Cost‐effective solar power system for your business

13 July 2020

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.