Smart Commercial Solar and Solar Car Parks in The Fifth Estate

It was an honour to be a part of The Fifth Estate's latest article that focused on the viability of commercial solar in Australia based on businesses' attitudes toward solar and its long-term profitability - especially with solar car parks on the rise.

Here is an excerpt:

"According to the founder of Smart Commercial Solar, Huon Hoogesteger, it’s not government policy that needs to change to improve uptake, it’s the attitude of businesses.

“I am so amazed solar is considered as a special energy source that needs special assistance,” he says.

In his view, solar is purely a smart financial decision which happens to come with substantial environmental benefits.

“Solar can cut between 30 and 50 per cent of a customer’s energy bill, so businesses will still get a return on investment even without RET subsidies. The product lasts – there is a 30-year life in the product. With the rebate, most companies see between a two- and five-year break even, without the rebate it might be seven years.”

Hoogesteger points out that a seven-year break even still means 23 years or more of vastly reduced energy bills.

“Rebates give a false sense to customers that without them it doesn’t stack up, it gives a false message. Solar doesn’t need rebates to provide a return.”

A coal-fired power station, by comparison, will cost around $500 million, but the owner certainly does not expect to see payback within five years.

“The thing that needs to change is the business perspective on the ROI of a capital project such as investing in solar as energy source.

“With solar panels you are effectively buying between 30 and 40 years of electricity upfront.”

It’s the equivalent of “banking 40 per cent of the future energy bills.”

Pay as you go model working well

His company provides a pay-as-you-go solar financing model that has seen the business grow by 400 per cent since it started three years ago, with major clients including IKEA, City of Yarra and NSW North West Rail. The aged care sector is also providing it with a lot of business.

The firm installs the system and undertakes the operational and maintenance aspects for the length of the contract – between five and ten years. The customer buys the power at a rate that is priced lower than their current kWh price, and at the end of the contract, they own the system outright.

The firm’s investors meanwhile receive a solid return from the sale of power.

Blue chips not looking at long term

Hoogesteger says that small to medium enterprises see the sense in the model and the opportunity to basically pay it forward for a few decades of cheaper, cleaner power. Big businesses, however, “struggle to rationalise a 30-year product.”

This is despite the reality that for someone like a big property firm, it will increase the value of its property product.

Other barriers in terms of the top end of town are a degree of struggle to get decisions made, because publicly listed firms are focused on the kinds of short-term decisions the stock market wants to see, not long-term ones.

“Large consumers [also] get cheaper power, and when a firm has very low energy prices it is hard to compete,” he says.

An example is data centres – major energy users on low rates for grid power. Hoogesteger says his firm has analysed the payback for major data centres, and it would take about a decade for investing in solar to reach the break-even point.

The sectors where he says there is substantial uptake include pubs and clubs, where the businesses’ power use profile works well in terms of the times solar produces energy. The hotter the day gets, the higher the air-conditioning gets turned up – just when the panels are pumping out more power.

“It’s a neat fit,” Hoogesteger says.

The investment model that underwrites the PAYG systems is also providing a mechanism for overcoming the split incentive. One current project is a pub where the tenant wants to lower energy bills, but the owner needs to achieve some return for having solar installed. So the owner becomes the investor underwriting the system, and receives a return from the tenant purchasing power from it.

The investment vehicle, Clear Sky Solar Investments, Hoogesteger says, is basically a divestment vehicle that was set up with assistance from the NSW Office of Environment and Heritage. OEH gave it seed funding as part of the drive to create mechanisms for community investment in solar.

A not-for-profit, it attracts funds from self-managed superannuation holders and ethical investors, who are looking for a return but are focused more on what their money is doing than how much of it they make."

Access the full article here