Solar energy is not just for sustainability-focused companies anymore. Across sectors, organizations are ramping up investment in solar infrastructure and funding renewable energy projects, not just with the Earth's best interests in mind but also their own.

Consider Apple, which is installing solar panels across its global facilities and collaborating with suppliers to transition key manufacturing lines to renewable energy sources. It is also investing in off-site solar farms and energy storage products to offset emissions from supply chains and customers.

In the retail space, Ikea has outfitted locations with rooftop and parking lot solar installations and battery storage systems, while Walmart recently committed to building 26 new community solar and distributed generation installations across six states in an attempt to build customer affinity and meet sustainability goals. Even one of the busiest shipping hubs is eager to get in on the action: Port Newark Container Terminal in New Jersey just stood up a new 7.2-megawatt solar power plant without interrupting operations.

Even in the face of on-again, off-again tax incentives, a still murky political climate in the United States, and a confusing and uncertain global regulatory infrastructure, these and other organizations believe the business case for renewables—and solar energy in particular—has never been clearer.

Solar, which now accounts for the largest share of global renewable power capacity, delivers both hard economic and soft business benefits when integrated into an enterprise energy portfolio. Global businesses and government entities are successfully leveraging solar strategies to insulate against fossil fuel market volatility and promote greater resiliency for crucial operations. At the same time, a bet on solar advances long-term sustainability goals while burnishing a brand image to appeal to increasingly climate-conscious consumers.

Organizations are seeing cost benefits as prices of solar equipment and infrastructure continue to fall. While solar infrastructure requires a large upfront investment (ranging from hundreds of thousands of dollars to millions, depending on company size), this renewable energy source becomes more economical over time due to lower operating and maintenance costs as well as long-term annual energy savings. According to the International Renewable Energy Agency (IRENA), 91% of newly commissioned, utility-grade renewable projects delivered electricity at a lower cost than the cheapest fossil fuel installations, primarily due to technology advancements, competitive supply chains, and economies of scale. Factor in government incentives, rebates, and tax credits, and businesses can expect a payback period on solar investments of between 8 and 10 years.

“Events like the Russian gas crisis and fossil fuel cost spikes highlight the value of solar’s predictable cost structure,” says Jacquelyn Pless, assistant professor, Technological Innovation, Entrepreneurship, and Strategic Management at the MIT Sloan School of Management. While the upfront investment and, for some, a politically charged bias against solar present a challenge, companies have much to gain by integrating solar into their energy plans, says Pless, who specializes in energy and environmental economics.

“Despite unpredictable policies and regulations, solar is less susceptible to geopolitics,” she maintains. “The solar supply chain is more diversified than traditional fossil fuels. Even without subsidies, solar is still the more economic choice in many locations.”

Solar energy on the upswing

Market dynamics are helping to have an effect in favor of solar energy. IRENAreports that the cost of electricity from solar photovoltaics, a modular solar technology that can expand from residential rooftop systems to utility power generation plants, has dropped by 82% since 2010, making it one of the most affordable sources of new electricity. By the end of 2024, solar energy accounted for the largest share of global renewable power capacity, firing up 1,865 gigawatts (GW) out of a total capacity of 4,448 GW, IRENA estimates. Asia has more than doubled its solar power installations since 2022, with the largest capacity increases in China (278 GW) and India (24.5 GW).

The outlook for solar is still relatively sunny in the United States, which is experiencing a volatile political climate and policy rollbacks for renewable energy. The U.S. Energy Information Administration confirms a record 30 GW of solar was added to the grid, accounting for 61% of last year’s added capacity, with another 32.5 GW expected to be onboarded in 2025. Battery storage, which helps balance supply and demand and improves grid stability by storing already created electricity, is also experiencing record growth, with 18.2 GW of utility-scale capacity to be added this year, according to the International Energy Agency.

Greater capacity and wider availability, fueled by positive market momentum, make a compelling case for enterprises to incorporate solar into their energy mix. Regionally, the bulk of U.S. activity is happening in Texas and California, which account for almost half of the expanded solar capacity. Other states are following suit, including Arizona, Michigan, Florida, New York, and Indiana.

“Between the technological improvements, decreasing costs, and incentives and tax benefits, the business case for solar is really attractive,” contends Bruno Pincolini, AI lead for the utilities industry at SAP.

The solar advantage: Cost savings and beyond

As the price of solar power infrastructure continues to drop, businesses see a path to big cost savings from transitioning to a renewable energy strategy. The Carbon Trust estimates that switching to renewable energy from fossil fuels can lead to a 20% to 50% reduction in energy costs over time. Depending on the country and region, companies can also leverage numerous tax advantages, subsidies, and other financial incentives to further drive down costs.

“The fundamental economics of renewables, and solar in particular, are shifting,” says Geoff Tuff, a sustainability leader in Deloitte’s Global and U.S. Energy, Resources, & Industrials group. “The costs are coming down on battery and storage technologies. In many regions, the cost curves are crossing, and solar energy and renewables are more affordable than some types of fossil fuel energy.”

Beyond cost savings, solar energy brings other benefits to the table, including:

Energy independence and business continuity: Reducing reliance on the grid insulates enterprises from both supply chain disruptions and the price volatility of traditional energy sources. This provides a measure of energy independence, financial stability, and business continuity. Solar power purchase agreements, which create a predetermined rate for electricity generated by on-site solar systems, can ensure more predictable costs, reduce potential penalty charges, and create greater opportunity for long-term savings. The rise of the “prosumer”—a decentralized approach whereby companies not only consume but also sell excess power back to the grid—monetizes solar investments by creating additional revenue streams.

