Case Study: Long Term Solar Ownership - Sandy's Pizza - USDA Reap Grant

In 2016, Sandy's Pizza owner Dan Bittner approached Morton Solar to discuss the possibility of installing a solar energy system on the landmark restaurant in Fort Branch, Indiana. Sandy's happened to be located in a rural area as classified by the Small Business Administration, so they were eligible for the USDA REAP Grant. And, Morton Solar was able to write their grant application and get them approved for 25% of the project cost. Now that Sandy's has had their solar energy system for over six years, we would like to take a deep dive into the technical and economic aspects to see if solar energy was a wise investment for the restaurant.

Sandy's Pizza is located at 609 South Main Street, Fort Branch, Indiana.

Sandy's solar energy system was commissioned in January, 2017. The system consists of 278 SunPower P17-340 solar panels for 94.5KWdc system rating. There are five Fronius Symo 15.0 KW inverters for an AC rating of 75KWac. The utility company uses the AC ratings of the inverters to size the systems for their engineering purposes. The solar panels are mounted on multiple buildings on the property since the roof of the restaurant alone was not large enough for this amount of panels. Fortunately, there are some storage buildings behind Sandy's that had roof space available, so multiple roofs were utilized. The inverters and electrical switchgear is housed in one of the buildings, and from there, the power is sent to interconnection point next to the electrical meter. A system expansion ensued in 2019 which added an additional 50 panels and an inverter.

Inverter room at Sandy's Pizza.

The system at Sandy's is designed to interconnect with the utility company at 208V-3 Phase. The system is capable of sending 200A of current back into the utility grid. However, most of this power is consumed in the building to keep their refrigeration, ovens, lights, HVAC, and all of the other necessary equipment required to operate the restaurant.

To this date on February 21st, 2023, the system has produced 700,020 KWH's over a six year period.

Return on Investment (ROI)

Now that the system has been up and running for six years, we would like to take a look at the return on investment of this project. Commercial solar projects are quite a bit more complicated than residential solar, but can provide a slightly better ROI because there are a couple of extra incentives available. One of those is the MACRS Accelerated Depreciation for Solar Energy Systems. This allows a farm or business to 'write-off' the solar equipment is a similar manner that they can take this incentive for tractors and other farm equipment. For most farms and businesses, this can be in the ballpark of a 10-20% tax credit which can be spread out over multiple years if necessary. Businesses can also take the Investment Tax Credit which was 30% in 2017 when Sandy's installed this system. However, this amount has been increased by the Inflationary Reduction Act (IRA) to include a 10% adder if the business is located in a 'Coal Community'. And, most of SW Indiana and SE Illinois are located in Coal Communities.

So, here are the costs and incentives of the Sandy's Pizza solar project:

Original System Design, Procurement, Installation Price: $199,000

USDA Reap Grant (Awarded 2017): ($49,750)

30% Federal Tax Credit (ITC): ($44,775)

MACRS Depreciation (15%): ($23,387)

Original System Realized Price: $81,088

2019 System Expansion (20KW): $42,900

30% Federal Tax Credit (ITC): ($12,870)

MACRS Depreciation (15%): ($6,435)

Expansion System Realized Price: $23,595

TOTAL SYSTEM REALIZED PRICE: $104,683

TOTAL ENERGY PRODUCED: 700,020 KWH

AVERAGE PRICE OF ELECTRICITY (PLUS DEMAND): $0.14 per KWH

TOTAL VALUE OF ENERGY PRODUCED TO DATE: $98,002

To summarize, we are happy to report that Sandy's solar energy system will break even this year. That will equate to about a 6.3 year payback, or break even date on the energy production alone.

However, there is another major benefit that Sandy's Pizza enjoys from their solar energy investment, that most solar payback calculators overlook, and that is the Increased Property Value and the ownership of assets. As a rule of thumb, the cost of materials for a solar energy project is about 60% of the overall cost. So, it can be estimated that the cost of the solar panels, racking, inverters, switchgear, and wiring (assets) added about $145,000 in value to the property. Many real estate agents in this area might argue about increased property value, but it hard to argue with the fact that these assets can be seen, touched, felt, and removed to be sold if the owner chooses to do so. But, the fact is, that would be silly to do since this system will produce at least $500,000 in energy over the next 25 years for Sandy's Pizza.

And, beginning in 2023, the USDA Reap Grant has been increased to 40% of solar project costs. And, the Inflationary Reduction Act (IRA) has increased the Federal Tax Credit to 30% PLUS a 10% adder for businesses located in 'Energy Communities' and/or located in a 'Low-Income Community'. So, businesses that qualify for both of these could potentially be eligible for 80% of a solar project total cost starting in 2023.

Contact Morton Solar at (812)402-0900 or contact@mortonsolar.com for more information on eligibility requirements and how to get started on a USDA Reap Grant application.