Making solar part of your business’s energy mix has never been more appealing. But risk and opportunity balances between an optimised design and types of PPAs.
While there’s heat in the market, there are incentives – but don’t unthinkingly sign away your business for a free set of steak knives! Or solar panels, for that matter.
According to the Electricity Authority, New Zealand’s solar energy generation capacity increased to just under 115MW in 2019.
Putting this into perspective, 115MW of installed capacity is similar to one of Contact or Mercury’s Geothermal stations. As a percentage, this equates to around 1.2% of total operating generation capacity in New Zealand.
Source: Electricity Authority
Lowering costs for installed solar
The installed cost of solar has dropped by around 75% since 2009 to an average of around $2.20 per watt. With large commercial energy rates continuing to rise, the return on investment starts to become more realistic for business customers considering solar.
Location is more important than just sunshine hours and roof direction
With 29 distribution networks in NZ, there are a variety of charging structures for time of use electricity customers. Some networks prefer to charge more for demand and capacity than on the total volume of energy consumed. Understanding how these charges are calculated is an important consideration for the ROI of solar. For example, a network price structure that favours variable charges will potentially have a far greater ROI than a price structure that favours peak demand.
Depending on the distribution network, peak demand charges can equate to a significant portion of your total electricity costs. Installing solar alone does not necessarily impact peak demands to any large degree. However as battery storage becomes more economic, this will assist customers smooth their load and reduce demand based charges.
For no money down, you too could have a solar array. Just be sure to check the fine print. And pick up your steak knives!
Power Purchase Agreements are a great way for solar companies to sell solar arrays to customers as they don’t require a customer to come up with the CAPEX costs associated with the array. There are typically two forms of PPA’s that are common in NZ.
One involves the solar company installing a meter on the array that is installed and then billing you for the energy you consume from the array at an agreed price. You can still engage with the market and import energy from a standard retailer as required. An agreement would need to be struck with your retailer for any exported energy, depending on the solar PPA, the solar company may get all the financial benefit from exported energy.
The other type is where the solar company becomes your retailer as well and manages both the import and export of power.
Sometimes the solar arrays are oversized so that the solar company can charge you for what you consume from the array and then make money selling additional energy back to the market.
This can all be used to pay off the cost of the array and there can be lease to own options or buy-out clauses after a minimum term.
In both cases, there are minimum terms from anywhere between 7 to over 20 years. Where the length of contract, maintenance and replacement clauses become important as inverters can need replacing after 10-15 years and panels at 20-25 years.
Is Solar right for my enterprise?
The first question I would be asking is:
What is the comparison between owning the array outright and the associated financing costs with benefits from the array going directly to OPEX costs from day 1 versus the costs and risks associated with a power purchase agreement?
Total Utilities has recently completed three large scale viability studies of 42kW, 96kW, 146kW, 286kW and 350kW solar arrays for commercial facilities and can assist you in determining the best solution that meets your specific requirements.
Solar companies are often constrained by the supplier of their solar products for what and how they deliver an array. Getting an independent solar viability review by Total Utilities can increase the efficiency and output of an array to ensure full value for money if you make solar part of your energy mix.
Your corporate sustainability targets might be in for a shock!
Prior to Christmas, the Government announced a raft of proposed changes to the emissions trading scheme (ETS) to rapidly decarbonise the economy.
This included lifting the ETS price cap from $25/tonne to $50/tonne and creating a market floor of $20/tonne.
If we take natural gas as an example, where at $25/tonne the ETS is priced at $1.37, at the market cap of $50/tonne this would increase the cost of the ETS to end users by $1.37/GJ (0.49c/kWh). With current raw gas pricing hovering around $9/GJ for large industrial users this could make raw gas plus ETS $11.74/GJ (4.23c/kWh).
We spend a lot of time looking at commercial electricity and energy management and that’s really something to notice! If your corporate sustainability journey does not include electricity or energy efficiency milestones, now is the time.
In addition to this, a ban on new coal-fired boilers for low and medium temperature heating has been mooted. With all coal boilers used for low temperature activities to be phased out by 2030. Coal boilers would still be allowed for high temperatures of above 300 degrees celsius.
The Interim Climate Commission estimates that switching coal boilers away to electricity or biomass at scale becomes economic when ETS costs are in the range of $60-$120/tonne.
