Category Archives: 2018

Eight ways to reach 100% renewable electricity [‘Build’ and ‘Buy’ options]

This blog post has been updated in Dec 19 to reflect the re-branding of NCOS to ‘Climate Active’.

As our company name suggests, we help organisations develop pathways that will help them reach 100% renewable energy.

Recently, we advised Eurobodalla Shire Council. The council needed help evaluating proposals for a Power Purchase Agreement, a Public-Private Partnership, and building their own solar farm. The ‘build’ versus ‘buy’ question was also evaluated in work we are currently performing for Inner West Council. This particular council wants to reach both 100% renewable energy and carbon neutrality.

The following infographic shows eight options we evaluated to reach 100% renewable electricity. In this blog post, we present a high-level overview of the ‘build’ and ‘buy’ options and factors that influence the business case.

Eight ways to reach 100% renewable electricity
Figure 1: Eight ways to reach 100% renewable electricity

GreenPower® and buying LGCs through a broker – ‘Buy’ options

The easiest way is to purchase GreenPower®, renewable energy generation accredited by the Australian Government. Buying GreenPower® means that you can ‘offset’ your energy consumption with renewable energy generation that is additional to Australia’s Renewable Energy Target.

Most electricity retailers have their own products sourced from accredited GreenPower® generators, and it is easy to make the switch. GreenPower® is a great option for smaller energy users who may not be able to enter into a Power Purchase Agreement. However, GreenPower® comes at a premium to grid electricity contracts. If you are interested in the combination of GreenPower® and PPAs, it is possible to source GreenPower®-accredited PPAs.

Another option to reach 100% renewable electricity is to purchase Large-Scale Generation Certificates (LGCs). LGCs are the green attributes of large-scale renewable energy production, and by buying and retiring them, you can claim the renewable energy generation, above and beyond Australia’s Renewable Energy Target.

Both GreenPower® and buying LGCs are recognised options for offsetting your electricity consumption under the Climate Active.

Power Purchase Agreement (PPA) – ‘Buy’ options

With Power Purchase Agreements (PPAs), you are contracting for renewable electricity for a minimum number of years, typically from seven years. You agree to pay a certain amount of money per MWh, which covers all costs including financing, construction and maintenance of the renewable energy asset.

If your aim is to become 100% renewable, you also need to purchase the LGCs. A bundled price for both electricity and LGCs can be very cost effective in the current market.

With a PPA, there is no capital investment from your end, and the renewable energy project developer owns the generation asset. The performance risk sits with the developer and you don’t have to worry about technical aspects. Your focus is on the price and supply of the electricity volume and LGCs.

Engineer, Procure, Construct (EPC) – ‘Build’ options

Under an EPC model, your organisation constructs your own renewable energy plant, typically a solar farm. This works if you have suitable land available, or if you can partner with someone who does.

Because the intention is to reach 100% renewable electricity, your solar farm will be connected to the grid, as opposed to a behind-the-meter installation. This is because most onsite solar PV installations can only meet part of your energy demand. A PPA will also form part of the deal.

You invest capital and directly or indirectly manage the construction of your renewable energy asset. Once your solar farm is operating, ownership is transferred to your organisation. It is important to note that you will take on the management and risk of the ongoing solar farm performance. Naturally, you will be more interested in the technical aspects with the ‘Build’ option.

Factors that influence the business case for ‘build’ or ‘buy’

When evaluating different options to reach 100% renewable electricity, there are many factors that need to be considered, in addition to risks and sensitivities. The three main factors that influence the business case for each option are

  1. Market pricing for electricity,
  2. LGC pricing, and
  3. EPC costs
Factors that influence the business case for build or buy
Figure 2: Factors that influence the business case for ‘build’ or ‘buy’

EPC costs are typically expressed in dollars per watt installed. The key components are hardware (including solar panels, mounting and inverters), labour (including civil works, electrical, maintenance and project management), and network connection. These costs have been steadily dropping, especially with respect to hardware components, achieving a connection can be more challenging.

Market pricing for electricity has been volatile in recent times due in part to the retirement of coal-fired power plants. At the same time, a record amount of renewable energy is being installed.

LGC prices have been high in recent years, but with increased supply coming online and the Renewable Energy Target being met, they may have little value after 2020.  You can use LGCs from your build or buy projects to meet your RET obligation, but you also need to retire enough LGCs to cover your energy consumption to claim 100% renewable energy.

Do you want to reach 100% renewable electricity?

As you can see in Figure 1, there are many options to reach 100% renewable electricity. Moreover, this space is evolving rapidly, and there may be additional methods in future. If you need help with evaluating your options, it is best to work with a company who has experience in this field. For further information, please do not hesitate to contact  Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.”

How Eurobodalla Council evaluated its options to reach 100% renewable energy at the same or lower cost than grid electricity

Speakers, from left to right: Patrick Denvir from 100% Renewables, David West from Sourced Energy, Barbara Albert from 100% Renewables and Mark Shorter from Eurobodalla Council
Speakers, from left to right: Patrick Denvir from 100% Renewables, David West from Sourced Energy, Barbara Albert from 100% Renewables and Mark Shorter from Eurobodalla Council

On 9 October, 100% Renewables in conjunction with our partner organisation Sourced Energy presented to a group of NSW Government representatives on Sourcing Renewable Energy, using the example of Eurobodalla Shire Council’s Renewable Energy Options Analysis. The presentation was also broadcast via a webinar to NSW Councils participating in OEH’s Sustainability Advantage program.

