The Economics of Solar
A combination of finance and marketing drive most commercial solar projects. With our energy solutions you can offset energy prices, and market your credentials of a pure, green energy source.
There is no denying the negative impact that coal based power has on the environment. However, it is currently the cheapest source of energy and the reason Australia enjoys one of the lowest energy costs in the world. Any decision to invest in solar generation capacity must be made against the reality of the cost of energy, including projections of future energy price rises.
While there is no ‘fuel’ cost associated with solar, the main concern for many is the construction cost of a facility. If the planned life of the system is 25 years, then the
cost of building and managing it over that time, divided by the total amount of energy generated in its life, will determine the average cost of the energy that is generated. This is called the ‘Levelised Cost of Energy’ – or LCOE – in the power industry.
The value of the energy generated will depend upon the details of your supply agreement with your current retailer. If the peak output of the solar facility is less than your typical daytime load, then the solar facility will lessen grid energy usage.
If you check your energy bill or supply agreement, there will be a cost per incremental kWh of energy, quoted as $/kWh (or may be quoted in $/MWh). If you expect to be generating more energy than consumed on site then you will be a net energy exporter. You will need to contact your energy provider to get details of their ‘Feed-in Tariff’ schemes.
Below are some general calculations to highlight the benefits:
Let’s use a round figure of a 100kW system, and assume a system cost of $4/watt, or a total of $400,000.
Depending on your location, you can expect energy production to be in the range of 1,500 to perhaps 2,000 kWh/kW/year – that is kilowatt-hours of energy per kW of installed capacity generated per year. So at 1,700 kWh/kW/year our 100kW system will produce 170,000kWh per year. If your energy tariff is $0.15/kWh then the value of the energy produced will be 170,000 x 0.15 = $25,500/year. In simple terms, that is a 16 year payback ($400,000 / $25,500 – not accounting for energy price rises) or a 6.3% return on capital (not considering depreciation). Most businesses will have a cost of capital, or equity return rate hurdle, higher than this.
Why should you invest in solar for a commercial operation?
Clear Solar is the viable option because:
- Solar will protect your company from increasing energy costs.
- You may be able to source suitable government support through a grant scheme to subsidize the capital cost of the project.
- You can benefit greatly if your plant is located at the fringe of the grid, or in areas where the grid is ‘constrained’, and your supplier recognizes the value of you reducing your effective load.
- If your site is off-grid running on gas or diesel then your effective energy prices is much higher, and the fuel savings significant.
- You can market your commitment to the environment.
The Clear Solar farms team can help you identify the best technology, offer competitive solutions, and deliver fast and efficient projects. Please contact us to discuss your project further.