Now more than ever businesses need to start planning their sustainability journey. At Total Utilities we are here to help.
The following was originally posted on the Centrica Business Solutions website and is reprinted with permission.
With environmental and economic sustainability at the heart of the corporate agenda, organizations face a range of risks if they fail to make progress
All organizations must pay close attention to risk. From financial viability to cyber attacks, it’s vital to understand and prepare for the forces that can disrupt the market and derail long-term sustainability – so businesses can survive in a fast-changing world.
Of all the risks that could affect a business’s long-term future, climate change is becoming one of the most urgent and complex. The United Nations warns that changing climate is disrupting national economies – and that accelerated action is needed to reduce emissions.
I want to hear about how we are going to stop the increase in emissions by 2020, and dramatically reduce emissions to reach net-zero emissions by mid-century
António Guterres, United Nations Secretary-General
Many organizations are already exploring what they can do to make a difference. They know that significant organizational, reputational and financial benefits can be gained by improving their environmental credentials. That said, our Distributed Energy Future Trends report found most businesses are investing in initiatives that we’d consider to be ‘low-hanging fruit’. Few organizations are implementing the most sophisticated technological innovations that could really accelerate their journey to net zero, such as smart energy management and on-site generation. In fact, just 18% of organizations see energy as an asset to be managed, in order to generate competitive advantage.
It’s important that organizations consider the strategic benefits of implementing the latest sustainable energy innovations. But perhaps even more importantly, they also need to recognize the risks they face if they don’t implement these innovations. Here are a few of the top concerns:
Energy security
As the world moves to low-carbon energy sources, making sure that you have continuity of supply is vital. Business leaders acknowledge the importance of energy resilience, which is why they rank energy security as being a top-three risk to their operations.
It’s important to have a detailed energy strategy, one that puts targets around energy resilience. Currently, only half of businesses that we’d consider to be ‘sustainable’ have an energy strategy that details how they will become a low-carbon organization. With other businesses, the figure falls to just 24%. Clearly, there is scope for businesses to push ahead in this area.
Having a plan is just the first step, though. It’s also important to consider implementing sustainable energy innovations, which can help to reduce reliance on the grid and provide additional security in the event of a power failure. Without harnessing the latest innovations, organizations may not be safeguarding themselves as fully as they could against the catastrophic consequences of power loss.
Innovation is good for business
In today’s economy, no company can afford to stand still. It’s important to keep moving forward and improve the products and services you deliver to your customers. Continuous innovation is good for business and often creates new opportunities that can enhance the way your business operates.
This is certainly true of sustainable energy innovations. From artificial intelligence to digitalized energy management solutions – low-carbon technologies can create new opportunities for businesses to monetize their power assets and improve their brand reputation. What’s more, organizations that look at their strategy anew and consider how they can join their energy technologies together can maximize their commercial benefits and return on investment. It’s clear that organizations who embrace sustainable energy innovations can gain competitive advantage – and those businesses that fail to harness these new opportunities risk being left behind.
Preparing for a more digital world
Organizations that aggressively pursue digitalization are expected to grow the most in the next five years. But companies that are truly future-focused don’t just introduce new digital platforms and technologies on a whim – they consider their wider implications, including the energy requirements of each digitalization initiative.
In our transformed world, new strategies are required to understand precisely where, how and when energy is being used across your organization. By monitoring, managing and aggregating all available energy assets, including energy demand and usage, organizations can ensure they generate and consume power in the most efficient way.
The latest sustainable energy innovations can support this initiative by providing organizations with the insight they need to make more intelligent decisions about their energy strategy in a digital world. But organizations that don’t embrace these innovations may lack these insights and could run the risk of wasting energy and money. And this may snowball, as more and more digital technologies are embraced.
Futureproofing your operations
Businesses that clearly define their energy strategy and invest in the latest sustainable energy innovations will find themselves in the best position to meet their environmental targets, gain competitive advantage, and futureproof their operations. Companies that do not embrace the latest energy technologies may find themselves at a disadvantage in a competitive market.
With businesses maturing at different paces, it will take strategic planning to accelerate environmental and sustainability ambitions. Contact Total Utilities to see how we can help you invest in sustainable energy innovations that will solve business challenges and deliver tangible results.
Research shows that using low-carbon energy solutions can improve your reputation – helping make the case for sustainable energy innovation.
