Our Commercial Solar PV project seeks to accelerate the uptake of larger scale solar within the commercial precincts of the Blue Mountains and Greater West region by providing an innovative, community-based approach to ownership and financing that makes business and environmental sense.
Commercial premises, with high power consumption during business hours, are ideal sites for 20-100kW solar power systems. While solar power is cheaper than retail power for many businesses, high up-front costs, and ongoing finance liability remain an obstacle to adoption.
Blue Mountains Renewable Energy Co-operative plans to address this problem through community ownership. The co-operative will purchase and own viable solar systems on commercial premises and sell the power to the occupants. After a suitable contract period (approximately 7 years), transfer of ownership to the landlord is anticipated. This scheme is expected to generate ongoing costs savings for the tenant as well as medium term financial returns to the co-operative. By reducing the amount of dirty coal power our local businesses are dependent on, it will also deliver environmental benefits.
How commercial PV can save businesses money
Solar panels – photovoltaics, or PV for short – have been enthusiastically embraced by home owners for years now. This has allowed the industry to scale up production, leading to significant cost reductions. Today, many businesses are starting to realise that solar is no longer just about being green. It is about reducing costs, or if you are a landlord, it can be about creating an extra revenue stream from your rented premises. This is possible because, taken over a 5-7 year period, the cost of solar panels is less than the retail cost of the electricity they generate. Investing in solar panels allows businesses to lock in part of their electricity costs into the future – at today’s prices. With lifespans stretching to 25 years and beyond, it is clear that solar PV is an asset that will go on returning on the initial investment.
What makes commercial solar PV different to residential?
Many commercial premises operate refrigeration and air conditioning that work hard during the day – when solar generation is at its peak. This day time “peak load” makes it possible to install large solar systems with almost zero export of power to the grid. This is different to a residential setting where daytime load is often small and energy is exported to the grid.
Commercial Solar PV reduces the dependence of business on coal power without the complication and uncertainty associated with feed-in tariffs. It is most cost effective at premises that operate seven days a week during daytime business hours.
Why does commercial solar PV need community assistance?
While there are cost benefits from solar, many business operators will get a better return by investment in their core business activity. Taking a loan to purchase a significant PV system reduces the capital available to improve and grow. In other words, for many businesses, investments other than solar make more sense.
For community investors who are interested in seeing a faster uptake of renewable energy this presents an opportunity. By purchasing the solar system and on-selling power to businesses, community investors could see returns in the order of 7% over a 7 year period – a higher rate of return than Australian 10 year bonds or bank term deposits. By purchasing power rather than a solar system, businesses are not restricting their access to the finance they need to grow their business. (These rates and periods are purely indicative of potential returns and are not a guarantee.)
Are there any other benefits?
In areas like the Blue Mountains, local business is an integral part of the community so schemes like this can be a win for everyone. For example, having lots of businesses operating on clean solar energy increases the “eco-tourism” potential for the area which in turn increases local employment opportunities.
What stage is the project at?
After a research period of nearly 12 months, we have identified the key features of a community based commercial solar PV collaboration. The co-operative is now at the stage of seeking seed capital to create a detailed business plan and develop the legal instruments required to kick start the scheme. We have applied for a grant from the NSW government and, should this be successful, we will be looking for both investors and customers in the second half of 2014.