Tag Archives: financing options

Challenges with achieving ambitious targets

Challenges with ambitious targets
Challenges with ambitious targets

In part 1 of the blog series, we investigated what the scope of your climate change target could be. In part 2, we looked at the global and national goals you should be aware of. In this blog post, we will shed light on some of the challenges that you may face when setting ambitious goals.

Striking a balance

Setting targets is often about striking a balance between what we know can be achieved with today’s commercially available solutions and what will be available in coming years.

This is why many targets for renewable energy, for example, are 100% by 2030. It is expected that battery storage for solar and renewable energy sourcing for energy supply will be readily available and cost-effective by that time.

Interim targets tend to focus on onsite measures that are known to be cost-effective now, such as energy efficiency and solar panels.

Challenges with achieving ambitious targets

In our experience, both interim and ambitious long-term targets can present challenges for you. Here is a list of some of those challenges.

Ongoing internal support, resources and funding

This is often the most common barrier and challenge; how to gain and sustain the support and funds internally to make efficiency and renewable energy initiatives happen. There are usually limited funds, competing priorities and resources are stretched.

Without internal support at senior level as well as people to develop business cases and implement projects, most programs do not last or succeed.

Strategy tips:

  1. One or a few key staff and managers who want to see continued action on renewables and emissions reduction, and make it a priority on an ongoing basis.
  2. Having clear financing strategies for renewables, efficiency and other emissions reduction measures, including awareness of state and federal incentives such as the Energy Saving Scheme and the Renewable Energy Target, a consideration to fund from Capex or a loan, revolving energy funds or similar.
  3. Alignment of renewable energy and emissions reduction plans with your organisation’s strategy so that this is embedded in your organisational priorities.
Download Free Financing Options for Sustainability Projects

Understanding electricity markets and your energy purchasing processes

Energy procurement will most likely deliver the bulk of your organisation’s ambitious renewable energy goals, so without a plan, you may not be able to achieve an ambitious renewable energy goal ahead of the ‘greening’ of the grid.

The ability to meet an ambitious renewable energy goal cost-effectively is heavily influenced by how you source electricity from the market. Whereas in the past, GreenPower® was available, but at a cost premium, many organisations are now able to source energy from renewable energy projects at similar or even lower cost than conventional power.

Strategy tips:

In this rapidly evolving environment, you need to take time to understand how the electricity market and renewables procurement work and develop your energy sourcing strategy accordingly. In particular, investigate the following aspects of energy procurement:

  • The current and future electricity and renewable energy market
  • Contract terms for renewable energy supply
  • Types of contracts for renewable energy purchasing
  • Interest in collaboration or partnering for volume to achieve better pricing are all aspects of energy procurement

Transport and waste

Transport and waste can be sources of large carbon emissions. However, solutions to achieve step-change in energy demand, renewable energy or carbon emissions can be limited, particularly if your organisation is already focusing on emission reduction in these areas.

In our experience, the level of focus on carbon emissions and renewables for these sources is low or lags the focus that is applied to electricity and stationary gas. This often leads to the omission of these sources from targets.

An emerging aspect of this is the potential for electrification of vehicles to change electricity demand and thus increase the amount of renewable electricity that needs to be sourced to meet ambitious targets. Some organisations are beginning to assess their future energy demand with an EV fleet and incorporate this into their long-term forecasts.

Strategy tips:

Consider including transport and waste in future targets if they are not already part of your goal. Make sure that you apply appropriate resources to understand opportunities and future trends.

The emergence of electric vehicles will introduce new challenges for the identification of new opportunities. A good strategy is to forecast what changes will occur and when. This may not be a significant factor for the next 4-5 years but will almost certainly be a more important issue as we approach 2030.

Organisational growth

While you are implementing efficiency and renewables, your energy demand may grow with organisational growth. Your emissions intensity may reduce, but your absolute emissions may still be growing.

Strategy tips:

The greater the level of organisational support and understanding of the nature, scale and timing of opportunities, as well as an understanding of the type and scale of changes that will occur to your assets over time helps to set targets that are realistic and achievable.

You need to take these changes into account so you know what combination of emission reduction options can help you meet your target in the most cost-effective way.

Conclusion

You may find you have only achieved a small part of your goal after a few years, despite the fact you have progressed several onsite solar and energy efficiency projects. Often, building energy efficiency and onsite solar can deliver part of the solution, but each project is individually small.

This is beginning to change with cheaper solar panels making larger-scale systems cost-effective, which in turn has a greater impact on emission reduction and onsite renewable energy generation.

The overall effort towards ambitious goals is likely to include a small number of measures that have individually significant impact (e.g., a renewable energy PPA), plus a large number of small measures that have low impact but are good for the bottom line.