Deloitte recently published The Global Millennial Survey. This reinforced a number of other surveys that concluded that brands with a strong corporate social responsibly and sustainability plan will attract a higher caliber pool of prospective employees and a large range of engaged customers.
42% of those surveyed stated that they would start and or deepen a relationship with business who has products/services that positively impact the environment/society whereas 38% said they would cease or reduce their relationship with businesses who has products that negatively impacted the environment/society.
In business, it’s often said that reputation is slowly built, but quickly lost. That’s why, as a successful company, it’s vital to take a strategic view of your brand – to avoid the damage that can result from being on the wrong side of fast-moving public debates.
The below was recently posted by Centrica Business Solutions and is republished with permission.
Globally, there are few issues being currently debated more than the environment and climate change. In response, many organizations are looking to implement technical low-carbon energy innovations – including solar power or electric vehicles – as well as less tangible innovations, such as reshaping business strategies to more closely reflect environmental concerns.
When you’re considering investing in any of these approaches, it’s vital to understand the wider implications they may have on your business – both positive and negative.
In particular, it’s clear they can have a significant impact on how your brand is perceived by customers and shareholders. Our recent report, Distributed Energy Future Trends, shows that decision-makers recognize that low-carbon energy solutions result in reputational benefits for businesses.
According to our research, as many as 30% of companies we surveyed say that investing in energy technology results directly in a better company reputation – up from 24% in 2017. That’s a big rise in just two years and shows that energy technology, an increase in environmental responsibilities as an organizational priority, and brand perception are closely linked.
Strategy linked to brand
In the past year alone, 36% of the businesses we surveyed changed their brand position to be more environmentally friendly. This shows they understand the importance of demonstrating sustainability credentials.
Of course, to be effective in the long term, any change in brand positioning should be genuine. Customers, employees, commentators and regulators are all rightly suspicious of brands making unsubstantiated or misleading claims about their environmental friendliness, and their perception of your brand may be different from the crafted positions you take.
This means that, ideally, the drive toward sustainability should be strategic – with a combination of economic and environmental drivers the focus for success. Our survey shows that 86% of companies think ‘sustainability’ has both economic and environmental dimensions. It’s clear that organizations cannot simply talk about the importance of environmental responsibility – their words need to be backed up by clear and decisive action.
There are signs that this is happening. In fact, social and environmental responsibility is steadily rising up the strategic corporate agenda, and our research found that the only two factors are considered more important: efficiency and financial performance. What’s more, the fourth most important item on the corporate agenda was reported to be compliance with legislation and regulation – which is, in itself, a critical part of reputation management.
Practical impacts on stakeholders
There are a wide number of ways in which sustainable energy innovations can enhance your brand perception, and these are largely dependent on the strategy you opt for.
Invest in sustainable transportation technologies, such as workplace charging points and an electric vehicle fleet, and this could start to have positive impacts not only on employees who use them, but on the local community too. Already, half of fleet owners have at least one electric or hybrid vehicle, our research shows.
Solar technologies, too, can be a visible demonstration of your environmental commitment, and can combine with battery storage for economic and resiliency benefits too. Rather than relying on traditional energy sources, you’re able to generate your own energy onsite, store this generated energy in a battery for use during times of high grid demand or grid interruptions, and may even increase profitability by reducing expenses.
Innovative energy technologies can improve brand perceptions in indirect ways, as well. According to our research, the issue of energy security and resilience is now a top four risk for companies. It’s easy to see how a power failure at a critical site or data center could cause damage to your brand. Yet solutions such as battery storage and backup generators could mitigate these issues as part of a sustainable energy strategy. This will keep you ‘always on’ and safeguarded from commercial, regulatory and market risks.
Organizations with strong future growth prospects are those that have a clear strategy for how energy can contribute to their company values. In fact, one-third of organizations who expect their annual revenue to grow by over 20% in the next five years have made a clear link between sustainable energy use and their brand image and company values.
Find out more about how Total Utilities can help you invest in sustainable energy innovations that can have a positive impact on your organisational competitiveness, environmental credentials, brand perception, and carbon emissions.
New Zealand has set a target under the Paris Agreement to reduce its greenhouse gas emissions by 30% below 2005 levels by 2030, and to adopt increasingly more ambitious targets in the future.
Per capita, New Zealand’s emissions are one of the highest in the world with an output of <1% of the total world’s emissions.