About Eurobodalla Council’s renewable energy goals

Eurobodalla Council has a goal to source 100% of its electricity from renewables by 2030 as per its Emission Reduction Plan 2017-2021. The plan also has two additional goals to reduce emissions by 25% by 2020 and by 80% by 2030 for council operations.

With a strong track record of carbon abatement, Eurobodalla Council has already reduced its emissions by 35%. Despite the target of 100% renewable energy being 12 years away, Eurobodalla Council wanted to look at their options now, for a number of reasons:

  • Council is coming off its electricity contract at the end of 2018 and faces much higher prices
  • Some councillors and the community were interested in the recent developments in local government-owned solar farms, like the ones by Newcastle and the Sunshine Coast councils
  • Recent developments in renewable Power Purchase Agreements (PPAs), like the SSROC PPA
  • Council had also received an offer from a private developer for a Public-Private Partnership (PPP) and another offer for a Virtual Generation Agreement via a PPA.

With several offers on the table and given the uncertainty and volatility in the energy market, Eurobodalla wanted to get independent, expert advice on the viability of these options. They selected 100% Renewables and partner organisation Sourced Energy to help them navigate the options and put recommendations forward.

Renewable energy options assessment

100% Renewables performed an analysis of three different business cases:

  1. Build and own a ~10 MW solar farm in the LGA
  2. Co-invest in a 30 MW solar farm via a Public Private Partnership
  3. Contract directly via a Power Purchase Agreement
Figure 1: Evaluated options for Eurobodalla Council to achieve 100% renewable energy
Figure 1: Evaluated options for Eurobodalla Council to achieve 100% renewable energy

We evaluated each option in terms of how well it was able to meet the objectives of ‘cost’, meaning achieving the same or lower than grid price, ‘sustainability’, meaning the need to achieve a 100% renewables goal, and ‘risk’, meaning the reduction of risk to an acceptable level.

Figure 2: Finding the best-fit 100% renewable energy solution
Figure 2: Finding the best-fit 100% renewable energy solution

Our findings

For all of the options considered, a major factor limiting Eurobodalla – and other councils – from sourcing 100% renewables cost effectively is a ministerial order that prevents councils from entering into “contracts for difference”, a contracting method that underpins many ‘corporate PPAs’ in the market. In effect, this means that all options must consider Council’s load and timing of energy demand, and look to sculpt solutions that align with this demand while managing differences between renewable energy generation and demand via load balancing strategies.

Our analysis found that in the current environment, a PPA is the lowest-risk and easiest-to-implement option for Eurobodalla Council, but sourcing 100% renewables is unlikely to be feasible at this time. Council should seek to incorporate the purchase of large-scale renewable energy from the start of the next electricity contract period using a shorter-term agreement where it is found to be financially viable and has no additional risk when compared to a regular retail contract.

Council should also consider forming a buying group or partnering with other councils in the region or state to increase the size of the electricity (including renewable energy) load to be contracted and to increase the attractiveness of the opportunity to retailers, potentially leading to lower cost outcomes.

The build options evaluated offer a fairly low return in the short term, require substantial upfront investment and carry some delivery risk. The current uncertain policy environment plays an important part in this outcome, particularly for mid-sized projects. At this time, build options for Council should be a lower priority for investment, but can and should be re-visited as build and implementation costs reduce further and the policy environment changes.

Conclusion

While in the case of Eurobodalla Shire Council, the ‘build’ case was only marginal, your situation might be different. If you are unsure as to whether you should ‘build’ or ‘buy’, please call/email Barbara or Patrick for an informal chat.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.”

Allowable ‘offset mechanisms’ for 100% renewable energy and carbon neutral goals

This blog post has been updated in Dec 19 to reflect the re-branding of NCOS to ‘Climate Active’.

In an earlier blog post, we analysed two different targets, carbon neutrality and 100% renewable energy. In this blog post, we answer two customer questions about ways to offset typical emission sources, as well as displaying a summary table.

Can you offset your entire carbon footprint by purchasing renewable energy?

The short answer is no. It is possible for 100% of your electricity demand to be met by renewable energy. However, it won’t be possible to reach carbon neutrality solely based on an efficiency and renewables strategy.

This is because renewable electricity purchases can only be used to offset your electricity consumption and not to offset other emission sources like natural gas, diesel or petrol emissions, or supply chain emissions like paper consumption. For these emission sources, carbon offsets may need to be purchased until renewable energy alternatives are widely available.

You can read more about the differences between the energy and carbon footprint in this blog post.

Can you use LGCS to offset the electricity consumption from assets over which you don’t have operational control?

LGCs, or Large-Scale Generation Certificates are Renewable Energy Certificates, which certify that renewable energy has been produced. Every 1 MWh of eligible renewable energy generation creates 1 LGC. You can use LGCs to offset your electricity consumption and claim the renewable energy. You can buy LGCs indirectly by purchasing GreenPower®, by entering into a corporate PPA or buying LGCs through a broker.

