5.2 Commercial And Industrial Solar Installations

Introduction

Commercial and industrial solar installations apply photovoltaic technology to the electricity needs of businesses, factories, warehouses, malls, data centers, and other non-residential facilities. They typically sit between small residential systems and very large utility-scale plants, both in size and in how they interact with the grid and the host building. This chapter focuses on what is distinctive about solar for commercial and industrial users, often abbreviated as “C&I solar”.

Typical System Sizes And Settings

Commercial and industrial systems usually start where rooftop residential systems end. A small shop might install a system of 20 to 50 kilowatts, a supermarket or office building might use hundreds of kilowatts, and a large factory or logistics center can reach several megawatts on a single site. These systems are often installed on flat or gently sloped roofs, on large parking lots as carports, or on nearby ground where land is available.

The electricity from C&I solar is mainly used on site to serve lighting, cooling, heating, machinery, refrigeration, and office equipment. Because many commercial and industrial loads operate during daylight hours, there is often a good match between solar generation and demand, which influences system design and economics.

Load Profiles And System Design

Commercial and industrial consumers have characteristic load profiles, which describe how their electricity use changes across the day and across seasons. An office-heavy building might have a sharp rise in demand in the morning, a plateau during business hours, and a drop in the evening. A factory with multiple shifts may have nearly constant demand, while a cold storage warehouse can have high and steady demand for refrigeration.

For C&I solar, the designer aims to match part of the load profile with the solar generation pattern. Solar output typically follows a bell-shaped curve over the day, with a peak around midday. When consumption is also high at this time, more solar energy can be consumed on site rather than exported to the grid. The share of solar electricity that is consumed directly at the premises is often called the self-consumption rate. A high self-consumption rate usually improves the financial performance of the system, because the owner avoids buying expensive grid electricity instead of selling surplus power at a lower tariff.

Integration With Commercial Roofs And Structures

Commercial buildings often have large flat roofs made of concrete, steel decking, or lightweight materials. Mounting systems for these roofs are commonly ballasted, which means they are held in place by weight rather than by penetrating the roof, in order to minimize the risk of water leaks. Roof structural strength must be checked to ensure that it can bear the additional weight of panels, mounting systems, and, where relevant, snow loads.

Obstructions such as HVAC units, vents, skylights, and parapet walls can create shading and reduce available area. For industrial sites with processes that emit dust or fumes, such as cement plants or certain manufacturing facilities, panel soiling and corrosion risks must be evaluated. Carport installations over parking areas are another frequent option for commercial customers, providing both electricity and shaded parking. These structures must be designed to withstand wind, rain, and, in some climates, snow and ice.

On-Site Versus Grid-Export-Oriented Designs

Many commercial and industrial systems are designed primarily for on-site use. In that case, the system size is often limited so that typical daytime production does not significantly exceed daytime demand. In other cases, such as in regions with favorable feed-in tariffs or power purchase policies, it may be attractive to oversize the system relative to on-site demand to maximize grid exports.

For on-site oriented systems, the designer may study historical consumption data, often from smart meters, to determine a system size that keeps exported energy at an acceptable level. Where tariffs penalize high peak demand, solar can also help reduce those peaks, although this depends on the timing of the peaks relative to solar output.

For export-oriented designs, grid connection capacity and local regulations become more important. In some jurisdictions, there are size thresholds that trigger more complex permitting or grid studies once exceeded. Commercial customers must understand these thresholds to avoid unexpected delays or costs.

Tariffs, Demand Charges, And Solar Value

Commercial and industrial tariffs are often more complex than residential tariffs. Instead of paying only for energy in kilowatt hours, C&I customers frequently pay a combination of energy charges and demand charges. Demand charges are based on the highest power level, in kilowatts, that the customer draws from the grid over a defined period, often 15 minutes, during the billing cycle.

Solar can reduce both energy charges and, in some cases, demand charges. Energy charges are reduced by the kilowatt hours generated on site and used directly. Demand charges can be reduced when solar output coincides with the time of peak demand. However, if a facility’s peak demand occurs in the evening or at night, solar alone may not significantly reduce demand charges.