Your strategy to meet ambitious targets should include both these measures.

100% Renewables are experts in helping organisations develop their renewable energy strategies and timing actions appropriately. If you need help with developing a target and action plans that help you meet this target, 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.

Building your own grid-connected solar farm under an EPC contract

In a previous blog post, we analysed eight ways to reach 100% renewable electricity, looking at various buy and build options. In this blog post, we will shed more light on the EPC (build) options.

The volatility of wholesale electricity prices in recent years had many organisations consider building their own mid-scale solar farm to mitigate this risk. Also, installing solar PV on facilities can have an upper limit due to available roof size or suitability, so some organisations are considering building one big solar farm instead that can supply them with renewable electricity.

What is a mid-scale solar farm?

There is no official definition of the size of such a system, but it typically ranges between 0.5 MW and 10 MW (as opposed to utility-scale systems, which are much larger). Mid-scale systems usually connect to the distribution rather than the transmission network, which makes them cheaper to implement than utility-scale plants. They are NOT serving any behind-the-meter loads.

How can you build your own mid-scale solar farm?

You will need to invest capital and directly or indirectly manage the construction of a renewable energy asset, typically through an Engineer, Procure, Construct (EPC) Contract. Given that you are constructing a new generation asset, your contractual arrangements must cover site preparation, approvals, construction and maintenance.

Upon commissioning or after an agreed period of operation the ownership of the plant is transferred to you. At this stage, you take on the management and risk of the ongoing performance. Your greatest interest will be the technical aspects of your solar farm.

Using the electricity from your solar farm to offset your energy consumption

When you install solar PV behind your meter, every kWh that your system produces displaces energy consumption from the grid. There is no need to ‘sell’ the produced energy to yourself. The situation is different when you run a grid-connected solar farm that does not serve any behind-the-meter load and instead is connected to the grid. If your renewable energy project is in front of the meter, you must sell the generated electricity into the market, like any other generator.

Under National Energy Market (NEM) rules, all energy projects must have a retailer to sell the energy to the market. The retailer will balance your load when your renewable energy plant is not generating or not generating at full capacity and will provide other risk management services for you.

Classification of solar farms under AEMO rules

Under Australian Energy Market Operator (AEMO) rules, your solar farm will likely be classified as either exempt, non-scheduled, or semi-scheduled depending on the extent to which it will be participating in central dispatch.

  • Exempt – Plant size is less than 5 MW
  • Scheduled – The generating unit participates in central dispatch. Plant size is greater than 30 MW.
  • Non-Scheduled – The generating unit does not participate in central dispatch. Between 5 MW and 30 MW if some or all energy is sold in the NEM. Less than 30 MW if energy output is purchased by a local retailer or a customer located at the same connection point. However, ‘local use’ means that no more than 50% of the electricity supplied can be exported to the network.
  • Semi-Scheduled – The generating unit will participate in central dispatch in specified circumstances. Greater than 30 MW. However, AEMO can – at its discretion – classify the renewable energy plant as a scheduled generator.
Types of energy generators under AEMO rules
Types of energy generators under AEMO rules

Common ways to sell renewable electricity from your solar farm

Given that you need to sell the electricity into the market, it is worthwhile investigating different ways you can do this. In this blog post, we will focus on the most likely models, being a fixed price and spot market EPC.

EPC and sell fixed-price offtake

Under this model, you undertake an EPC construction agreement and sell the generation at an agreed fixed price per MWh (typically at a discount to market) to an offtaker. The offtaker can be a third party or your own organisation if you wish to balance your energy consumption with the renewable energy generation from your solar farm. As per NEM rules, a retailer needs to pass through or ‘sleeve’ this agreement.

Depending on your objectives, you can sell or purchase the Large-Scale Generation Certificates (LGCs) from your solar farm. For implications of selling or retiring the LGCs, please read our blog post on What you need to know about accounting for LGCs.

If your solar farm is bigger than 5 MW AC, your project will likely need to be registered as a semi-scheduled generator with AEMO. This means that AEMO can curtail your energy output or ask you to stop generating when there is network congestion (see picture at the top of this blog post). This won’t be the case if your project is smaller than 5 MW – you will receive an automatic exemption from AEMO.

EPC and receive spot market revenue

Under this model, you will register your solar farm as a generator which will likely be a semi-scheduled market generator (less than 30 MW generation) market participant under AEMO rules. Your renewable energy generation will be sent to the market via an export meter, and you will receive spot market revenue from AEMO.

Like with the option above, AEMO may curtail your energy output, which will affect the business case of your solar farm (unless your solar farm is smaller than 5 MW in size).