LGCs can be used against your electricity consumption, but they can also be used to offset the downstream electricity consumption from assets over which you don’t have operational control. Examples of this would be the energy consumption of street lights in the case of councils or the energy consumption of an outsourced data centre.

Allowable offset mechanisms per emission scope
Figure 1: Allowable offset mechanisms per emission scope

You can purchase LGCs to cover your own electricity consumption plus additional ones for your outsourced assets and retire them on behalf of your outsourced provider. This decision is particularly important for the size of a potential Power Purchase Agreement.

Offsetting mechanisms for your typical emission sources

The following table helps to clarify which offset mechanism can be used against which emission source using the example of a Climate Active-compliant inventory. It also shows what emissions sources carbon neutrality and achieving 100% renewable energy relate to.

Allowable offset mechanisms for carbon neutrality and 100% renewable energy

Emission SourceUsing carbon offsets to ‘offset’Using LGCs (RECs) to ‘offset’Achieve carbon neutralityAchieve 100% renewable energy?
RefrigerantsYesNoYesN/A
Natural GasYesNoYesAchievable only with renewable fuels
Fleet Vehicles DieselYesNoYesAchievable only with renewable fuels
Fleet Vehicles PetrolYesNoYesAchievable only with renewable fuels
Fleet Vehicles EthanolYesNoYesAlready renewable
Fleet Vehicles BiodieselYesNoYesAlready renewable
Fleet Vehicles LPGYesNoYesAchievable only with renewable fuels
ElectricityYesYesYesYes
Electricity (Street Lighting)YesYesYesYes
Electricity consumption base buildingYesYesYesYes
Outsourced electricity consumption (e.g. data centres)YesYesYesYes
Water and sewerYesNoYesOnly if water/sewer provider is powered by renewables
PaperYesNoYesN/A
EquipmentYesNoYesN/A
Food and CateringYesNoYesN/A
PostageYesNoYesN/A
Taxis, Uber and other servicesYesNoYesOnly if third-party organisation has fleet powered by renewables
Employee commuteYesNoYesOnly if all employees’ commute is powered by renewables
Waste to landfillYesNoYesN/A
Green wasteYesNoYesN/A
Air travelYesNoYesOnly if planes are powered by renewables

If you would like to know more about the best strategy for your organisation to offset your emission sources given your unique circumstances, why not have an informal chat with Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.”

Bioresources Hub in the Hunter, Sunshine Coast Council Solar Farm and EDQ’s Aldoga Solar Farm

Barbara Albert from 100% Renewables and Simon Crock from the Sunshine Coast Council at the RDAC 2018
Barbara Albert from 100% Renewables and Simon Crock from the Sunshine Coast Council at the RDAC 2018

Last week, Barbara Albert from 100% Renewables proudly chaired the Renewable Energy and Energy Supply stream at the Regional Development Australia Conference in Tweed, NSW.

Mayor Katie Milne from Tweed Shire Council kicked off the conference, followed by the Hon. Ben Franklin, Parliamentary Secretary for Renewable Energy and Northern NSW, who talked about the NSW Government’s perspective on regional development. Barbara had the pleasure to chair three presentations on renewable energy projects across New South Wales and Queensland.

Case study 1: Building a Bioresources Hub in the Upper Hunter

The first presentation was ‘Building a Bioresources Hub in the Upper Hunter’ by Gerry Bobsien from Muswellbrook Shire Council. The talk focused on the energy transition underway in the Hunter region and the opportunity this presents for renewable energy. The two coal-fired power stations located in the Muswellbrook Shire will be retired in 2022 (Liddell) and 2035 (Bayswater).

Muswellbrook Shire Council has an active economic diversification agenda and is working with a range of regional stakeholders to foster new energy jobs in the region. The purpose of establishing a bioresources hub in the Hunter is to create an innovation incubator to drive biorenewable research through to commercial deployment. Muswellbrook Shire Council supports an initiative being driven by the University of Newcastle’s International Centre for Balanced Land Use, to promote the region as a ‘BioValley’ with valuable assets such as:

  • Skills (close proximity to a major university)
  • Biomass (large underutilised land associated with mine buffers and rehabilitation sites)
  • Grain transport rail corridor to the port of Newcastle.

According to a recent federal government report, there are 5 million tonnes of underutilised biomass resources in NSW. Access to the rail corridor could potentially deliver these feedstocks to the Upper Hunter to support a biorenewables industry.

Case study 2: Sunshine Coast Solar Farm

The second presentation was on the ‘Sunshine Coast Solar Farm’ by Simon Crock from Sunshine Coast Council. Between 2014 and 2017 Queensland paid one of the highest prices for electricity compared to other states and the Sunshine Coast Council’s expense on electricity kept rising. At the same time, renewable energy became cheaper which led Council to build their own solar farm to supply them with affordable renewable electricity.

The Council went to market for an Engineer, Procure and Construct (EPC) contract for the 15MW Valdora solar farm in FY13/14 and signed the contract with Downer in 2016. At the same time, Council went to market for retail electricity services and selected Diamond Energy for their Electricity Supply Agreement and Power Purchase Agreement.

