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Commercial & industrial solar: Meaning & benefits
Commercial solar is one of the three main segments of the solar energy sector.
What is commercial solar?
Commercial solar, also called commercial and industrial solar or C&I solar, consists of solar energy projects designed for commercial properties, such as office buildings, data centers, warehouses and logistics centers, and other commercial and industrial real estate assets. Most C&I solar projects are installed on the rooftops of these existing buildings, and are examples of distributed generation (DG).
In addition to solar panels for generating electricity, C&I renewable energy assets can also include paired battery storage and electric vehicle charging.
Solar industry segments
Commercial solar is one of three main segments that industry groups use to describe and analyze the solar power market. These three industry categories are:
Residential solar: These are solar power systems placed on residential properties by the homeowner. In terms of the quantity of systems installed, residential solar represents the largest segment of the industry: According to the Solar Energy Industries Association, 97% of all solar power installations in the U.S. are located on residential rooftops.
Commercial & industrial solar: The C&I solar segment includes systems placed on various types of commercial real estate properties. In most cases, commercial solar projects consist of solar panels placed on the rooftops of existing real estate assets, like a warehouse or an apartment building. However, C&I projects can also include ground-mounted solar arrays. Commercial solar installations typically have an electricity generation capacity of less than 1MW per year.
Community solar is a subset of the C&I solar segment. Community solar projects allow utility customers to support the development and use of clean energy. Subscribers to community solar projects pay a fee that supports the operation of a solar energy installation that sells the electricity it generates back to the grid. In exchange for their subscription fees, project subscribers each receive a share of the proceeds in the form of credits on their utility bills.
Utility-scale solar: These are solar installations designed for large-scale energy production. As a rule of thumb, the Solar Energy Industries Association (SEIA) classifies utility-scale solar projects as those that generate more than 1 MW of electricity on an annual basis. Rather than mounted on the roofs of buildings, utility-scale solar installations are usually ground-mounted across many acres of land.
Commercial solar market growth
Although commercial solar historically experienced slower growth than the residential and commercial segments, various tailwinds are propelling the growth of the C&I segment. These include:
Tenant demand: Tenants of commercial real estate properties increasingly desire access to cost efficiencies unlocked by on-site C&I solar systems.
Rising efficiency standards: In California, Title 24 requires all newly constructed nonresidential and multi-family high rise buildings to have an on-site solar photovoltaic (solar PV) system.
Increased emissions disclosure rules: Several large jurisdictions, including the European Union and the state of California, have enacted legislation that will require certain companies to disclose Scope 2 emissions (and in some cases, Scope 3 emissions, as well). Scope 2 emissions include the purchase of electricity, and disclosures are meant to account for a business’s impact on the environment through its power use
SEIA and energy industry analyst Wood Mackenzie estimate that commercial solar capacity will continue to grow, with new capacity added on an annual basis reaching nearly 3000 MW (3 GW) by 2029.
Commercial solar financing
C&I solar developers and solar asset owners, including REITS, may be eligible to claim clean energy tax credits to finance a portion of project construction.
Commercial solar tax credits
The clean electricity investment tax credit (ITC) provides owners of clean energy projects, including C&I solar, with a tax credit meant to help defray the costs of construction. For projects placed in service starting in 2025, the value of the tax credit is equal to 6% of the qualified investment cost basis, or 30% of the cost basis if the project’s construction meets prevailing wage requirements.
Based on SEIA/Wood Mackenzie projections for C&I solar capacity added through 2029, this means the sector will generate more than $9 billion in tax credits from 2025-2029, as shown in the chart below.
C&I solar projection data: SEIA/Wood Mackenzie ITC value per installed watt of C&I solar: Evergrow data
Clean energy tax credits, including commercial solar tax credits, are transferable, which means the taxpayer who is eligible to claim the credit may sell it to a third-party to help defray the costs of installing a system.
Learn more about C&I solar tax-credit financing
Evergrow helps owners of C&I solar projects access tax-credit financing. Click “Get Started” to learn more.
