Publication: Solar power
This paper is information resource for managers looking to invest in solar power to supply a portion of a facility’s energy usage. Solar power can provide long-term energy and cost savings however a careful analysis is needed to check whether it is the right option for your business.
Should your business consider solar power
We conduct solar power assessments standard in our energy audits. However, for most of our clients we often identify cheaper and easier options to reduce energy costs. We typically advise our clients to first tackle the more cost-effective energy and demand saving solutions, such as upgrading lighting, installing power factor correction and optimising HVAC systems.
However, many businesses these days have already installed some energy efficient equipment and are looking at the next stage in energy management, and this typically involves a more significant capital expenditure.
When considering major capital works such as replacing chillers, upgrading a BMS and replacing motors with high efficiency motors, the installation of solar panels may be a viable, and potentially cheaper and simpler alternative.
When assessing the cost-benefits of installing solar power there are several important issues to be aware of:
1. Feed-in tariff
Many states such as NSW and QLD do not offer feed-in tariffs to large businesses (households and small businesses may be eligible for a low feed-in tariff. It is important to enquire with your energy retailer on whether they would offer a feed-in tariff. This will significantly impact the cost-effectiveness and the sizing of a solar array.
2. Export ratio
Typically a large business will receive no, or a relatively low feed-in tariff. Therefore any electricity generated from a solar array and exported to the grid may generate no, or minimal cost savings. To maximise the cost-effectiveness of a solar installation all electricity generated from the solar array should be consumed at the time of generation, this is referred to an export rate of zero (battery storage may be used, however this may significantly increase installation costs by over 50%).
3. Sizing an array
To ensure no electricity is exported to the grid it is important to correctly size the array to match a building’s pattern of demand. Using average monthly or yearly data is not suitable and will generate errors. The electrical demand of a facility must be measured throughout the day and night (e.g. interval data analysis). A solar array should be sized to so that its peak output is less than the minimum daytime demand of a site. As a rough guide, the maximum summer peak generation of a solar array is ~60% to 80% of its rated output.
4. Available space
A solar array may use 8m2 to 10m2 per kW of installed capacity. At many sites the maximum size of a solar array may be limited by available roof space, shading and unsuitable roof structure.
5. Be conservative
It is better to be conservative and install a smaller capacity solar array, than to install a larger array and find you are exporting a lot of electricity to the grid (and getting nothing in return). There is always an option to upgrade and increase the capacity of solar array in the future if needed.
5. STCs and LGCs
It is important to consider the size of a solar array and the impact on STCs and LGCs. In a simplified approach: Small scale technology certificates (STCs) are applicable to solar arrays < 100kW, and LGCs are applicable to solar arrays > 100kW. The spot price for STCs is generally higher than LGCs. STCs are typically generated at the time of installation and assume a 15-year generation period. STCs can therefore significantly offset the initial installation cost. LGCs however are typically generated annually based on the metered electricity generation of a solar array. LGCs therefore provide an ongoing annual cost saving and no upfront cost reduction. LGC generation is more complex than for STCs, a site must apply to become an accredited power station in order to create LGCs and certain book-keeping requirements must be met.
6. Your electricity costs
The more your are paying for electricity, the more money installing solar power will save. It is important to consider your time-of-use charges and calculate cost savings based on when the solar array will be generating electricity. Do not use an average electricity rate. This is a common mistake. Always use actual electricity rates from your most recent electricity bill.
7. Demand reductions
One of the most neglected areas when conducting a cost-benefit analysis of a solar installation is whether it will generate savings off network demand or capacity charges. As discussed in our paper on understanding electricity costs, demand charges can account for up to 25% of total electricity costs.
If you facility has a peak demand consistently between 11am to 3pm, then chances are installing a solar array will generate significant demand savings. This can increase annual cost savings and reduce the payback time on investment.
If however your building has a peak demand that can occur in the morning or the afternoon or evening (when the output of a solar array may be low, or negligible), then little demand savings may be achieved and the payback time will increase.
It is also important to conduct a network tariff analysis to asses how you are being billed for demand. Some sites are billed on all-time demand throughout the day and night, or only on peak-period demand, or some sites have a separate demand charge for peak, off-peak and shoulder times.
8. How much energy can we save
For more sites solar will never be able to generate all of your electricity demand. Due to limitations sizing an array to meet minimum daytime demand, and limitations with available roof space most sites we audit can only install a solar array that can supply 15% to 25% of total electricity consumption. This is a significant saving, and considering a 20 to 25 year life of the solar panels, installing solar power can provide long-term cost and energy savings.
9. What is the payback on investment
The payback will vary significantly depending on a range of factors. We are able to conduct a stand-alone solar power assessment, or include it in an energy audit. As a rough guide, from our experience a solar installation usually has a payback between 6 and 10 years. If you have a supplier telling you their solar panels have a payback < 5 years it is wise to be sceptical.
10. Get independent advice
Solar panels represent a significant capital investment. Depending on the size of an installation costs may vary from $5K to over $100k. The payback can vary from 6 to 10 years. Sizing the capacity of a solar array and conducting a cost-benefit analysis is a complicated process. Don’t rely on a cost assessment from a supplier trying to sell you their product. Before spending big, take the time to seek independent advice. Make sure any money you invest will generate the desired energy and cost savings.
We do not sell or supply solar panels, nor are we affiliated with any suppliers. We provide independent, unbiased and expert advice.
Contact us now
Contact us for a a solar power assessment.