Figure 1 below shows the Business-As-Usual load profile for Council. As can be seen, Council’s daytime consumption exceeds their night time usage. Council pays higher rates during peak times, compared to offpeak. Such a load profile is ideally suited to a solar farm.

Typical BAU load profile for Council.
Figure 1: Typical BAU load profile for Council.

Figure 2 shows the typical generation output profile of the solar farm. The renewable energy plant delivers the most energy in the middle of the day when insolation is strongest.

2: Typical solar farm renewable energy generation
Figure 2: Typical solar farm renewable energy generation

Combining the solar farm’s output with Council’s load profile results in the renewable energy generation offsetting Council’s daytime usage. Excess electricity that is being generated is sold to the market at the spot price.

How the Solar Farm offsets Council's electricity consumption
Figure 3: How the Solar Farm offsets Council’s electricity consumption

At night, Council still has to buy electricity to cover night-time use. Streetlighting was kept on a separate, fixed-price contract to avoid the risk of offpeak electricity spot price spikes.

Electricity revenue and expenses
Figure 4: Electricity venue and expenses

Case study 3: Delivering Solar Differently in the Sunshine State

The third presentation was on ‘Delivering Solar Differently in the Sunshine State’ and was held by Lavinia Dack and Brooke Walters by Economic Development Queensland (EDQ).

Queensland has a target to supply 50% of its electricity needs from renewables by 2030. It has an average of over 300 days of sunshine a year, which makes it ideal for the development of solar farms. As part of the Queensland Government’s Advancing our cities and regions strategy, which aims to renew underutilised state land to generate jobs and drive economic growth, EDQ embarked on an analysis of current land holdings to identify if there was a site suitable for renewable energy.

A 1,250-hectare site in Aldoga, Gladstone was identified as favourable due to its proximity to a cost-effective, high voltage network, suitable land conditions and good solar irradiance. Acciona Energy was selected as EDQ’s partner. Key aspects of the agreement are the

  • Delivery of a 265MW solar farm
  • Lease period of 30 years that maximises interim land use with ongoing income
  • Improvements to the land with services and roads ideal for future industry attraction
  • Giving back to locals through a community benefit fund for the life of the project

 

It was a pleasure to be the chair of these wonderful presentations. If you are interested in your clean energy becoming a case study for others, why not consider working with 100% Renewables. We are experts in energy efficiency, renewables and net zero, and help is just a short phone call away. Call Barbara if you’d like more information. 1300 102 195.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.”

Are ‘carbon neutral’ and ‘100% renewable’ the same?

It is not always clear what the targets carbon neutrality and 100% renewable energy mean. In this blog, we will define these targets and talk about the difference between your energy and carbon footprint. In one of our next blog posts, we will look at allowable offset mechanisms like RECs/LGCs and carbon offsets.

The difference between your energy and carbon footprint

Your energy footprint relates to your business’ energy consumption. For most organisations, ‘energy’ encompasses not only electricity but also stationary energy and transport fuels. Examples of stationary fuels are natural gas, diesel for generators, and LPG for forklifts. Examples of transport fuels include diesel, petrol, and LPG that power your fleet.

A carbon footprint is the sum of your emission sources, a big part of which is your energy consumption. You can develop a narrow carbon footprint of emissions that happen at your place of business (Scope 1) and the emissions associated with electricity consumption (Scope 2). Alternatively, you can develop a wide carbon footprint which also includes emissions in your supply chain (Scope 3).

A carbon footprint is usually broader than your energy footprint. You can see in Figure 1 that an energy footprint is a subset of a carbon footprint. From a carbon accounting perspective, your energy footprint relates to your Scope 2 emissions and to some of your Scope 1 emissions.

The difference between your energy footprint and carbon footprint and claims for 100% renewable energy and carbon neutrality
Figure 1: The difference between your energy footprint and carbon footprint and claims for 100% renewable energy and carbon neutrality

What is carbon neutrality?

Carbon neutrality (or zero net emissions) is reached when all emission sources in your defined boundary are zero. This is demonstrated in Figure 1 in the bottom line. Ideally, your defined carbon footprint boundary encompasses as many emission sources as possible so that your claim for carbon neutrality is credible.

You can reach carbon neutrality by:

  1. Reducing your emissions onsite through energy efficiency or by installing solar PV
  2. Building or purchasing renewables offsite, and by
  3. Offsetting the rest of your emissions through the purchase of carbon offsets

For further information on these three categories, you can read our blogs on the carbon management hierarchy, compare the value of onsite and offsite solar, and installing solar via onsite PPAs.

What is 100% renewable energy?

You are 100% renewable when the amount of renewable energy produced is equal to or more than what is consumed. In most cases, people associate only electricity with ‘100% renewable’. However, as you can see in Figure 1 ‘energy’ can encompass stationary and transport fuels as well. So, to be truly 100% renewable, you would have to include these fuels. While it is relatively straightforward to reach 100% renewable electricity, it is more difficult to achieve 100% renewable energy for stationary and transport fuels.

