Case Study: Solar Power for a 100kW Manufacturing Facility in Ontario

• Location: Ontario (eligible for Ontario Net Metering program)
• Facility Size: 50,000 sq. ft.
• Energy Consumption: 1,200,000 kWh annually
• Current Utility Rate: $0.12 per kWh (current average Ontario industrial electricity rates)
• Peak Demand: 100 kW (consistent energy usage throughout the day)

The manufacturing facility operates during business hours, with significant energy consumption in the form of machinery, lighting, and HVAC systems. 

The company’s monthly electricity bill, currently a substantial operating expense, is one of the facility’s largest ongoing costs. With energy costs steadily rising in Ontario, reducing this bill through solar energy is important to improving the facility’s financial sustainability.

• Proposed System Size: 100 kW solar photovoltaic (PV) system
• Estimated System Cost: $250,000 – $300,000 (including installation and equipment; final cost varies based on factors like equipment choice, installation complexity, and location)
• Incentives:
  • 30% Federal Investment Tax Credit (ITC): Reduces upfront cost by 30% (for commercial solar projects).
  • Accelerated Capital Cost Allowance (CCA): The system qualifies for CCA depreciation, which allows the business to write off the cost of the system over 5 years. This reduces taxable income and increases cash flow in the early years of the investment.
  • Ontario Net Metering: Allows excess energy generated to be sent to the grid, providing credits that offset electricity costs during periods of higher consumption (winter months).

• The system qualifies for accelerated depreciation under the CCA system. The total cost of the solar system can be depreciated over 5 years, allowing the business to recover a portion of the investment through tax savings.
• Yearly depreciation will vary depending on the specific assets but can significantly reduce taxable income, freeing up cash flow. The CCA can be used to offset tax liabilities over the first few years, improving the business’s liquidity.

• Annual Savings: $17,280 (electricity and net metering credits)
• Upfront Cost After Tax Credit: $175,000
• Simple Payback Period: $175,000 ÷ $17,280≈10.1 years

This gives a payback period of approximately 10 years. After this period, the system will continue to generate savings for the facility, providing a clear financial benefit for years to come.

• After 20 years, the system will have saved $345,600 in electricity costs and net metering credits, based on annual savings of $17,280.

The system is expected to last 25-30 years, and after the payback period, the business will continue to benefit from virtually free electricity. If we assume annual inflation in energy costs of around 2%, the savings and ROI would improve over time, making the system even more profitable in the long term.

1. Upfront Tax Incentives: The federal 30% tax credit significantly reduces the initial cost of the system, making the investment more financially viable.
2. Cost Savings: The 100 kW solar system can save the facility around $17,280 per year in energy costs, reducing operating expenses and improving the bottom line.
3. Accelerated Depreciation: The facility can benefit from accelerated depreciation (CCA), further improving cash flow and reducing taxable income in the first few years.
4. Long-Term Investment: After an initial payback period of about 10 years, the system continues to generate free electricity for another 15-20 years, providing ongoing savings.
5. Environmental Impact: Solar power helps the facility reduce its carbon footprint, contributing to sustainability goals and enhancing corporate reputation.

For manufacturers in Ontario, investing in solar energy is a win-win. The combination of federal tax incentives, net metering credits, and long-term energy savings makes solar an attractive option for reducing energy costs and improving profitability.

By switching to solar, manufacturers can cut their reliance on the utility grid, stabilize energy costs, and benefit from predictable returns on their investment. Additionally, the long lifespan of solar panels (typically 25-30 years) ensures that the initial investment continues to pay dividends long after the payback period.

This case study shows that solar can be a highly effective strategy for reducing operating expenses, increasing profitability, and contributing to long-term sustainability goals.

Reduce energy costs and power your manufacturing facility sustainably with our professional solar installations in Ontario.