Business New Zealand recently released a report which concluded that “opportunities to improve our performance in productivity and renewable penetration lie in every part of the energy supply chain. While productivity and renewables are not necessarily mutually exclusive, we need to consider the best policy balance. Our country is richly endowed with resources so should our focus be primarily on economic growth with a reliance on carbon prices to guide renewable penetration, or do we need stronger policy support for low-carbon economic output? With an economy heavily driven by trade, the cost of our choices has direct consequences for our international competitiveness. And, since our future is uncertain, how do we remain responsive and resilient to changes in the world around us?”
There is no doubt that the current Government’s policy strategy is being geared to meet the targets under the Paris Climate Accord.
The Insights Behind Sustainable Business Growth
Centrica recently published the following survey of businesses in 10 countries (UK, Ireland, Germany, Italy, France, Hungary, Belgium, Netherlands, USA and Mexico) and across 7 verticals (manufacturing, retail/ wholesale trade, healthcare/ medical, education/schools/universities, construction/ trades/ property development, travel/tourism/hospitality and property/real estate).
The survey identified some interesting trends:
Customers are driving change
Perceived risks are growing
Energy is an increasingly vital part of an overall business strategy
Yet only 1 in 8 businesses are doing it successfully
They concluded that in today’s fast-changing world, businesses need to find an innovative way to balance their financial performance and environmental policies using the following key focus areas.
What does this mean for your business?
Becoming a supportable business isn’t something that can be achieved overnight, and the journey can be challenging. Many successful businesses are complementing their internal expertise by engaging a third party, like Total Utilities, to help them understand the energy market and associated technologies, build business cases and engage stakeholders.
In the electrical industry, Power Factor is widely known as a bit of a dark art. Over the last few years, advances in technology have brought new types of correction systems to the market along with a range of off the shelf cheap products that can be ordered online and promise the world but deliver little.
The below paper was written by Allan Ramson (NZCE, BEng, MBT), General Manager of kVArCorrect Ltd and provides an insight into the pros an cons of active versus passive power factor correction for different applications. For a full copy of this paper please click here.
History of Static VAr Generators (SVG) Technology in New Zealand
Metalect Industries combined with the Engineering School at Canterbury University to fund and direct research into Active Systems for 3 phase applications in 1996-1998. This culminated in publication of a PhD thesis by Edward Arnold Memelink in 1999. From there, single phase prototypes were built and tested. Metalect Industries and a technical team from Canterbury then extended the design to 3 phase, obtained government research grants, and units were built and site tested, notably on the Queenstown Gondolas. Whilst successful in electrical terms, the systems could not be economically manufactured due to component limitations of the time and by 2006, the projects were abandoned. Several related products were spun off as ongoing products for Metalect Industries and several of the ZVX units (Zero Crossing By-Pass units) have been installed in many sites around New Zealand.
Conventional Capacitor Based Power Factor Systems
Benefits
Proven technology when correctly designed
Larger switchboard builders and specialist companies know what they are doing
Utilises available switchgear
Contactors, MCB’s, fuses
Simple to maintain
Ensure air flow as designed, capacitor current within specifications, temperature within specification
Simple to repair
Replace contactors, capacitors, MCB’s, fuses, etc. All done by any Electrician without system shutdown (if designed correctly)
Low cost test equipment
Current meter, temperature measurement. Capacitance meter not required (if the current is correct, so is the capacitance)
Easily expanded
Add more capacitance in very small lumps as site grows
Reliable
Capacitor failure does not take whole system offline. Saves customer money in penalties by continuing to partially operate
Deficits
Cannot control leading power factor
There are very few sites where this is required.
Can be slow to react (but not always)
Often not required. However, there are capacitor-based systems that are specifically designed to response sub-second
Old capacitors may be prone to leaking
Modern capacitors are optionally fire-retardant resin filled.
Generate significant heat
True, but active systems generate even more. If the available cooling cannot handle a capacitor system, it absolutely cannot cool an active system
Can produce system resonance issues
This is so rare; we have only ever documented one case in NZ (but can be easily fixed)
Considered to be Old Fashioned
A matter of image only
Risk of fire in the event of capacitor failure
Modern capacitors, combined with correct design, completely mitigate this.