To avoid doubt if your real objective is to green your electricity supply, you can define your target to be ‘100% renewable electricity’. You can reach this goal by:

  1. Implementing onsite solar PV
  2. Building your own mid-scale solar farm or solar/wind farm in partnership with others
  3. Buying renewables (e.g., through a corporate Power Purchase Agreement)

For further information, you can read our Guide on ‘How to achieve 100% renewable energy’ or buy Barbara’s book ‘Energy Unlimited – Four Steps to 100% Renewable Energy’. Signed copies can be purchased here, and the ebook version is available from reputable bookstores.

Conclusion

Carbon neutrality and 100% renewable energy are two different targets. It is easier to reach ‘carbon neutrality’ than to reach ‘100% renewable energy’, especially if the boundary for energy encompasses both electricity, natural gas and transport fuels. However, to be a leader in climate change, your organisation should also strive towards a renewable energy target as your impact will be much greater.

It is possible to reach 100% renewable energy AND carbon neutrality. Microsoft has been achieving both since 2014. You can also pursue both targets in a staged approach. As an example, you could aim for 100% renewable electricity in the first instance, followed by carbon neutrality in the medium term, followed by 100% renewable energy in the long run.

If you have specific questions about defining a target that works for your organisation, or if you would like us to develop a pathway to your sustainability goal, please have a chat with Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.”

Financing options for sustainability projects for councils

Barbara Albert from 100% Renewables presenting on financing options for sustainability projects for councils
Barbara Albert from 100% Renewables presenting on financing options for sustainability projects for councils

Last week, 100% Renewables was asked to present at a webinar run by the Sustainability Advantage Program from the Office of Environment and Heritage about financing options for councils. Topics covered were why you need a funding strategy, how to align it with broader organisational strategies and plans, a detailed discussion about various funding options, how a financing strategy can be integrated into organisational planning and developing an optimal financing strategy.

Why you need a financing strategy for sustainability projects

Most sustainability initiatives require some sort of financing, and it pays to plan ahead so that you can seamlessly execute your environmental strategy and reach your stated targets. Knowing beforehand what your needs will be will also make sure that you are ready to submit your business cases in line with budgetary cycles.

Free Download: Financing Options for Sustainability Projects

Aligning your financing strategy

A funding strategy for local governments is not a standalone document – it needs to tie into broader strategies like the Community Strategic Plan, delivery and operational plans, as well as the sustainability strategy. Figure 1 shows the hierarchy of organisational alignment.

Aligning a local government's financing strategy with strategic and operational plans
Aligning a local government’s financing strategy with strategic and operational plans

11 funding options for local governments

Traditionally, local governments have funded their sustainability initiatives either from the budget or through a loan. However, there are many more options available. In the webinar, Barbara covered 11 funding options for councils, along with pros and cons for each option, as well as an indication of the challenge to establish and maintain them and a few case studies. You can find the 11 financing options in the list below.

  1. Pre-existing and future incentives and grants, free money
  2. Environmental levy/Special Rate Variation, internal funding
  3. Self-financed through the normal budgeting process, internal funding
  4. Self-financed through a Revolving Energy Fund (REF), internal funding
  5. Internal carbon price, internal funding
  6. Loan financed, Council borrows
  7. Equipment lease, third-party funding
  8. On-bill financing, third-party funding
  9. Onsite solar Power Purchase Agreements, third-party funding
  10. Energy Performance Contracts, third-party funding
  11. Community energy projects, third-party funding

It’s important that you keep in mind that these funding options are not mutually exclusive and that your funding strategy will most likely contain a mix of these.

What are the most suitable financing options for your council?

Every council’s needs, circumstances and objective are different, so a financing strategy needs input from senior management to make sure that it is fit for purpose. Here are two ideas for how you could filter out suitable financing options from the list above.

  1. Run a workshop with the leadership team and other key organisational stakeholders in which you go through all financing options and let the group determine the most suitable ones.
  2. Present a shortlist of pre-evaluated financing options to the leadership team so that they can provide feedback.

Both options lead to the development of a pathway for implementing your optimal financing strategy.

Defining your optimal financing strategy for your sustainability projects

In most cases, your optimal financing strategy is based around four different ways detailed in Figure 2. The best money is always free money, which you can access through grants and incentives. Grants are only available at certain times, and it is best to have projects shovel-ready, so you can submit when the time comes.

Incentives like Small-Scale Technology Certificates (STCs), Large-Scale Generation Certificates (LGCs) and Energy Savings Certificates in NSW (ESCs) will make the business case of investments more attractive, as there will be additional income streams for your energy projects.

Optimal financing strategy for sustainability projects for local governments
Figure 2: Optimal financing strategy for sustainability projects for local governments

The second-best option for councils from a financial-return-perspective is to finance projects internally. If you spend money from your funds (e.g., General, Water/Sewer, or Streetlighting Funds), you will be able to enjoy all energy project savings, without having to pay interest or sharing the benefits with another party.

The third-best option is to borrow money, which is typically done for capital-intensive projects. Councils have access to very favourable interest rates, but the Clean Energy Finance Corporation (CEFC) might also be able to co-fund your project, so it is worthwhile enquiring with them.

If you don’t want ownership of your energy project and you are happy to split the financial benefits with another party, you can also consider third-party financing through solutions like leasing, onsite solar PPAs, community energy projects or Energy Performance Contracts (EPCs).

