The deployment of grid‐connected photovoltaic (solar PV) systems continues to grow at an impressive rate. In 2018, there was a 30% increase in systems implemented and it continues to move forward.
Most of this growth involves residential systems, which have an 80% share of the connected capacity in NZ.
Where’s the growth in commercial solar pv systems? Why are the industrial and commercial sectors lagging behind?
The following article was written by Perry Hutchinson, who holds a Master of Engineering Studies in Renewable Energy Systems and has 30+ years of experience designing and implementing industrial electrical systems.
One benefit drives decisions about solar PV for industrial/commercial use…
Commercial Solar Power System Cost
The New Zealand Smart Grid Forum identified that although residential consumers consider a range of potential benefits ‐ such as energy independence, environmental impact and a desire to participate in the technology ‐ sound economics is what drives industrial and commercial consumers.
So the challenge in photovoltaic design is to present solar as a viable business investment in New Zealand, even though we lack the government subsidies and generous feed‐in tariffs enjoyed in many other countries.
What is a feed‐in tariff?
Feed‐in tariffs (FIT) offer you a defined payment for the energy you feed into the grid from your solar PV system. In New Zealand, this can be as low as $0.04/kWh.
When generous feed‐in tariffs are available, the key constraint to system size is essentially the available space for the PV array; for viable projects, the bigger you build it, the greater the return.
However, having low feed‐in tariffs changes the whole approach to system design. There is a tipping point where increased size (and increased investment) actually results in diminishing returns.
Forget feed‐in tariffs. Focus on offsetting electricity costs
The viability of a PV system (photovoltaic system) with low feed‐in tariffs depends on offsetting electricity cost. And offsetting electricity cost depends on discovering the optimal level of self‐consumption.
There is a tipping point for self‐consumption with on‐grid PV systems. This is the maximum size of the system where we still achieve 100% self‐consumption. Building the system larger than this results in some of the PV generation being fed back to the grid and therefore, self‐consumption starts to fall.
Generation Profile for commercial solar power systems
But with the generation profile changing ‐ not only seasonally, but also daily and hourly ‐ what is this optimal level of self‐consumption? A system size maximised for 100% self‐ consumption in summer will fall short of that in winter. Conversely, a system size maximised for winter will over‐generate in the summer (and lower self‐consumption as surplus is fed back to the grid).
Load Profile for commercial solar power systems
In addition to this, load profile must also be considered. What if the load is biased towards the morning or biased towards the afternoon? This could impact the optimal direction you orient the array (the azimuth). For example, a more westerly orientation may be better for load profiles with an afternoon bias.
Tariff Structures for commercial solar power systems
Tariff structures could have a similar effect. We have worked with clients with quite complex tariff structures that could influence array configuration. For example, high morning tariffs could mean a more easterly orientation is better.
Obviously, each situation is unique and requires something more than an “out of the box” solution due to the complex interplay between these constantly changing variables – the solar resource, load profile and tariff structure.
Our approach to getting Solar Power right
Traditionally, a project’s net present value (NPV) is used to evaluate and prioritise projects. NPV takes into account the time value of net cashflows over the life of a project by applying a discount rate.
But rather than treating this as an “endpoint” calculation, at Pacific Energy we use NPV to optimise the PV design.
We model a system on an hourly basis over a year using NIWA weather data, the tariff structure and load profile from the time‐of‐use meter as the key inputs. The model then finds the optimal combination of size, tilt and azimuth that maximises the NPV of the project over its 25‐year life.
The maximised NPV reflects the optimal level of self‐consumption for the system which in our experience can be anywhere between 85 – 95% on an annual basis. This provides the starting point for more detailed design to be undertaken.
For solar projects, Total Utilities partners with Pacific Energy whose focus is on bringing sustainable energy projects to life.
By combining sharp economic analysis with a deep understanding of industrial power systems, they design and specify viable and pragmatic solutions that optimise energy use and reduce carbon footprint. They are experts in system analysis and provide unbiased, independent advice for investment decisions.
The retail price of energy for large commercial customers in New Zealand will remain elevated in 2020-21. So what are you going to do about it?
New Zealand’s large commercial market for electricity and natural gas has been on a roller coaster ride for the last 2 years, the likes of which have not been seen before.
There are numerous drivers that influence market movements. Fundamentally though it comes down to the balance between availability of supply and user demand.
