Sunny Side Up

Miles Brandon’s Mazda and VW dealerships, toasting in the nearly constant sunlight of Southern California, presented what would seem ideal conditions to produce solar power.

Their large, flat roofs absorbed the rays most days of the year on his 3 ½-acre lot in the south Orange County city of San Juan Capistrano, where shade is precious and most everybody wears sunglasses outside, including Brandon, heck maybe even inside the dealership, with all of its large windows.

The dealer actually considered switching to solar-generated electricity 20 years ago after a solar vendor came calling, thinking of the potential cost-savings and gentler environmental impact. But he took his building contractor’s advice to wait until prices dropped and equipment quality improved.

He’d gotten into auto retail when he bought a 1964 Volkswagen dealership in 1997, adding a Mazda franchise in 2015. Several years after the expansion he was approached by another solar vendor and felt the time might be right to consider the change.

California had already been offering rebates for adding solar-generated power to the electrical grid, and Brandon was selling more purely electric vehicles. He also realized more EVs on the road would mean rising electricity rates, translating to higher power bills at his stores.

“I thought, why not produce our own?” he said.

After he and his building and electrical contractors interviewed a handful of vendors recommended by Brandon’s auto dealer friends, he settled on Stellar Solar out of San Diego County, to the south of his stores. The company had entered the business shortly after Brandon joined the auto industry.

Savings From the Sun

In the two years since the solar panel arrays went up on his stores’ roofs, Brandon said energy costs’ share of his operating budget have fallen about 50% from approximately 2% to 1%. He saved more than $100,000 in the first year alone. The solar vendors had conservatively estimated 5% to 6% electricity rate increases for a break-even scenario at the dealership, but Brandon has since watched rates rise by the double digits.

“Looking at what I paid before – I’m saving all that rate increase, too,” he said. “I’m really happy with the investment.”

The Mazda store, with a smaller footprint than his VW facility, generates all the power it needs through its panels, while the VW facility produces about ⅔ of its energy demands.

Brandon expects he’ll recoup his upfront installation costs in less than four and a half years, though that tends to be different for every business based on a number of factors, such as the local utility, whether a roof replacement is needed before installation, electricity rate changes over time, and any unique conditions at the site.

He said he’s doubly glad he made the move when he did because the state has since scaled back its incentives to install solar, though it still offers reduced reimbursements that can be coupled with federal tax credits.

Good Timing Today

More auto dealers are opting for solar power these days as the panel systems have become more efficient and government incentives have encouraged the switch, said Maria Vargas, director of the U.S. Department of Energy’s Better Buildings Initiative.

“I think solar is an exciting opportunity for dealerships. There have been great examples of dealers that have done that,” she said. “Energy use is one of the big overhead expenses.”

The DOE established the initiative in 2011 to increase investment in more energy-efficient buildings and share best practices between the public and private sectors.

She said multiple developments are dovetailing to make solar energy more attractive to dealerships, including the tax credits introduced by the 2022 Inflation Reduction Act for installation costs.

“You’re not reliant on a utility to create energy. In a lot of places where weather events happen, a solar system gives you a little independence, reliability, resiliency,” she said. “If energy is a big expense, all of a sudden solar looks pretty good.”

Benefits Add Up

If a dealer has conditions in his or her favor, he or she can not only recoup the upfront investment in a solar system but even save money over the long run with either low or no energy costs, which can represent a major chunk of a store or auto group’s operating budget.

Say a dealer spends $1 million to install solar but gets a $300,000 federal tax credit, plus state support if offered in its state in the form of a tax credit or other form, such as renewable energy credits. That can potentially take down its upfront cost to $400,000 out of pocket. Then over time the accumulated savings from reduced utility payments and in some cases selling excess energy back to the utility can return the balance in a few as two years.

Even in some states that don’t offer incentives, high electricity rates can mean rapid payback, said Will Kenworthy, regulatory director, Midwest, for the nonprofit group Vote Solar, where he helps develop solar policy.

“Then they save thousands a year on energy costs for 25 years – the systems are very long-lived,” he said. “What makes a successful project or not – it varies a lot, especially with large commercial businesses.”

Sifting Through the Factors

It was exactly those kinds of considerations Brandon was careful to research along with his contractor team before deciding whether to go solar, and when he did decide to switch, which vendor to go with. He said he actually learned a lot simply by soliciting proposals from multiple vendors, in his case five.

“I brought in people a lot smarter than me,” he said, narrowing the five vendors to two. “From there it was a matter of courting companies to see who was the best fit.”

Just assessing his local utilities’ electricity rate structure was tricky, as they can be opaque, to say the least, Brandon said – and he’s a certified public accountant by trade.

In the end, he considered the vendors’ estimates of future electricity rate increases conservative and decided he’d save money over time with solar. Rate hikes since then have proved him right.

The only solar savings potential Brandon decided to hold off on is the emerging use of battery storage of excess solar energy produced during daylight hours. The extra power could be used overnight when electricity rates are higher, rather than the store selling its excess back to its utility as it does now.

As he waited those years to install solar in the first place, he plans to wait until the battery technology improves and comes down in price. If he makes that move, he figures he may ultimately even make extra cash from his Mazda store rather than pay for its power use.

Besides all the savings, Brandon sees other benefits from his sunny perspective.

“It also feels good that you’re helping the environment.”

Originally posted on Auto Dealer Today