Download Free Financing Options for Sustainability Projects

If you need help with a financing strategy for your sustainability plan and you want to run your ideas past our energy experts, why not contact Barbara or Patrick for an informal chat.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.”

Financing your solar panels through an onsite power purchase agreement (Solar PPA)

If you are considering the installation of solar PV panels on your premises, an outright purchase will return the greatest financial benefit. However, if you don’t have the capital, one of the financing options available is an onsite solar PPA.

What is a solar PPA and how does it work?

An onsite solar power purchase agreement (PPA) is an agreement between your business and a PPA provider.

Solar PPA infographic
Solar PPA infographic

Figure 1: Onsite solar power purchase agreement (solar PPA)

As per Figure 1 above, there are three parties to consider; your business, the PPA provider and your electricity retailer.

  1. PPA provider is the installer, owner, operator and maintainer of the solar PV on your premises. The PPA provider sells you the electricity generated from solar for an agreed price and duration, typically ten years. At that time there may be options for you to purchase the panels, for the PPA provider to remove them, to extend the agreement, or to renew a PPA agreement with a new system.
  2. Your business (purchaser, or off-taker) is the buyer of electricity from the solar panels on your premises. You buy this electricity for an agreed price, lower than your grid electricity price.
  3. Your electricity retailer continues to supply electricity from the grid, likely to cover most of your demand, and you will continue to receive a bill from them. Your retailer may agree to purchase excess solar energy generation for a feed-in-tariff. As a result, there will be two electricity bills, one from your PPA provider and one from your electricity retailer.

Free Download: Financing Options for Sustainability Projects

What are solar PPA benefits?

There are many advantages to procuring an onsite solar PPA, which include:

  • No upfront cost – the PPA provider bears the costs associated with the purchase and installation of the solar panels.
  • No on-going operation and maintenance costs – the PPA provider is responsible for operation and maintenance of the solar panels.
  • Helps achieve environmental goals – you can use the electricity generated from the solar panels to reduce your carbon emissions or to meet your renewable energy targets.
  • Lower cost of electricity – the solar PPA price should be lower than the cost of grid electricity and may include a process to confirm that this is the case and adjust over time.
  • Monitoring of and guaranteed performance – the PPA provider monitors and may guarantee the performance of the solar panels as part of the agreement.
  • Potential for expansion and battery storage – a PPA could potentially be expanded to include new solar panels and battery storage. Thus, savings from solar could grow over time with no capital outlay and continued cost savings compared with grid power prices.

What are solar PPA risks?

There are also potential risks associated with onsite solar PPAs, which include:

  • More expensive over the life of the agreement – although there is minimal upfront cost for a solar PPA, the total cost over the life of the agreement will be higher than simply purchasing the system at the start.
  • Duration of solar PPA – many PPAs are for 7 to 15 years, which may be longer than your business can commit unless there is long-term certainty of remaining at the same location.
  • Expansion or change – future development adjacent to or on your facility, or to fixtures attached to your roof may alter the performance of or weaken the case for a solar PPA.
  • Costs to make your property solar-ready – You may incur additional costs such as electrical works, cabling and roof repairs when installing solar panels.
  • Quality of panels – you may have less choice in solar panel and inverter technologies under a PPA.

Panel of preferred solar PPA providers

Councils and government agencies can consider using solar PPA providers from the panel of preferred suppliers established by the NSW Government Office of Environment and Heritage (OEH). Support services offered by the NSW OEH include:

  • a prequalified, carefully vetted panel of Solar PPA suppliers (currently six suppliers) and their contact details
  • the Solar PPA Template Contract which can serve as a basis for your agreement
  • ongoing support
  • the Solar Financing Tool
  • the Solar PPA Program brochure – a brief overview of the program

An agreement template can be found by contacting the OEH through their website.

Your own solar installation(s)

It can be difficult to know what solar PV systems to select and how to best finance them. If you would like to speak to a consultancy that is not tied to any product suppliers, please contact Barbara or Patrick. Here are five reasons why you should choose an independent consultancy.

Please note that we have developed a Financing Guide for Sustainability Projects, which you may find useful.

Download Free Financing Options for Sustainability Projects

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Does the typical carbon management hierarchy apply to your business?

Clients sometimes ask us in what order they should deliver carbon reduction actions, often in the context of their carbon neutral/zero net emissions goal. Ordinarily, we suggest the ‘typical’ carbon management hierarchy such as that shown in Figure 1.

Typical carbon management hierarchy
Figure 1: Typical carbon management hierarchy

Typical carbon management hierarchy

The typical hierarchy suggests that a priority order of implementation should include:

  1. Energy efficiency: referred to as the ‘first fuel’, more efficient technologies, controls and practices helps to ensure that the least amount of energy is consumed before other measures are considered.
  2. Onsite solar PV: use of available roof space to implement solar PV to offset grid electricity consumption which is mainly produced from fossil fuels. Battery storage will enable solar PV systems to be expanded to offset a higher percent of onsite power demand in future.
  3. Offsite renewables: Power Purchase Agreements are becoming increasingly popular, particularly by large corporations and groups of organisations with similar aspirations and procurement processes. Some organisations have their own land and are interested in building their own solar farm to meet some or all of their energy needs.
  4. Carbon offsets: generally seen as the last step in a carbon management strategy, offsets are often purchased after all other ways to reduce carbon emissions have been exhausted.