Active Power Factor Systems (SVGs)
Benefits
Fast and accurate correction of power factor (leading or lagging)
When working as designed, there is no doubt that the power factor correction delivered is excellent
Often physically smaller than capacitor systems
Wall mount options are lower cost than the rack mounted large SVGs
More reliable than poorly designed conventional systems
Certainly not true for properly designed capacitor-based systems
Deficits
Higher cost of installation than conventional capacitor-based systems
Made up of unit purchase price plus 3 x CT’s (and may require air conditioning.) Even without air conditioning in the switch room, the cost of SVGs is higher
Expensive to expand because the units come in big lumps. EG: if the system is 5kVAr short of achieving target, minimum step is 30kVAr at >$5-7k installed
Contrast a capacitor-based system where an extra 5kVAr may be a few hundred dollars only
All the eggs are in one basket, causing potential large penalty tariffs to the user
If the unit has a fault and goes ‘off- line’ all power factor correction is unavailable. If a capacitor fails in a conventional system, then the rest can continue
Generates almost twice the heat as a capacitor-based system and is specified for lower ambient temperatures to start with.
Capacitor based systems have a higher ambient temperature specification. This is critical in non-air conditioned rooms over summer months
Usually very high MTTR (mean time to repair) times – recommend 100% complete spare system backup to avoid 0% power factor control to the site (maximum exposure to penalties)
When the whole system is offline, the full penalty tariffs will be incurred by the end user. One way around this is to use multiple 30kVAr units rather than a single larger unit, although this is a huge cost disadvantage
Units have more capacitance internally than conventional systems. Worse, these capacitors are electrolytic type with corrosive acids inside
True, and the lifetime of electrolytics is known to be significantly less than high quality MPP caps as used in capacitive type power factor systems. See kVArCorrect’s papers on Design Problems in Power Electronics
More susceptible to dusty and humid environment compared to capacitor-based systems
Modern capacitor-based systems can fail too, but the MTTR is significantly lower and can be fixed by local electricians without ‘return to base’ or very specific skill sets
A Combination of the two Technologies – THE HYBRID SYSTEM
Potentially, a Hybrid system that combines the two technologies can mitigate the cons of both technologies whilst accentuating the pros. The scenario would be, for a 100kVAr requirement, to provide 70kVAr of capacitor based modules with a 30kVAr SVG. In every case where the author has investigated the case for control of leading power factor, it has been found that the amount of leading kVAr required is less than 30% of the total requirement. For example, we’ve documented sites with 20-50kVAr leading at certain times and 200-300kVAr lagging at other times. This Hybrid system is undoubtedly more cost effective than a full 300kVAr of SVG, in addition to not having all of the negative points shown in the tables above. The system will produce far less heat and will not be completely off-line due to an SVG electronic malfunction, as there would be significant capacity in the capacitor based section of the system to avoid the bulk of penalties.
Summary
The comparative pros and cons of the three technologies are summarised in the following table – the third column relates to kVArCorrect’s Hybrid system, which was developed specifically to overcome the limitations of both capacitor-based systems and active systems. It uses a traditional capacitor-based approach for bulk power factor correction, with a smaller active system to handle high speed as well as leading power factor requirements. The Hybrid system is designed to have the best of both technologies whilst offering superior reliability.
While fully active systems can provide exact kVAr requirements for both leading and lagging power factor in near- to real time, they can be extremely expensive, and are normally return-to-base in the event of electronics failure. Clients are often shocked to discover the cost of expanding a fully active system could be as high as the original installation.
Hybrid systems only rely on the active electronics for less than 25% of the overall available corrective kVAr’s, meaning 75% or more of the power factor correction is still available to mitigate the potential penalties, should the electronics require repair or servicing. Hybrid systems combine the speed and control benefits of a fully active system, with the maintainability and reliability of a capacitor-based system.
About the author
Allan Ramson is the owner of kVArCorrect Limited and has worked extensively in the Australasian Power Factor market for over ten years. Allan and other engineers at kVArCorrect are ex-employees of Ampcontrol and Metalect Industries in Rotorua, and have been involved with Active System technology in New Zealand for many years.
Also having been closely associated with few hundreds of power factor correction systems installed, it is with significant experience in the market that this document has been written. kVArCorrect designs and manufactures capacitor based power factor systems, Hybrid Capacitor/SVG systems, a range of power quality controllers, and SVG add-ons. Additionally, kVArCorrect sells SVG systems in 30kVAr, 50kVAr, 100kVAr and above sizes.
