When finance and engineering teams evaluate industrial solar projects, the primary focus is often on the Levelized Cost of Energy (LCOE) or simple payback period. This perspective, however, frequently misses a critical financial variable: the impact of the new solar asset on the Total Cost of Ownership (TCO) and depreciation rate of the existing factory electrical installation. Integrating a power generation source fundamentally changes how assets that were once simple consumers must now behave.
What is TCO for Electrical Assets?
The Total Cost of Ownership for an industrial electrical system is a comprehensive financial calculation. It moves beyond the initial purchase price (CapEx) to include all costs associated with the asset over its entire service life. Key components include:
- CapEx: Initial acquisition and installation costs.
- OpEx: Operational costs, primarily energy (grid power) consumption.
- Maintenance: Scheduled testing, preventative service, and corrective repairs.
- Downtime: The high financial cost of production loss during an outage.
- Disposal: End-of-life decommissioning and removal costs.
How Solar Changes the Depreciation Profile
Depreciation is not just a fixed accounting entry; it reflects the physical and functional wear on an asset. A new solar array introduces two competing factors. On one hand, it reduces grid energy costs (a positive TCO factor). On the other, it can introduce new stresses – such as harmonic distortion from inverters or increased reverse power flow – that can accelerate the physical degradation of transformers and switchgear, shortening their effective lifespan if not managed.
The New Role of Maintenance in TCO
This is where a holistic solar service strategy becomes essential. A basic solar O&M contract only covers the panels and inverters. A “Level 4” service plan, however, must also include predictive monitoring of the core factory electrical installation. By using predictive tools like thermography and power quality analysis, the service provider can identify and mitigate these new stresses, effectively protecting the original asset’s value and normalizing its depreciation schedule.
Upgrading vs. Depreciating: A Financial Fork
An existing factory electrical installation that cannot handle the new solar load is, by definition, functionally obsolete. Its depreciation must be accelerated, leading to a significant write-down. Conversely, a targeted upgrade to this installation, performed as part of the solar project, resets its value. This upgrade is a new capital investment that extends the asset’s useful life and should be amortized over its new, longer lifespan, drastically improving the TCO calculation of the entire site.
Calculating the True Cost
A CFO must therefore ask deeper questions. It is not just “What is the ROI of the solar?” but “How does the solar project impact the TCO of my entire $10M electrical infrastructure?” Factoring in the cost of a comprehensive solar service plan and any necessary infrastructure upgrades provides a true, holistic financial picture, preventing unexpected capital expenditures and aligning the engineering reality with the long-term financial strategy.