Pattrick Smellie: Solar power for commercial buildings – it's finally time

Roof-top solar electricity generation is starting to make compelling economic sense. Photo / 123RF

Opinion

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It's been a long time coming, but for many commercial building owners or their tenants, installing roof-top solar electricity generation is starting to make compelling economic sense.

Even five years ago, the cost of photovoltaic solar generation was still well above what it costs to buy electricity from the national grid, where at least 80 per cent of the electricity is already coming from renewable sources in New Zealand.

There was simply very little point, barring exceptional circumstances, in a business considering a solar installation.

But as the price both of solar PV technology and the kit required to integrate it into commercial premises and industrial processes has plummeted, both landlords and tenants are starting to explore whether the sun can finally be a meaningful supplier of their daytime energy needs.

Early adopters include Kiwi Property Trust, which has large installations on Auckland's Sylvia Park shopping centre, among others, and Watercare, which is floating a 1 Megawatt solar farm on a settling pond at the Rosedale wastewater plant, near the Northern Motorway.

The latest project to be announced is a commercial-scale solar installation for Fletcher Building at their Laminex plant in Hamilton. It will be owned by the landlord and installed by Vector's Powersmart business, which has been pushing solar since 2007 despite the fact that it undermines the network company's traditional business of owning wires that connect premises to the national grid. Vector justifies this by arguing that off-grid technology is coming anyway, and it is keen to build revenue in areas outside its monopoly network activities, which are regulated by the Commerce Commission.

Laminex's decorative plastic kitchen and work surfaces require high temperatures and pressure for the bonding process, which means the plant requires a significant constant electricity load.

That makes it perfect for solar PV installation, since it will use all the electricity produced off the factory roof, avoiding both the cost of batteries for electricity storage or the rarely profitable business of selling excess solar power back to the grid.

Because the Laminex factory runs 24/7, it will remain connected to the grid for its night-time supply and for energy needs in excess of what the sun can produce off the factory roof.

However, it expects energy cost savings by meeting around 30 per cent of its daytime load from the roof at an undisclosed cost that is presumably competitive with the 8-to-10 cents per kilowatt hour that an industrial or large commercial user might expect to be paying today for their power.

Precise figures are hard to pin down, but evidence from Australia – with far better sun hours and a surge of solar investment bringing economies of scale – suggests costs of A4-to-A5 cents per kWh are becoming possible.

That would be revolutionary if it can be achieved in New Zealand, where conventional wisdom says the competitive cost of new wind or geothermal electricity is around 6 cents per kWh.

Rogier Simons, general manager at PowerSmart, says the sweet spot in New Zealand is somewhere between 9c and 15c per kWh, somewhere between the 20c per kWh that a conventional power company might charge for a smaller commercial user, but only just in the money against a Time of Use bulk contract for a larger commercial or industrial user.

However, that price is also locked in for at least a decade, and the longer the contract, the lower the price. Twenty year contracts are preferred, New Zealand firms are often opting for shorter than that, and terms as long as 30 years are possible, he says.

Firms can either buy the solar equipment outright or avoid the upfront capital cost and lease-to-own from Vector or a range of other suppliers who are emerging in the market, such as Wellington-based Infratec.

"What we're seeing in the market is that it's starting to make sense in the commercial space for installations over 100kW and under 500kW," says Infratec chief executive Greg Visser. "Over 500kW, we find that folk start looking at Time of Use contracts", where traditional power companies can offer lower rates.

With wholesale electricity market spot prices in the 10-to-11c per kWh region at present, large-scale solar is making sense, particularly because of the long term pricing certainty and moreso when other factors, such as corporate commitments to reduced carbon emissions, are relevant.

The Laminex installation helps Fletcher Building's drive to lower emissions 30 per cent by 2030.

The Laminex plant in Hamilton. Photo / Supplied

Solar won't work for every commercial building, Visser warns. Angle to the sun, the nature of the tenant's electricity demand, the weight-bearing capacity of an existing roof, whether the roof is large enough for a viable installation, and up-front capital cost vs long term lease-to-buy are all factors.

In the Laminex case, the building owners, family firm Udy Group, were early adopters of commercial-scale solar technology, installing a 240 kilowatt array on top of a Whangarei shopping centre in 2014.

The Northland location made solar viable earlier than in many other parts of the country because of very high network charges. The building can partially avoid those network connection charges by using its own solar power, even though it will still pay network charges for electricity delivered the usual way.

Director Dan Udy says it was hard to make solar installations on other commercial buildings stack up in other locations during the prolonged period in the last decade when wholesale electricity prices were historically low and stable.

"At that stage, we looked into it but we couldn't offer power at a rate that was economically viable," Udy told BusinessDesk.

However, that prolonged period of stability has ended, with much higher and more volatile wholesale power prices over the last couple of years becoming the norm.

And over that time, the cost of the solar system itself has fallen 35 per cent, says Udy.

"I don't see it dropping a helluva lot more," he says, but he does expect battery technology to become cheaper and extend the range of possible installations.

As yet, this revolution is still embryonic. The Ministry of Business, Innovation and Employment's 2019 energy data compilation shows that a grand total of 98 Gigawatt hours of solar energy was produced in 2018.

That's 0.22 per cent of total electricity of 43,028 GWh generated that year. However, it's grown from just 3GWh in 2007 and installed capacity almost doubled between 2016 and 2018.

One of the beauties of rooftop solar installation is that it meets one of the most difficult economic requirements for any large-scale solar project: very cheap land.

In Australia, for example, solar project developers fan out through the countryside looking for farmers in drought-prone areas who lack water rights and have few other revenue options for their land.

A factory or shopping mall roof, or a settlement pond at a wastewater plant, are just another kind of free land.

Expect to see more and more sun-farming on big buildings' roofs from here on in.