Should you build your own solar farm?

Building your own solar farm is a long-term investment that requires management of the construction process with significant up-front costs before any benefit can be realised. In addition, the underlying technology costs are on a downward trajectory which reduces your asset value over time.

However, if you have access to cheap, suitable land and if your cost of capital is low, this will improve your business case. Adding a shadow carbon price into your business case further improves it.

Your benefits depend on what price you can sell (and purchase) your generated electricity for, whether you will sell your LGCs which will generate additional income and the difference between this and your regular grid cost for electricity. Each situation is different, and if you are interested in evaluating your options further, you should consider asking specialists like 100% Renewables for help – 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. 

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

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 National Carbon Offset Standard (NCOS).

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.”

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.”

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

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.

Financing energy efficiency and renewable energy projects

A few years ago, there were few options to invest in energy efficiency or renewables – to buy and own the equipment, or finance it with a loan. Nowadays there are many innovative and flexible financing mechanisms available. You can decide on how to structure the cash flow, what party will own the asset and the associated risks, and how the asset will be treated on the balance sheet.

On one end of the spectrum, you can self-fund all the actions, and own and operate the new assets. An example of this would be replacing all your lights with energy efficient fittings, or installing solar panels on your roof from your capital budget.

On the other end of the spectrum, you can have no upfront investment, outsource the ownership, operation, and maintenance, along with the risk the project might not perform as expected, and only pay monthly instalments from the operational budget. An example of this would be entering into a power purchase agreement (PPA) with a solar company.

Free Download: Financing Options for Sustainability Projects

The criteria for what financing options you would choose depends on the specific project, your risk appetite, your tax situation, organisational preferences, the net present value (NPV) of the various business cases and the trade-offs you are willing to accept. An example for a trade-off might be not paying any upfront costs, but having to accept a lesser financial return for your project.

The following table is meant to give an overview of the various options for energy efficiency and renewable energy investments. You can find out more details about these financing options in chapter 10 of Barbara’s book ‘Energy Unlimited’.

Financing option Up front cost Repayments to 3rd party Organisation owns asset Balance sheet Technical risk
Self-funded from capital budget or internal carbon price 100% N/A Yes On Yes
Revolving energy fund 100% N/A Yes On Yes
Loan funded 0% Fixed or variable Yes On Yes
Green bonds 0% Fixed Yes On Yes
Operating lease 0% Fixed – $/month No Off Yes
Capital lease 0% Fixed – $/month Yes, at end of lease On Yes
On-bill financing 0% Fixed Yes On No, if there is a guarantee
Onsite solar PPA 0% or setup fee $/kWh purchased No, can purchase at end Off No
Community ownership 0% or setup fee $/kWh purchased No Off No
ESA and EPCs 0% or small Variable No, though can purchase at the end of ESA/EPC Off No

We have developed a Financing Guide for Local Governments that goes into more details about these financing options.

Download Free Financing Options for Sustainability Projects

If you need further help with determining which financing or project delivery option is the best fit for your individual circumstances, please talk to Barbara or Patrick.

Setting up a Revolving Energy Fund

A lot of times in our work the question comes up as to how energy efficiency and renewable energy projects can best be financed. One financing option is to create a “Revolving Energy Fund”, also known as a ‘Green Revolving Fund’ or ‘Sustainability Revolving Fund’.

A Revolving Energy Fund (REF) is an internal fund that provides financing to implement energy efficiency, renewable energy, and other sustainability projects that generate cost savings. These savings are tracked and used to replenish the fund for the next round of investments, thus establishing a sustainable funding cycle while cutting operating costs and reducing the environmental impact of an organisation.

The seed capital for the REF can either come from an annual operating budget or the capital budget. There may be a one-time infusion of capital or multiple infusions over time to scale the fund gradually. It is essential that the portfolio performance of all the energy projects and the cash injections be forecast, to see whether the fund will grow or deplete over time.

The advantages of a REF are that it cements your commitment to your sustainability goal and provides a tangible vehicle to achieve it. On the other hand, there might exist internal hurdles in setting up the fund. We have found that another barrier for REFs is that organisations are not aware of this financing vehicle and the manner in which it operates. Moreover, in the case of Councils, a resolution might be required.

Free Download: Financing Options for Sustainability Projects

To help our clients with setting up such a fund, we developed a downloadable checklist and worksheet. In this document, you will find out more about the necessary background work, how to pitch the fund and engage your stakeholders so you get it approved. You will also look at the financial flows, the size of the fund and seed capital, as well as manage the fund.

pdf-icon“Revolving Energy Funds Checklist and Workbook”

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Download Free Financing Options for Sustainability Projects