Oil, gas, thermal and hydro
The Government’s decision to ban future offshore oil and gas drilling put an end date on New Zealand being able to meet all of its natural gas requirements. The closer we get to the end of current supply the higher the price will climb.
Supply issues with our largest field, Pohokura during 2018/19 and reduced gas production overall has more than doubled gas spot pricing from 2016/17.
In dry years, the electricity system relies on natural gas and coal to provide security of supply. This is for both base load and peaking generation.
With little to no new renewable base load generation planned in the immediate future, the market price is largely driven by the use of thermal based generation.
As consumers of electricity and natural gas, we have no control over the market. However here are a few prudent measures that can be taken to mitigate cost increases in a rising market.
Strike while the iron is hot
Electricity and Gas procurement should not be a once in a 2- or 3-year event. Leaving purchasing decisions to the last minute can have significant negative consequences.
You may only have limited options, having to accept what the market is offering or move to expensive default rates. If there are short term constraints in the market, then pricing may have been more cost effective 3-6 months ago.
Aligning your procurement strategy with a specialist energy consultant provides independent advice and a view of wider market considerations. This is particularly important when setting budgets for the following year.
Have I got a deal for you?
Incumbent retailers will at times be proactive in offering “deals”. However, this is usually from their view of the world and can be part of a defence strategy to sidestep customers reviewing the wider market.
In a rising market, we typically see a significant accordion effect. This is where the difference in prices offered can range more than 20%, even among the large generator retailers.
Without context, pre-emptive renewal offers can at times be viewed with suspicion. A specialist energy consultant can vet such offers quickly.
Understanding the market means pricing is checked against offers they are currently seeing. Advice can then be provided whether to accept the offer or go to market.
The mystic art of Power Factor
Often missed on large commercial invoices are power factor related penalty charges. These are billed by the electricity retailer on behalf of the local network distribution company.
Not all networks charge large commercial customers for poor power factor, but when they do the related charges can be avoided with correction equipment. (See: what is a power factor correction unit?)
There are a multitude of off the shelf solutions out there, however employing a specialist power factor company that designs solutions specific to requirements ensures you get the best bang for buck on your investment.
If correction equipment is already installed, make sure that this is added to your maintenance plan. If well looked after, correction units should last 10 years or more. They are susceptible to heat degradation. A quick check to make sure that air extraction fans on the units are work correctly and filters are kept clean can extend the life of the unit.
Rectifying power factor related issues can also help reduce peak KVA demand and associated costs if these are being billed by the local network company.
The secret life of kilowatts
Do you know how much energy your business uses when you are not there?
Energy monitoring combined with energy data analytics will help you identify energy wastage. Monitoring electricity use with real time energy analytics can also alert you to potential issues during operational hours.
This will allow you to act immediately rather than just seeing the impact on the monthly invoice the following month. With the rapid evolution of the internet of things, energy monitoring as a service is more cost effective than ever.
Are the good times over?
Unless there are structural changes in the market, Total Utilities does not see the retail price of energy for large commercial customers doing anything but remaining elevated (+/- 25% higher for electricity and +/- 45% for natural gas) compared to the 2013-2018 period.
A combination of dry weather, growth in the New Zealand population, general growth in usage and Government policy have put this in place.
Having an Energy Strategy that aligns with your business strategy and planning ahead, being proactive in minimising wastage and understanding where savings can be made will minimise the impact of rising prices.
If you don’t know precisely how, when and where energy is being used across your business, how can you understand where your energy costs really lie, or the best opportunities to improve energy and operational performance?
Working together with Centrica Business Solutions, Total Utilities is the exclusive partner delivering the Energy Insight product solution to the New Zealand market. Using Centrica’s wireless sensor technology, you can monitor energy usage in real-time – right down to device and equipment level. When this information is relayed to our PowerRadarTM analysis platform, you can access the intelligence you need to develop a data-driven energy strategy.
The Power of IoT
Our Internet of Things (IoT) technology is providing the deep energy insights that uncover flexibility and value in your operations and generation assets. This is a ‘game changer’ in raising energy performance across all types of organisations – from manufacturing and leisure – to healthcare and education.
Energy Insight technology provides full visibility of energy usage across your site, or multiple sites – right down to individual device level. We attach self-powered, wireless sensors to equipment and processes, such as conveyor belts, lighting circuits, chillers, or any other energy consuming assets.