The monthly bill for a commercial user often includes a term like:
$$ \text{Monthly bill} = C_E \cdot E + C_D \cdot P_{\max} + C_F $$
where $C_E$ is the energy charge per kilowatt hour, $E$ is the total energy consumed, $C_D$ is the demand charge per kilowatt, $P_{\max}$ is the maximum demand observed during the billing period, and $C_F$ represents fixed charges.

Understanding these tariff structures is essential for designing C&I solar that delivers meaningful savings.

Business Models And Contract Structures

Unlike most residential users, many commercial and industrial customers do not necessarily buy a solar system outright. Instead, they may engage in different business models that match their financial strategies, balance sheets, and appetite for risk.

One common arrangement is a power purchase agreement, often called a PPA. Under a PPA, a third-party investor develops, owns, and operates the solar installation on the customer’s site, and the customer agrees to buy the electricity produced at an agreed price per kilowatt hour for a fixed term, often 10 to 25 years. This allows the customer to benefit from solar without upfront capital expenditure, while the investor receives a predictable revenue stream.

Another approach is a leasing model, where the business pays a regular fee for the use of the solar system, but does not necessarily pay directly for the electricity output. In some regions, lease-to-own structures are available, where ownership transfers to the customer after a set period.

For customers with sufficient capital, direct ownership allows them to capture the full financial benefits, including savings on electricity bills, tax incentives where available, and sometimes income from exported electricity. In this case, the organization must also account for maintenance responsibilities and potential impacts on its financial statements.

Policy And Regulatory Context For C&I Solar

The attractiveness of commercial and industrial solar depends strongly on local policies and regulations. Net metering or net billing rules determine how surplus electricity exported to the grid is credited. In some places, exported energy is valued close to the retail rate, which benefits customers with variable daytime loads. In other contexts, exported energy is credited at a lower wholesale rate, which encourages designs that emphasize self-consumption.

Some jurisdictions have specific caps on system size relative to the customer’s load or connection capacity, especially for on-site generation. Utilities may also impose technical requirements such as protection devices, remote disconnection capabilities, or power factor control for larger C&I systems, since these systems are big enough to influence local grid conditions.

In addition, tax policies, accelerated depreciation rules, or investment incentives can be particularly relevant for businesses, because they can be integrated into the company’s broader financial and tax planning. Corporate environmental reporting requirements or voluntary sustainability commitments can also play a role in motivating C&I solar projects.

Storage, Backup, And Reliability Considerations

Commercial and industrial operations often place a high value on reliability. Many facilities must avoid downtime, especially in sectors where interruptions can damage equipment, spoil products, or disrupt critical services.

On its own, a grid-connected solar system will typically shut down during a grid outage for safety reasons. To provide backup power, C&I installations may be combined with battery storage or with other backup sources such as diesel generators. Battery systems can be designed to maintain power to critical loads, such as servers, essential machines, or emergency lighting, during outages. They can also perform additional functions, such as demand charge management or time shifting of solar energy to later in the day.

For industrial users with energy-intensive processes, hybrid systems that combine solar, storage, and existing backup infrastructure can provide both reliability and cost savings. Control systems become more complex, because they need to manage when to charge and discharge batteries, when to rely on the grid, and when to start backup generators, all while respecting technical and contractual constraints.

Environmental And Corporate Image Benefits

Many companies pursue solar installations not only for cost savings but also for environmental and reputational reasons. On-site solar can reduce a company’s scope 2 emissions, which are the indirect emissions from purchased electricity. This can help organizations meet corporate climate targets or align with environmental, social, and governance frameworks.

Visible rooftop or carport solar installations also communicate a company’s sustainability commitment to customers, employees, and investors. Some companies use real-time solar production displays in lobbies or websites to highlight their performance. This can be especially valuable for brands that wish to demonstrate leadership in environmental responsibility or that operate in markets where customers are sensitive to climate and sustainability issues.

