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.
Total Utilities is proud to have been nominated as a finalist in the 12th annual Microsoft New Zealand Partner Awards. These awards reveal the capability and influence that Microsoft Partners have in empowering customers to create real change and value.
As a business we have been known for a number of years for vendor-independent business consulting which enables our customers to make informed and contestable decisions in relation to their migration to Cloud computing.
Once the customer embarks on that journey it is crucially important to have the right governance in place to control costs and realise the value promised in the original business case.
Total Utilities has developed analytics that ensure our clients gain the value from their cloud environments and provide insights to help save money.
“Being finalists for the 2019 Microsoft Partner ‘Optimising Operations Award’ is a significant milestone for Total Utilities as it means we are now also gaining recognition for our independent, innovative and inexpensive Cloud FinOps service which provides that financial governance.”
Our national grid pricing needs solutions. And after 10 years of pondering its navel, the Electricity Authority (EA), the Government agency charged with ensuring an efficient and effective electricity industry, plans to release a paper that may or may not gain industry consensus and may or may not actually be the right answer.
A decade in, the EA claims it is past the point where it is seeking an industry consensus, and advises that “you’ll have to show a factual error in our assumptions to change our views.”
This paper attempts to address the question, who pays how much for the right to access the electricity transmission backbone that is the national grid.
Just how we derive economic efficiency by perpetuating monopolies, stifling innovation and transferring the costs of transmission to regional small businesses and consumers, is beyond me.
This backbone is owned and operated by a Government-owned monopoly called Transpower, and connects our generation assets to the whole country.
The trouble with essential monopolies like the national grid is that they exert enormous political influence. Combine this influence with that of other essential monopolies such as the electricity generators who own our hydro dams, and massive energy consumers like the Bluff aluminium smelter, and the EA’s findings are wholly predictable.
This draft report, citing “economic value created”, suggests transmission costs be moved away from certain major users – notably the Bluff aluminium smelter – and should instead fall most heavily on domestic consumers and small businesses farthest from the point of generation. Meanwhile the hydro dam owners (the generators) will continue to utilise the transmission network without paying anything like the true cost of doing so.
When justifying their recommendations, the gurus at the Electricity Authority have estimated net economic benefits to all parties involved in the electricity market, of between $200 million and $6.4 billion by 2049. There are clear signs of an agency that has lost track of the most basic financial disciplines, when they can seriously suggest that a business case benefit that has an estimated range of $6.2 billion over 30 long years is somehow rational rather than looking suspiciously like a complete guess.
Virtually all these barely-credible benefits are assumed to come via increases in market efficiency. Just how we derive economic efficiency by perpetuating monopolies, stifling innovation and transferring the costs of transmission to regional small businesses and consumers, is beyond me.
Disincentives to use the national grid
The EA’s proposed pricing mechanism builds in disincentives for those seeking to find alternative methods of transmitting, storing and using electricity. The EA will do this in the following two ways:
By offering special discounts to people considering using innovations such as battery and solar to avoid using the grid. These discounts will be funded by transferring these costs to other consumers (in other words, not by reducing Transpower’s profits); and
By reducing peak load pricing. This is the mechanism whereby we pay more for electricity transmission at times when the grid is most heavily used: think winter cold snaps and dinner time. Peak load pricing offers a price incentive to those who want to store and use their own electricity at a time when it is most expensive on the national grid. No peak load pricing, no incentive to innovate.
The national grid was bought and paid for over decades by all the taxpayers of New Zealand. This asset was designed to reliably transport one of our most essential services, electricity, and to share the costs evenly to the benefit of all.
Perhaps the Electricity Authority should be paying more attention to mechanisms and policies that have seen electricity prices soar over the past two decades, instead of continuing this futile, decade-long attempt to fix a transmission pricing problem that didn’t exist in the first place.
Most of us now agree that climate change is all too real and we therefore all need to do something about it, sooner rather than later.
However, some impulsive political changes in the past 18 months, like unilaterally banning all new offshore oil and gas exploration, can be environmentally counter-productive. For example, NZ coal usage in 2018 was the highest for a decade! Undoubtedly, this is a decision our political leaders didnt want to see happen.
Wood biomass however is a great renewable resource and therefore represents an important and growing energy solution.
At this time, NZ needs a genuine cross-party accord on the best way to tackle climate change, much like the superannuation accord back in the 1990’s. The superannuation accord worked well and served to de-politicise a potentially highly contentious area. A similar approach is needed now.