“Almost any commercial and industrial contract, whether you’re a McDonald’s, a manufacturing plant, or a ski resort running lifts, has a commitment to use a set amount of electricity during specific periods of time, and there are penalties if usage is above or below contract commitments,” says Henry Bailey, senior director, strategy for the utility and energy segment at Cognizant. “If you’re able to generate your own electricity and store it to augment what’s contracted with a utility, you can balance the loads and avoid penalties.”

Growth to meet rising energy demands: Demand for electricity, fairly static for more than a decade, is now soaring thanks primarily to the hypergrowth of data centers required to support the surge in AI deployment. This increase in demand has created a need for complementary energy streams that can be deployed quickly, including clean sources of power like solar. “It’s no longer a zero-sum game—the generational demand for increases in electricity requires a lot more power sources,” says Ivan Kozak, a managing director in Deloitte’s sustainability strategy practice. “That strengthens the case for including renewables in the mix.”

Meeting sustainability goals: Sustainability remains a key driver of solar power investments, whether the goal is meeting corporate sustainability objectives or enhancing the brand image with environmentally conscious consumers. Despite recent retrenchment from environmental, social, and governance initiatives in the United States, sustainability remains a major compliance issue on the global stage. Moreover, companies across geographies increasingly associate sustainability with business advantage. According to a Morgan Stanley Institute for Sustainable Investing report, 85% of respondents view sustainability as a value creation opportunity and over 80% see the potential for sustainability to drive stronger cash flows, higher profitability, and higher revenue growth.

AI and data analytics help solar ROI

The accelerating pace of AI adoption is strongly escalating energy needs, but the technology can also play a role in improving the costs and performance of solar infrastructure.

As with most industrial assets, AI and machine learning models can power predictive and preventive maintenance applications, helping to detect and correct anomalies in advance of solar panel and other equipment failures. In addition, sensor data, historical records, and visual equipment inspections can be analyzed and used in model training to initiate real-time adjustments and fixes to potential problems, boosting reliability and continuity of solar service.

ENGIE, a global energy firm prioritizing a transition to renewable energy production, deployed intelligent technologies to help manage and maintain its growing solar capacity and ensure predictable, reliable operations. By leveraging digital twin capabilities made possible using tools like SAP S/4HANA, SAP Predictive Asset Insights, and SAP industry cloud products, the energy giant’s Chile operation launched a predictive maintenance application aimed at improving asset uptime. One notable benchmark: ENGIE Chile achieved an 11% reduction in production losses, thanks to its ability to pragmatically identify and replace broken fuses.

AI coupled with advanced analytics and cloud-based data warehouses can also support real-time energy forecasting. This capability allows enterprises to predict and improve energy usage, avoid service disruptions, and choose best periods for when to produce, consume, or store energy. “Power generation from solar is obviously free, but it’s not like traditional power that you can turn on and off depending on how you want to consume it,” says SAP’s Pincolini. “AI can help determine when to sell energy back to the grid based on peak prices. This can become another source of income to the business.”

Industrielle Werke Basel AG (IWB), a Swiss utility and energy solutions provider, is among those leaning into machine learning to predict solar power production. Using SAP Business Technology Platform, SAP Datasphere, the SAP Energy Data Management application, and SAP Analytics Cloud, the utility is consolidating current and historical data, cumulative power load profiles, and local meteorological forecasts to improve power supply management through real-time insights. The AI-driven analysis is also working to boost IWB’s sustainability metrics, allowing it to optimally incorporate solar power into its overall energy mix.

Ongoing challenges

Even with the recent momentum, a few obstacles could blunt solar’s short-term impact. The capital intensity of solar investment remains a gating factor for many organizations, despite the long-term promises of declining costs and faster payback.

The intermittent nature of solar energy can be another hurdle. Solar typically requires a hybrid approach of solar generation and battery energy storage systems (BESS), which store excess electricity for later use and thus are critical to ensuring a consistent power supply. This approach introduces integration issues, because much of the grid has yet to be upgraded to efficiently support solar infrastructure, including BESS. “The technology to manage the grid with intermittent solar plus BESS is different from more point-based generation energy sources,” says Deloitte’s Kozak. “Grid management technology can deliver potential advantages.”

In addition, the regulatory environment and reduction of financial and tax incentives continue to be a drag on solar planning, as both play a significant role in relative economics. In the United States, for example, policy changes are diminishing tax credits and financial incentives for renewables, and continuing high interest rates raise the cost of initial capital expenditures for solar infrastructure.

These same trends are also challenging the economics of fossil fuel-powered generation, notes Deloitte’s Tuff. “These projects are taking longer to deploy and are getting more expensive, given both the scarcity of turbine supply and the same impact from cost of capital increases,” he explains. “So, on a relative basis, renewables remain an attractive addition, and in some cases alternative, given the large increase in demand growth we are seeing.”

Best practices for moving forward

When building a business case for solar and other renewable energy sources, leaders should emphasize not just sustainability benefits but also the economic value. As with any other major business investment, it’s important to set up clear and tangible metrics for tracking performance and demonstrating value to key stakeholders, especially the C-suite and the board of directors.

Leadership teams considering solar adoption should also continue to build a strong data infrastructure, including data management capabilities, growable data warehouse platforms, and intelligent analytics tools. AI and machine learning capabilities can help to improve solar output and costs, but they require high-quality data.

Finally, business leaders need to understand that a successful path to renewables takes a village. Look beyond your organization’s four walls and identify partners, communities, and peer companies to collaborate on renewables initiatives that advance growth and competitive advantage. Think about energy not as a cost center, but as a way for strategic advantage.

“You often have to play with others to get the best economic returns,” says Tuff. “We’re living in a world we’ve never seen before, and change is only accelerating. It creates all sorts of opportunities to do things differently.”

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