Sector-Specific Examples

Within the broad category of commercial and industrial solar, different sectors use solar in distinct ways. Retail stores and supermarkets often install rooftop systems to offset refrigeration and air conditioning loads during daytime hours. Logistics centers with large flat roofs and parking lots are especially well suited to solar, because they have ample space and relatively stable loads.

Manufacturing plants can use solar to offset base electricity demand for machinery and process loads. Some energy-intensive industries may not be able to meet all their needs with on-site solar because of limited roof space relative to their consumption, but they can still significantly reduce grid purchases.

Data centers, which have high and constant electricity demand, may combine on-site solar with off-site renewable contracts to increase their share of clean energy. Hospitals and educational institutions often use solar as part of broader sustainability programs, sometimes combined with teaching and research objectives.

Planning And Implementation Steps Specific To C&I

While detailed project development is covered elsewhere in the course, C&I solar has specific planning features. The process often begins with an energy use analysis, using at least 12 months of consumption data, and ideally shorter interval data, to understand load patterns. Site surveys evaluate available roof or ground space, structural capacity, shading, and existing electrical infrastructure.

Commercial organizations must often coordinate internal stakeholders, such as facility management, finance, procurement, legal, and sustainability teams. Contracts can be more complex than for residential systems, especially for PPAs or leases, and may involve negotiations on price escalations, performance guarantees, and responsibilities for maintenance and insurance.

Connection to the building’s electrical system is usually at a medium voltage or low voltage point that serves the whole facility or a major section. Designers must ensure that protection settings, metering arrangements, and compliance with safety codes are in place, and that any modifications are acceptable to the utility and any relevant authorities.

Operation, Monitoring, And Performance Management

Once installed, commercial and industrial solar systems require active monitoring to ensure they operate as intended and deliver expected financial and environmental benefits. Performance monitoring typically includes real-time or near real-time data on energy production, inverter status, and sometimes module-level data. Businesses compare actual performance to expected performance models that account for weather conditions and seasonal variations.

Regular cleaning may be more important in industrial environments where dust, soot, or chemical residues are present. Inspections may focus on potential issues with wiring, inverters, mounting structures, and roof conditions. Early detection of faults or underperformance protects the business case and avoids disruptions.

Some organizations integrate solar monitoring into their broader energy management systems, which also track building energy use, heating and cooling, and other processes. This integration allows them to adjust operations, for example shifting certain activities to periods of high solar production when feasible.

Challenges And Limitations Unique To C&I Solar

Although the potential for C&I solar is large, projects can face particular challenges. Roof ownership and tenancy arrangements can be complex. For example, in a shopping center or industrial park, the building owner and the electricity consumer may not be the same entity, which complicates who benefits from the solar system and who invests in it. Long lease terms and clearly defined responsibilities can help, but negotiations may be difficult.

Industrial operations can change over time. A company might expand, close, or relocate a facility before the end of the solar system’s expected life. This creates some uncertainty around long-term investment returns, especially for systems with 20 to 25 year lifetimes. Some contracts attempt to address this through buyout clauses or relocation options.

Technical limitations may arise due to constrained grid capacity, especially in areas where many C&I systems already exist. Utilities may require costly grid reinforcement or impose limits on export capacity, which can affect the economics. Finally, many businesses lack internal expertise in energy systems and must rely on external advisors or developers, which increases the importance of transparent contracts and clear performance expectations.

Summary

Commercial and industrial solar installations occupy a key space between small residential systems and large utility-scale plants. They are shaped by the size and patterns of business energy use, the physical characteristics of commercial buildings and industrial sites, and the financial and contractual frameworks of the organizations that host them. Their success depends on aligning system design with load profiles, understanding complex tariff structures, choosing appropriate business models, and managing technical and regulatory requirements.

For many businesses, C&I solar provides not only a way to reduce energy costs, but also a tool for improving resilience and advancing corporate sustainability goals. As policies evolve and technology costs continue to change, the role of commercial and industrial solar in the broader energy transition is likely to expand further, particularly when combined with storage, digital monitoring, and innovative financing models.