The push and pull of commercial solar in Australia
More and more businesses are taking up solar photovoltaic (PV) systems on commercial premises in Australia and, according to SunWiz Managing Director Warwick Johnston*, it’s happening more frequently. Warwick talks to Sustainability Matters about some of the latest trends in commercial PV and the push and pull factors at play in Australia.
While the solar industry has been ‘distracted’ by the residential solar market for some time, Warwick believes there are now greater opportunities and less market saturation in the commercial market. “This is giving commercial PV a push,” he said, “while the pull factor, and one of the main drivers for the growth of commercial PV, is that solar is now recognised as making good financial sense.
“We’ve seen a considerable decrease in pricing over the past two years, which has made solar affordable for business,” said Warwick. “Now, with only relatively incremental improvements in solar PV efficiency and price, businesses are no longer holding off investing in solar.
“Financing is also more readily available for commercial PVs than it once was.”
However, businesses should take care when it comes to investing in solar. “Make sure you get a financial evaluation that takes into account your hour-by-hour energy consumption and your tariff structure,” Warwick advised. “All too often, we see businesses investing in an oversized system that doesn’t match their energy consumption profile. So what might have been an impressive return, if it was appropriately sized or positioned on a better business, might end up being a woeful financial return.
“Businesses need to get an analysis that takes into account an hour-by-hour energy balance across an entire year.”
Small businesses have an energy tariff structure that is pretty similar to residential structures — mainly a fixed charge and then a per-kilowatt charge over that that can be quite high, explained Warwick. “But when it comes to large industry energy users, they generally have a low kilowatt-hour charge and then have a separate charge for their peak demand.”
Warwick has completed a white paper on how solar can reduce the demand charges that many of these businesses face. “Interestingly, our analysis showed solar can reduce peak demand charges quite considerably, but it varies depending on where the business is located, the tariff structure and the energy consumption profile. In summary, peak demand reduction is possible from solar; never guaranteed, but always worth evaluating if that’s going to change the financials from reasonable to outstanding.”
How will the upcoming election influence the solar market?
Warwick forecasts that STC (small-scale technology certificate) pricing under the government’s Small-scale Renewable Energy Scheme will be pretty much unaffected by the election. He also expects renewable energy regulations will remain untouched but believes the price of LGCs — large-scale generation certificates which are sold through the open large-scale generation certificate market — could be affected.
“We have just been through a fairly brutal cut to the RET (Renewable Energy Target), so it’s unlikely that anyone is going to try to cut it further.”
Although the election could add a bit of caution to the market, Warwick believes there are other significant factors that are influencing the price of renewable energy certificates more than the election, such as electricity retailers avoiding financing projects. “That said, the space in which the retailers are holding back is being filled by the state government and other industries. We are seeing the likes of the Queensland and Victorian governments announcing that they will support renewable energy generation. There is also movement by a coalition of Melbourne councils and business to go out to tender for a fairly large amount of renewable energy. So there’s a bit of activity there.”
Trends in commercial PV solar
The development of battery technology is one of the main trends in the commercial PV solar market at the moment. “From a commercial perspective, batteries can be more cost-effective or more financially viable to the extent that they are used in combating peak demand charges. From a residential perspective, when Tesla first announced its battery, PV residential solar took a bit of backward step.” Warwick explained that this was a result of people holding off investing in PV as they were waiting for the battery solution to develop, even though most PV systems are future-compatible with battery storage systems.
As far as technology goes, it looks likely that a variation of silicon will remain the dominant technology for around the next 10 years. This technology is now efficiently mass-produced in China, which is keeping prices falling each year. “I’d be quite confident in buying Chinese panels from the right manufacturer, but it would have to be a reputable manufacturer so you make sure you’re getting quality,” said Warwick.
Warwick said that the growth of Internet of Things (IoT) technology could also have an impact on the growth of solar. “For example, with household appliances, IoT technology can give you the ability to control when you consume energy. Therefore, when you have excess electricity generation, say on a sunny day in the middle of the day, your system may be capable of telling you this and you may be able to use this energy to run your dishwasher then, rather than at night.”
Although we don’t see many bakeries or hotels buying PV at present, as most of their energy is consumed during the night, this could change as technology develops. “Beyond that, we see that there is a huge number of industries across the economy that could benefit by buying PV.
“If you’re in business, you should be considering solar,” concluded Warwick.
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