Every organisation has unique needs

However, while this approach is ‘ideal’, every business’ situation is different, and this approach may not represent the best strategy for everyone. For example:

  • Energy using technologies may be capital intensive or new energy efficiency opportunities may be limited.
  • Onsite solar and batteries may be able to meet all of the energy demands of a warehouse operation for example. However old roofs, heritage buildings, multi-storey and energy-intensive facilities might have very limited PV capacity, or PV may only meet a small percent of energy demand.
  • Onsite solar PV may actually be cheaper and deliver a better return on investment compared with many efficiency measures.
  • Purchasing renewables via a PPA is becoming increasingly cheaper, particularly for large energy users. This may be a better option than many efficiency or onsite solar opportunities as it can achieve emissions reduction at scale that other options cannot, and at similar or lower cost to ‘standard’ grid power.
  • A business may have considerable Scope 3 carbon emissions that it has low ability to influence other than to purchase offsets; for example, flights, employee commute or catering expenses.

A business should tackle ambitious goals such as carbon neutrality with a multi-pronged approach that evaluates all of the abatement options and prioritises them based on what they can contribute to the end goal. The optimum carbon management hierarchy for each business may be different.

Individual carbon management hierarchy
Figure 2: Individual carbon management hierarchy for a client in a large heritage building

For example, a recent plan developed for a client in a large heritage building showed that their net zero goal can best be met through a PPA for renewable energy, followed by offset purchasing. Efficiency and onsite solar PV make only a small contribution in their case. This is shown in Figure 2.

Represented in this way makes it easier to communicate what is most to least important in the context of achieving ambitious carbon goals.

If you are interested to find out where your biggest savings are, both in monetary and carbon reduction terms, please contact Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.

How USC developed their Carbon Management plan

Barbara was the main speaker at a TEFMA webinar focusing on the development of USC's Carbon Management Plan
Barbara Albert from 100% Renewables presenting at a webinar to TEFMA

This blog post has been updated in Dec 19 to reflect the re-branding of NCOS to ‘Climate Active’.

This week, Barbara presented at a webinar run by TEFMA to Universities around Australia and New Zealand. The topic of the presentation was the Carbon Management Plan for the University of the Sunshine Coast (USC) developed with the University by 100% Renewables.

USC to become a carbon-neutral university

USC has a long track record of sustainability since its inception when several awards were received for design at its Sippy Downs campus. USC’s sustainability program encompasses the natural environment at the university, energy and water efficiency in design and operation, waste management, supply chain emissions, transport as well as a wide range of education and engagement activities for staff and students. Strong governance has seen the sustainability program thrive over several years.

Building on this track record, USC’s strategic plan commits that the ‘University will strengthen leadership in sustainability for the region and beyond’. One of the main initiatives to arise from this commitment was that USC should aim to be carbon neutral and should plan for this accordingly.

USC’s approach to developing a Carbon Management Plan (CMP)

A key priority for the CMP is that it be cost-effective through a program of actions over time that are similar in cost to or lower than the cost of not acting to reduce emissions. Initiatives that can drive this outcome were informed by a planned, systematic approach:

  • Carbon emissions data were analysed for all USC operations, and forecasts of future emissions developed based on known changes in facilities and expected growth in student numbers,
  • Extensive analysis of onsite energy efficiency and renewable energy opportunities was carried out,
  • A market-led proposal to develop a central thermal energy storage system and a large-scale onsite solar PV and storage project at the Sippy Downs campus was developed

The central element of the CMP development was the engagement with USC’s stakeholders, to present USC’s emissions forecasts, options for abatement, potential targets to aim for, and frameworks against which to measure and report on emissions. Workshops were held with key stakeholders from the USC executive, staff and student body to ensure a wide range of views and ideas were heard and considered.

USC’s recommended targets

The CMP development served to refine USC’s carbon neutral objective:

  • Carbon neutrality should be aligned to the Climate Active
  • Carbon neutrality should be achieved by 2025
  • A focus on in-house measures and renewable energy procurement is strongly preferred, with offsets purchased as a last step
  • USC should aim to make the Moreton campus carbon neutral from the beginning

The Carbon Management Plan (CMP)

The CMP will be underpinned by a robust emissions measurement methodology aligned with Climate Active. This will develop over time as data management systems for small sites and some Scope 3 emissions are improved. The proposed data management approach is illustrated in Figure 1 below.

Figure 1: Staged inclusion for emission sources
Figure 1: Staged inclusion for emission sources

Initiatives to be implemented under the CMP were developed based on estimated future emissions for an extensive Scope 3 boundary for all campuses.

The CMP is divided into three themes:

  1. Management – management and governance of the CMP
  2. Carbon abatement – carbon reduction measures that form part of the journey to carbon neutrality
  3. Engagement – ensuring that both students and staff are engaged so that the actions of the CMP are supported

Based on assessed and recommended investments, marginal abatement cost (MAC) curves were developed to illustrate the cost-effectiveness of the planned CMP over time. Figure 2 below illustrates the MAC for the university’s plan at 2040, when most of the investments have paid for themselves and are returning a positive cashflow to USC.

