This commercial solar guide is for New Zealand businesses considering an investment in solar power to reduce power bills, provide a hedge against rising energy prices and reduce carbon emissions.
The guide covers:
As the price for solar panels and solar components fall, and as grid electricity prices rise, the economics of solar are improving, in many cases offering an attractive return on investment for businesses to install solar panels, on-site or on top of their roofs.
The number of households installing solar panels is increasing in New Zealand. It has become an economically viable choice for many. Moreover, businesses in New Zealand now realise the value it may bring them.
In comparison to residential homes, businesses typically have an electricity usage profile that complements solar generation, using more electricity in the day when solar generation is at its peak. This way, companies can maximise the value of the solar electricity generated with no need for batteries.
In contrast, residential systems end up exporting a lot of solar energy to the grid and where its value is less than consuming the electricity directly within the property.
Businesses generally install larger systems, allowing them to realise the economies of scale, making it cheaper for every kilowatt of solar installed.
The rate of return will depend on the financing option. In most cases, businesses gain healthy returns from investing in solar power, often between 5% and 15%.
The Huntly Coal Power Station - Still In Operation
Although roughly 80% of power generated in New Zealand comes from renewable resources, 20% still comes from mining coal and natural gas. Renewable resources like geothermal power aren’t as green as some proclaim, this is due to the extraction process in which carbon is released.
Solar power is 100% renewable, with the only emissions coming from manufacturing and shipping processes. The carbon payback from solar is a fraction of the expected life of a solar system.
Many businesses need to report on emissions or sustainability efforts. The great thing about solar power is that it is entirely measurable. The monitoring systems indicate exactly how much solar energy is used, and the carbon emissions that are avoided.
Throughout 2020/2021 there was a considerable increase in electricity prices for most businesses. Power prices doubled, and even tripled for some companies. While these prices are expected to reduce it highlights the volatility of electricity prices that can be experienced.
Installing solar power allows a business to rely on fixed power prices for the electricity generated for at least 25 years. Solar panels have a 25 to 30-year performance warranty. Other components like the inverters generally only need to be replaced once during the lifetime of solar panels.
Cheviot Park Motor Lodge - Whangarei - 30kW
Figuring out the best solar power system size will be critical in making the economics of a solar power system work.
Generating more solar power than energy usage will generally reduce the financial return.
Reviewing past electricity use can help determine the best system size. Historic electricity consumption can be modelled against predicted electricity generation to provide an estimate of expected export from the solar system.
Determining the best system size can be an involved process, so it’s best to contact a solar consultant or solar installation company who will use specialist tools to assist in this process.
Fronius Monitoring Displays
Solar power systems need to be monitored to ensure the panels are producing the expected amount of electricity. If an undetected issue is left unchecked, it could result in considerable loss of power savings. Monitoring will also identify any faults that could result in a safety issue.
Shade, created by obstructions such as trees, leaves or dust, can hinder the performance of a system. A simple clean might be all that is needed to bring the panels back to peak power generation.
Monitoring can be done in-house from time to time to check in with the inverter's monitoring platform.
Alternatively, businesses can enter into a maintenance agreement with a solar company to monitor and maintain the solar power system when required. The solar company can also take care of maintenance. Generally, systems aren’t likely to fail as solar panels are inherently durable and tested to rigorous standards, however faults can occur from time to time and they will get dirty which will cause a system’s energy production to drop.
A ground-mounted solar power system is an excellent option should a roof be unsuitable for a solar power system. Although it's more expensive to build a ground mount array due to groundworks and the frames required. A solar power system on a roof uses the existing roof structure to attach the solar array frame, which generally reduces the cost.
Batteries are unlikely to be cost-effective for most businesses. The primary value of a battery can be realised by reducing electricity export from the solar system and using this power at times of high electricity prices. The cost of the battery system is often greater than the arbitrage value offered.
There are a number of other potential value streams, but these are not easily accessed by businesses.
Batteries can offer value by providing emergency backup power. The value of which should be weighed against the alternatives.
Power Purchase Agreement (PPA)
In a PPA, a third party owns the solar power system they install on the businesses roof. The system owner enters a contract with a business to sell the generated power for a defined price over a fixed term.
The solar company pays for all the equipment, completes the installation, and monitors and maintains the system. A PPA is an excellent solution as it offers a business a hedge on electricity prices as it will not be subjected to fluctuating electricity prices for the portion of power supplied by the solar system.
The PPA business will send monthly invoices for solar power used, which generally is accounted as an ‘operational expense’ and is typically tax-deductible
The benefit of a PPA is that it allows a business to benefit from the solar system without the need to invest their own capital.
A loan will allow the business to have more control over the system and potentially benefit from more costs savings in the future (if grid electricity prices continue to rise).
The solar power system will be accounted for as a ‘capital expense’ because the equipment is in the name of the customer/business. Therefore a company can claim depreciation.
See this example of how financing worked for Kaitaia College in Northland.
Installing a solar power system of a commercial size can be daunting. However, there are solar consultants out there that guide customers through the process, and ensure the solar power system is designed to meet the unique needs of the business.
Here are just some of the tasks a solar consultant can help with:
First, the consultant will conduct a preliminary feasibility study. This assesses technical and financial feasibility. They will be able to advise on:
The second stage is working through the details of the design of the solar power system. The consultant will design the system so that it can be taken out for tender and fixed.
These specialists are also knowledgeable on which companies offer the best quality and price. They can also check the finer details of the quotes provided to see if anything is missing.
Once a solar integration company has been appointed, the consultants may help with quality assurance throughout the installation process.
The cost of a solar consultant needs to be accounted for as it may impact the economics of the system. A smaller 100kW system is not a lot less work for the consultant than a one-megawatt system, as they will go through the same process. Therefore smaller system sizes might not make hiring a consultant viable.
Revolve Energy is an award-winning consultancy firm with decades of experience and has consulted for some of New Zealand's most iconic solar power projects, including:
Contact Revolve Energy to see if they can help get your commercial solar project going.
Businesses won’t need a consultant to get a quote. Solar power installation companies will provide all the information required to make a sound decision. Here is what they can provide before purchasing a system:
Join the hundreds of other New Zealand businesses benefiting from solar! If you would like to get started with three, free quotes from New Zealand's most trusted commercial solar installers, click here to go to My Solar Quotes commercial solar quotes form.