All businesses should be looking to reduce their energy consumption and electricity spend wherever they can. A commercial solar system is a great way to do this in an economical way, without having to change the way your business operates.

There are several things a business should consider when thinking about a commercial solar system. These include the following:

1. Does the Business Own or Lease the Site?

If your business owns the site where it conducts its business, then you don’t need to be concerned about this step. You are able to install solar on your site pending any government approvals that would be applicable. These are usually known and taken care of by your eventual solar Engineering, Procurement, and Construction (EPC) provider.

If your business leases the site from a landlord, then the first step in your research regarding solar should be asking permission from your landlord to make sure they will allow the installation to occur. This should be further formalised in a Letter of Consent (LOC) as well as an amendment to the main lease, or letter of amendment (LOA) to state what happens in the case of the lease expiry or lease termination. This would refer to making good of the property, a condition that would already exist in the main lease.

Once you have an in principle agreement around the LOC and LOA you are then free to move on to the next step. These letters can be formalised down the track once you have approved the business case for the solar system.

2. Usable Space

Solar systems can be installed across a number of different applications. The most common area for a solar system to be installed at a commercial business is on the roof. If using a roof space, it is important to identify any potential shading impacts or obstructions on the roof that will limit the amount of area available for panels to be installed. A solar provider will usually find the most efficient way to install panels around obstructions, but it is good to understand the impact these may have.

The other consideration you should have for rooftop systems is access and safety. Working at heights can be extremely dangerous if not managed properly. As well as this, solar systems need to be maintained long term, so it is important that when thinking about the space available, there is also a provision for safe access walkways, exclusion zones near live edges including skylights, or even the requirement for permanent guardrail and skylight mesh.

Solar systems can also be installed on available ground space like unused land. These systems are installed on frames that are pile driven into the ground and the panels mounted on a frame with cables to be trenched back to the sites main switchboard.

This is a good solution if the site has limited or no available roof space and lots of available land. The benefit of a ground mounted system is that it can be installed and orientated in the optimal direction which creates greater energy yields. It also eliminates working at heights which reduces the installation risk as well as ongoing operation and maintenance costs.

Other applications of which solar can be installed include, solar car shades, where a system can be installed on top of a purpose-built car shade structure where the panels act as both electricity generators and shading. Or building integrated solar, where the glass panels are used as windows or atrium ceilings. All these options can be considered when looking at usable space.

3. Business Load Profile and Operating Hours

Thinking about how your business uses power and its hours of operation will determine whether solar will be a good solution for your organisation. As commercial solar systems only operate while the sun is shining, a business that only operates at nighttime will not see any benefit of a solar system.

On the other hand, the majority of businesses tend to run between the hours of 9:00am to 5:00pm. This is perfect for solar. The scenario that will attract the best return on investment would be a business that operates seven days per week between the hours of 9:00am to 5:00pm. This would mean the system would be offsetting a large amount of the daytime consumption of the business without producing any exported power.

Other businesses that operate 5-6 days a week will achieve great returns but the solar system will be exporting power during the time that they are not operating. Under the current circumstances in the energy market, retailers are not offering much in the way of Feed In Tariffs (FiTs) for exported power and therefore export does not provide much, if any benefit. The real benefit of solar is being able to offset consumption that would otherwise be purchased, so reducing export should be a goal.

If you understand how your business uses power and roughly the timing, this will help you decide whether solar should be a consideration of yours. As battery technology starts to become more financially sensible, businesses that operate out of these hours will start to become viable for solar and battery solutions.

A good EPC provider will request to obtain the interval data for your site from your electricity retailer and map out exactly how you use your power for a twelve (12) month period.

4. Purchasing Solar

When considering how to pay for a solar system, a business has a number of options. These include:

1. Capital Purchase (CAPEX);
2. Finance or Lease; and
3. Power Purchase Agreement (PPA),

These options are all available and will depend how your business compares its investments as well as risk profile.

CAPEX

A CAPEX purchase is where the business purchases the system using its own free cash flow. The CAPEX purchase will bring the business the strongest returns which are typically within 4-6 years. CAPEX purchases will require ongoing operation and maintenance as well as costs in replacing components that fail if they fail outside of their respective warranty periods.

A CAPEX purchase will make sense to a business who:

1. Has the available cash to pay for the system;
2. Prefers to buy and own assets in the business;
3. Has a low cost of capital and therefore using a finance or PPA arrangement would not make sense;
4. Is aware of the ongoing operational costs; and
5. Want to achieve the fastest return on investment.

Finance or Lease

Finance or Lease options are good for businesses who do not want to spend their capital on a solar asset and would rather keep that capital for us in their core business.

A Finance or Lease option will make sense to a business who:

1. Does not want to spend the business capital;
2. Wants the system to be cash flow positive meaning the savings will outweigh the finance costs;
3. They have a low cost of capital through an existing banking relationship;
4. Is aware of the ongoing operational costs; and
5. Understands the risk of finance arrangements in the case of downtime or failures.

PPA

A power purchase agreement (PPA) is the final procurement option for a business. A PPA is where the EPC installs the system for free at the site and the customer simply pays for the electricity that the system generates but at a much more competitive rate versus their retail electricity rates.

A PPA option will make sense to a business who:

1. Does not want to spend the business capital;
2. Does not want to take on the risk of downtime or failures;
3. Does not want to take on the obligation of future operational costs; and
4. Wants to continue focusing on core business while an experienced EPC owns and operates the system.

This guide should give businesses enough information for how they should go about exploring their options for a commercial solar power system. To learn how your business can harness cleaner, more affordable and more efficient energy with commercial solar, get in touch with us today.