Figure 2: Marginal Abatement Cost Curve for USC at 2040
Figure 2: Marginal Abatement Cost Curve for USC at 2040

The MAC curves illustrate that there are several highly cost-effective abatement measures that will pay for themselves within a few years. They also show that investment in rooftop solar – even at significant scale – is cheaper than offsetting emissions. The overall outcome in cost terms to USC will be cash positive.

If you would like to find out more about USC’s journey, please download our presentation here:

100% Renewables can help you with the development of your carbon management or carbon neutral strategy. For more information, please contact Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.

How putting an internal price on carbon can help fund sustainability projects

We recently helped one of our clients with financing options for their sustainability objectives. We showed them the many funding options available for sustainability projects such as leasing and loan options, funding from the budget, but also more innovative solutions like Revolving Energy Funds (REF), or Energy Performance Contracts (EPC).

Another innovative funding option is carbon pricing. Increasingly organisations are implementing an internal carbon price as a method of managing climate risk and achieving sustainability goals. According to the CDP, 600 organisations around the world in 2017 are using an internal carbon price with almost 800 planning to implement it soon.

Free Download: Financing Options for Sustainability Projects

Microsoft, for example, uses the revenue from its internal carbon fee to fund renewable energy, energy efficiency, research into emissions reduction technology, and to raise employee awareness of climate risks and opportunities.

Update April 2019:  Microsoft doubled its internal carbon fee to $15 per metric ton on all carbon emissions.

Others, such as Shell, BHP, and BP, embed a shadow price in their business strategy to help evaluate business opportunities such as investing in low-carbon assets.

What is an internal carbon price and how does it differ from an external price?

An internal carbon price is a fee an organisation places on the greenhouse gas emissions it emits, which can be used to influence investment and business operations decisions.

An external carbon price, on the other hand, is a locally, or nationally regulated price on carbon emissions from organisations in that region. Around 45 countries now put a price on carbon, including for example the European Union, Chile, Korea and Finland. These countries as well as several sub-national jurisdictions all use carbon pricing to curb greenhouse gas emissions.

How does an internal carbon price help with getting sustainability projects over the line?

Implementing a carbon price not only prepares organisations for future government regulation, it also gives them a competitive edge over other organisations. The implementation of an internal carbon price places an obligation on the entire organisation to manage their emissions. This obligation assists in making the business case for sustainability projects stronger. An internal carbon price can:

  • Shorten the payback period and justify investments with lower margins that would otherwise not have met internal approval criteria
  • Improve long-term resilience through low-carbon decisions in operations and in the supply chain
  • Make a company’s sustainability strategy more effective and meaningful
  • Make it easier to get buy-in from organisational stakeholders

Types of internal carbon pricing

There are three types of internal carbon pricing that organisations typically choose from:

Type of Internal Carbon PriceDescriptionBenefitsRevenue GenerationAustralian Case Examples
Internal Carbon FeeA fixed fee on each ton of carbon emissions emitted by the organisationGenerates a revenue stream to fund an organisations emissions reduction targetYesMicrosoft (Global)
Shadow PriceA hypothetical price on carbon emissions emitted by an organisation to use when making long-term business planning and investment strategiesThis allows organisations to prepare for future regulation and prioritise low carbon investmentNo Wesfarmers, AGL, Stockland,BHP,Westpac, Shell (Global), and BP (Global)
Implicit PriceAverage cost per tonne of emissions borne by the organisation to meet its emissions reduction targetsGenerates the revenue required to meet the organisation's emissions reduction targets such as being carbon neutral through purchasing offsets or renewable energyYesNational Australia Bank (NAB)

Quite often organisations use a hybrid approach to create what works for them and their goals.

How you can implement an internal carbon price

100% Renewables has developed a 5-step method for the implementation of an internal carbon price. These steps are illustrated in figure 1 below. You first need to calculate your carbon impact and determine what your carbon, energy or sustainability targets will be.

After discussing the business case for an internal carbon price with key organisational stakeholders, you need to agree on an appropriate price level. After that, it’s a matter of making sure that carbon pricing permeates the whole organisation and that it is integrated into the long-term strategy, planning and operations. And finally, you will have to monitor whether the carbon pricing is performing as expected and make any necessary adjustments.

How to set an internal carbon price
How to set an internal price on carbon

Figure 1 – How to set an internal carbon price

How we can help you with determining appropriate financing options for your sustainability projects

We use a tried and tested methodology to help organisations meet their sustainability goals. Some of the ways we help organisations include the following:

  • Organise discovery sessions or workshops where we present relevant financing options to key organisational stakeholders and get their input to develop a funding strategy
  • Evaluate your current projects and help with selecting the most suitable financing method
  • Present and explain the pros and cons of each funding method
  • Provide case examples of how other organisations have funded their sustainability initiatives
  • Integrate a funding strategy into your environmental/sustainability strategy
  • Calculate the business case for your sustainability initiatives (NPV, IRR, payback – depending on the needs of your stakeholders)

We have developed a Financing Guide for Sustainability Projects for Local Governments that describes 11 funding options.

Download Free Financing Options for Sustainability Projects

If you want to discuss financing and funding options for your sustainability strategy, please contact Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.