Richard Gardiner – Managing Director of Total Utilities
The following was a recent press release from Azwood Energy. biomass
Azwood Energy welcomes the Interim Climate Change Committee’s “Accelerated Electrification” report, which investigated the potential of electricity in greenhouse gas reduction. Azwood Energy agrees with the Committee’s view: “The challenge is clear – it is not so much about reducing emissions from the generation of electricity in a narrow sense, but it is about using low or zero-emissions energy to fuel the economy.”[1]
Whilst we find its investigation into electrifying our vehicle fleet commendable, we question whether the Committee’s reliance on the wholesale electrification of process heat is an outcome that truly promotes carbon neutrality and greenhouse gas emission reduction.
Azwood Energy is of the view that the increased utilization of woody biomass, a renewable, carbon-neutral energy source, in the transition from fossil fuel use in process heat makes sense, both economically and environmentally.
Energy expert, Dr. Martin Atkins,[2] has noted that “Biomass will play a vital role in providing process heat, particularly in producing process steam for medium to high process temperature demands. Biomass will be the lowest cost fuel switching option by a large margin when compared to electricity.”[3] He notes that complete electrification of process heat demand is not economically feasible.
Process heat needs are highly-situationally dependent and site-specific. However, from an operational and Capex perspective, high temperature hot water and steam requirements are best met using biomass as a fuel source in place of coal or diesel.
It seems big players in the industry agree. A video was released for the Climate Leaders Coalition showcasing Fonterra Brightwater’s switch to co-firing with biomass.[4] Speaking, in May, at the New Zealand Minerals Forum, Tony Oosten, Fonterra’s Energy Manager, noted that capital outlay and fuel costs for new wood versus coal boilers are now the same, and the viability of wood fuel has been proven in their Brightwater pilot.[5]
He explained Fonterra’s cheese plants use lower temperatures and can be run on electric technologies. Oosten says milk-drying plants prove more complex, (given their mixed high-heat requirements), but indicated new plants will be designed to meet their low heat energy requirements with electricity, allowing biomass-fueled boilers to be used for higher temperature requirements. Oosten says electrode boilers may be used for peak loads as they are more responsive than wood boilers, but they are twice as expensive to run as current systems.
Oosten raised issues of wood fuel supply, however, stating, based on the locally available supply in each region, Fonterra could access 15 megawatts of wood into each of its 32 manufacturing sites. Given Fonterra has now put a stop to installing any new coal boilers or increasing capacity to burn coal,[6] their energy requirements, 40% of which is currently met by coal, are set to supercharge demand for wood fuel.
More recently, French multinational food-products corporation Danone announced they would invest $40 million to convert their Balclutha milk drying plant to 100% biomass, cutting CO2 emissions by 96% or 20,000 tones per year.[7]
Brook Brewerton, General Manager of Azwood Energy, welcomes this, stating that the current constraint in demand is at the heart of stated perceptions of constrained supply. He says there is ample forestry residue left unutilized on hillsides and the commercially unproven fixation on industrial electrification is hampering the switch to biomass fuel and confusing the low-emission messaging.
Azwood Energy sees key areas of this report’s findings as an exacerbation of the problem. The ICCC should encourage thermal heat plant users to firstly reduce energy demand, secondly reduce the low-temperature heat demand on boilers and then encourage the feasibility of fuel switching to biomass for high-temperature water and steam.
Biomass for high-temperature water and steam is the most cost-effective option, at about one-quarter of the cost to produce steam, when compared with electricity, and does not require a huge investment in electrical networks and infrastructure.
Until increased demand ramps up the supply chain logistics, however, the perception of scarcity will continue. Azwood Energy is poised to scale their operations at viable sites across New Zealand and has been commercially supplying biomass to large heat plant systems for almost 20 years.
Scion has reported that there is sufficient biomass in New Zealand to replace in the order of 15PJ of coal consumption with its associated GHG emissions reductions.[8] The Bioenergy Association states there is potentially enough biomass available from plantation forestry to replace 60% of coal used in existing heat plant over the next 30 years. It notes that the biomass fuel market is under-developed because the current demand for wood fuel is low, but that “there are enough suppliers with commercial and technical capability to expand supply if demand for wood fuel increases consistently and in an orderly manner”. [9]
Brewerton notes that the recoverability of wood energy in the scenarios underpinning the Scion and Bioenergy Association data is conservative, and not based on 17 years of residue recovery and methodology improvement. “There is far more out there if the market is willing to pay for it. Recoverability modeling is on the low side, but it is a good place to start.”
Azwood Energy eagerly awaits the PHiNZ report due to be released later this year by MBIE, which addresses process heat directly. It is hoped the regulatory and policy settings changes it advocates will provide the priority for wood fuel it deserves, as a proven, economically viable local energy source with both up and downstream environmental benefits.
[2] Dr Martin Atkins, Senior Research Fellow with Waikato University’s Energy Research Group, has advised some of New Zealand’s most iconic companies on their path towards lower emissions, from dairy giant, Fonterra, to pulp and paper processor, Oji.
