategies. "From California to the Midwest and Southeast, climate change—flooding and tornadoes, for example—is becoming more and more apparent, and businesses are becoming more and more aware and concerned about it," Butler said.

Financing Solar for Businesses

Even with good intentions, the initial capital expenditures to install solar as a source of energy can be substantial, especially for middle market companies. To meet this challenge, creative financing methods have emerged to benefit both sides of a renewable energy deal.

While large firms can finance, install, and run their own systems, "many companies are opting to purchase solar energy from a power generator, letting these industry experts incur the capital expenditures while they, the customer, benefit from the lower kilowatt price," Butler said.

Most commonly, a solar power-generating company will sell a variety of energy services directly to a business. The generator receives tax credits, which enables it to build out the renewable energy system for less, translating into cheaper—and much more predictable—electricity expenditures.

Power purchase agreements are the typical mechanism used to facilitate the adoption of solar power. Even if costs escalate over time, the agreements have fixed pricing formulas, usually well into the future, allowing companies to avoid the uncertainty surrounding cost fluctuations that are inherent with conventional energy.

The Business Case

Utility tariffs for electricity generated by fossil fuels change from year to year, and that means a business’s energy costs can rise at any time or that they can fluctuate unpredictably from year to year. But solar power has no other fuel input, and that makes energy operating expenses a lot more predictable for those companies using it. "It’s a strong business case and value proposition for a commercial or industrial company," Butler said.

While solar power costs can go up, the long-term trend is that they will decline. Solar power expenses did rise recently as supply chains were slowed. But while such unforeseen events can occur and other supply and demand imbalances in an economy can affect pricing, the cost of solar has fallen dramatically, in general, over time, according to green energy website

Business Interest Picks Up

As solar power prices have trended downward, solar adoption has been more commonly associated with residential and utilities users rather than at the commercial level due to a variety of factors. For one, commercial and industrial customers may already pay different and often lower rates than residential customers for energy, which is less than what homeowners pay, reducing the financial incentives to save on operating expenses. Businesses also are not usually their own landlords, which can complicate a decision to go solar.

"Many middle market businesses don’t own their real estate," Butler said. "Landlords who aren’t prioritizing environmental goals don’t really have an incentive to put a solar panel on the roof or a battery in the parking garage. They pass through all the electricity costs, and they are not worried about dealing with power outages."

Before Making the Switch..

There are a number of factors middle market companies should weigh before making the jump from fossil fuels to solar, depending on their business goals, according to Fifth Third’s renewable energy finance experts. Start with the business’s energy consumption pattern and how that meshes with its local utility’s tariff structure.

  • If the company’s largest daily use of energy occurs during the time of the day that utility prices are the highest, it might make more sense to use cheaper solar energy instead. If the high-demand period is at night, harness solar energy with a battery storage system and then use the stored solar energy during that time period to cut costs.
  • If resiliency—the ability to keep operating during a network power outage—is important, using solar energy during the daytime (or even stored for use at night using batteries) may make the most sense.
  • If ESG goals are a primary concern, solar power is a friendlier energy source than fossil fuels.

Taken together, Butler said, "You are going to see more and more small- and medium-sized businesses get into this space and start to look at renewable energy as a way to participate in the energy transition for environmental reasons, to manage their costs, their profit and loss statements, and predictability."

Solar Battery Storage Systems Play an Increasing Part

Middle market companies are also ideally situated to benefit from another fast-growing trend in renewable energy: the use of battery storage systems in conjunction with solar power. By storing solar energy, a company can avoid tapping fossil fuels for its needs, an important consideration for stakeholders concerned about sustainability.

Many companies have committed to reducing their consumption of fossil fuels as part of the ESG strategies adopted by boards of directors. In addition, the Securities and Exchange Commission is drafting rules to require companies to report climate risks as part of their disclosures to shareholders.

The solar battery storage market is still relatively small—it was worth $148 million in 2021. But it is expected to grow to $540 million by the end of the decade, a compound annual growth rate (CAGR) of 15.5%, according to Straits Research. In the U.S., the market is projected to reach $37.7 million by 2030, growing at a CAGR of 8.2% from 2021 until then as analyzed by Allied Market Research.

Solar-plus-storage with batteries allows a business to match variable energy supply to its energy demand. Using batteries to store solar power allows a company to keep its lights and machines on at night or, if also connected to a conventional electricity grid, during a blackout. This capability is vital for certain businesses such as hospitals and government installations that can’t afford to go offline for any appreciable length of time without endangering their entire operation. Other companies might want to discharge the stored electricity to power their operations during periods of peak electricity pricing, lowering energy costs that might otherwise spike during high-demand hours on the power grid.

Lithium-ion batteries are the most popular type of solar storage battery, with nearly 80% of the U.S. market in 2020, according to Allied Market Research. Lithium-ion batteries can live anywhere. They might take up a couple of parking spaces in a company lot, and if a company finds itself short on battery storage, it can simply contract for more batteries and stack them.

Lithium-ion batteries generally have a shelf life of five to eight years. But they do have a downside: they can discharge completely in only four hours. This would be problematic in an extended blackout situation, but the industry is busily exploring other battery technologies with longer durations.

With the growing availability of batteries to store energy, renewables represent a profitable opportunity for both suppliers and end users. By working together, power generators and middle market companies can help the environment—while at the same time boosting their bottom lines.

For more information on solar financing and how midsize companies can take advantage of renewable energy opportunities, please contact Fifth Third’s Energy Finance team.

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