This instantly transmits real-time data to our cloud-based PowerRadar analytics and reporting platform. You can then access this intelligence to inform your decision making and improve efficiencies.
Deep energy insights
Hundreds of sensors, which can measure both heat and power consumption, can be installed within a few hours and won’t cause disruption to operations. Data provided by our IoT technology enables organisations to quickly identify and resolve energy waste. It can also pinpoint opportunities to reduce high peak-time energy costs by moderating consumption in these periods.
The biggest gains of IoT energy insights are often seen in improved operational efficiency and business resilience. By ensuring that critical equipment is operating optimally and preventing costly disruption, or even breakdown, large operational cost savings can be achieved. Continuity of operations is also assured, which is particularly beneficial in manufacturing environments.
The results of IoT energy optimisation
We’re seeing the positive results of our IoT enabled energy optimisation across all business sectors, including Progressive Enterprises New Zealand.
Join us on Monday as we discuss how the Internet of Things is changing Energy Management and how insights can support sustainable business. Register here.
Create a sustainable energy strategy, and build a competitive advantage with powerful energy insights that provide complete visibility of your energy footprint.
Now more than ever businesses globally are looking for wastage and holding utility costs to account by requiring detailed operational reports.
As the owner of your energy strategy, it is imperative that you have end-to-end visibility of your energy footprint. Obtaining this level of visibility will provide you with energy intelligence around consumption and performance of on-site assets. These energy insights will give your business the ability to:
Understand how energy is being used across your entire footprint
Identify processes and specific devices where energy is being wasted
Manage risks and opportunities in real-time to ensure performance of assets
Manage all your data in a single energy management system
Having a centralised view of your entire energy footprint and device-level data eliminates the time and complexity involved with managing energy data in multiple platforms. A single platform that integrates with other systems creates a holistic view of your energy infrastructure that can be used to inform a single, full report.
In addition, using a single platform to manage your energy data means you always know that you’re looking at real-time, accurate intelligence. This can help you make data-driven decisions about your energy strategy that are based on the most up-to-date energy data displayed in the energy management platform.
The granular level of intelligence provided by device-level data will provide you with a deeper understanding of your energy use and help to accurately form your energy strategy. This information can be used to identify ways to future-proof your strategy to:
Improve operational efficiency
Uncover growth opportunities
Unlock new revenue streams
Identify new energy technologies
Use Energy Insights data to improve operational efficiency
Data can help your business analyse capital equipment to identify inefficiencies and determine when equipment should be replaced or requires maintenance. By keeping equipment working efficiently and performing at its optimum level, you can avoid costly downtime and reduce business risk.
Use data to uncover growth opportunities
Better energy insights can free up resources to support growth initiatives, turning energy from a commodity cost to a value-adding resource. Growth opportunities can also be achieved when your strategy successfully lowers the costs associated with energy.
Use data to unlock new revenue streams
The information gathered through end-to-end visibility can help your business leverage its energy use, flexibility and existing assets. This opportunity unlocks new revenue streams for your business by allowing you to curtail energy use or sell surplus energy back to the grid through Demand Response (DR), demand management and asset optimisation.
Use data to identify new energy technologies
End-to-end visibility of your energy footprint can help to inform decisions on using new technologies such as solar and battery storage, back-up power generation, or cogeneration (also known as Combined Heat and Power or CHP) to help drive energy optimisation and improve resilience.
The visibility of your energy footprint will grow as you adopt new technologies, but by using a centralised system to holistically monitor and manage your data, this should not add any extra complexity. In fact, your energy management system can provide you with the data you need to justify your investments in on-site energy generation.
Why businesses need to choose the right platform and provider
It is imperative that businesses partner with a provider that has the right energy insight tools and a platform that collects and centralises granular, device-level data.
Working with Total Utilities, businesses can be sure that they’ll benefit from experience and expertise. We are the New Zealand providers of Centrica’s Energy Insight solution and integrated energy management platform, PowerRadar®. These tools are generating new opportunities across all types of industry, giving organisations the ability to manage real-time, device-level energy intelligence in a single, holistic view.
Contact our experts to find out how we can help you obtain real-time visibility of your energy performance and develop a strategy that turns your energy into a competitive asset.
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.
