NEWS

22Jul2015

Large Scale Rooftop Solar – Time to Invest?

 

Clean Energy Corporation Australia has conducted a feasibility assessment on the benefits of solar energy for large scale regional manufacturing facilities.

The case study is a high level reference to the key statistics gained from the consumption data analysis, the projected solar system capabilities, government incentive based risk and the energy, financial and environmental benefits for the facility.

Large scale rooftop commercial solar in Australia is still largely under-utilised, as substantial energy consumer’s look for energy efficient products that produce faster rates of return compared to the long term nature of solar PV investment.

The manufacturing facility is eligible for Clean Energy Finance Corporation (CEFC) funding, whilst also being a comparable profile to most large energy users. The facility operates seven days a week for 10 hours a day with manufacturing and processing being the core of the operations. Energy intensive process equipment, cooling/chiller systems and lighting within the facility make a significant amount of the consumption habits. Using data collated and conservative assumptions, a payback period of 7.95 years can be achieved with a 500kW system while offsetting a substantial amount of energy consumption.

 

Potential Offset

These consumption habits correlate with solar production as they are relatively constant and employment practices run during the day aligning with solar production.  See Figure 1. Assuming a large facility with annual consumption of 3800 MWh, a 500kW system can be used to offset part of the energy demand. Historic weather data for New South Wales illustrates that a 500kW system would produce 742MWh annually.

offset_graph

A system of this size is undersized compared to the facility’s demand but financially appealing due to 100 percent of the solar production being used directly without exporting excess to the grid. This is financially beneficial as it directly offsets the cost of the electricity being consumed from the grid. This undersized and optimised system can offset close to 20% of the facility’s consumption at an attractive rate. In addition, any solar energy produced which is not utilised will likely be forfeited due to export limiting requirements prescribed by the network distributor.

 

Environmental Benefits

The first year solar energy generation of 742MWh is equivalent to 564 tons of carbon dioxide (CO2) offset.

The cumulative 25 year solar energy generation of 16,613MWh is equivalent to 12625 tons of CO2 offset.

 

Government Incentives and Rebates

A solar system larger than 100kW grants the manufacturing facility eligibility to Large-scale Generation Certificates (LGC), whereby one LGC can be claimed for each MWh produced up until the year 2030. This also makes time a key factor in the decision as there is a limited time-frame to claim LGC’s. A 500kW solar PV system will be eligible for LGCs for generation of approximately 742MWh.

Clean Energy Corporation Australia has conducted an industry analysis looking at future predicted LGC demand coming into the market, coupled with supply of LGC up until 2030.  See Figure 2. Although these figures are assumptions that cannot be completely accurate we have endeavoured to produce the most accurate data possible. –  Contact the author of this article for further details regarding LGC price forecasting and modelling.

 lgc

 

Financial Benefits

Using the LGC price forecast in the analysis of the case study enabled an accurate representation of future cash flows.

The electricity was charged on a Time of Use (TOU) format at competitive rates whereby peak, shoulder and off-peak times were charged at 0.153 c/kWh, 0.109 c/kWh and 0.07 c/kWh respectively.

The manufacturing facility’s energy bill is over $30,000 a month, which is not uncommon in the industry and this same analysis can be applied to both smaller and larger energy consumers.

The manufacturing facility could expect to pay back the 500 kW system in 7.95 years with a 10% return on investment (ROI). Assuming electricity prices increase at 3% per year and energy production of the system follows the manufacturer’s warranty in conjunction with historic weather data the projected cash flows can be seen for the next 25 years in Figure 3. Due to the LGC’s stopping in 2030, the cash flows will reduce in the year 16. Additionally, 510 000kg of carbon dioxide can be offset.  This is the equivalent of approximately 140 cars on Australian roads.

25 year savings

The Clean Energy Finance Corporation (CEFC) can assist with finance from a range of lending facilities including the National Australia Bank (NAB) and Commonwealth Bank of Australia (CBA). This provides access to very competitive rates of under 5.7%. This has allowed large energy consumers an opportunity to enter the solar PV market with favourable financial terms when looking at Internal Rates of Return and Returns on Investment.

Throughout this case study we see a range of factors affecting the current landscape and viability large commercial business’ looking at opportunities to cut their energy and operating costs, while investing in energy saving technologies. The incentive to invest in large-scale rooftop solar has been subdued for a very long time, but with LGC pricing rising (and 15 years left on the scheme), access to cheaper funding now more readily available, solar product pricing dropping, lower installation costs and with a risk of a dropping exchange rate – is it time to take large-scale commercial rooftop solar seriously?

  • 22 Jul, 2015
  • James Cronan
  • 0 Comments

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