The economics of commercial-scale solar power farming in WA 10kW, 50kW and beyond

A growing number of residents of rural Western Australia residents are considering adding commercial-scale solar power farming to their portfolio of revenue streams. The primary benefit that solar farms afford their owners is an income source or money-saving facility that does not require continuing annual inputs, as other farming activities may.

What are the benefits of a commercial-scale solar power farm in WA?

The primary driver for taking up solar farming in Australia is to save money related to electricity–whether the system owner/operator is using the system to reduce power bills, or fortunate enough to have arranged a power purchase agreement (PPA) with an electricity retailer. The reasons why solar farming–and commercial solar PV in general–can be an attractive investment in WA are explained below.

Federal government Solar Credits rebate scheme

In order to harness the environmental benefits of solar power–in particular its greenhouse gas abatement potential–the Australian Federal government has introduced a number of incentive mechanisms that make installing a solar PV system financially attractive. Most notable and most directly influential with regard to solar power and other forms of renewable energy is the Enhanced Renewable Energy Target (eRET). The eRET, as it currently stands, calls for 20% of Australia’s electricity generation to come from renewable sources by the year 2020, and lays out the framework by which progress towards this goal is to be monitored and accomplished.

For those interested in solar photovoltaics (solar PV) and solar farms, of particular interest is the eRET’s Solar Credits scheme. This provides what amounts to an extra-hefty, up-front discount (in the form of STCs/RECs) on solar PV installations and solar farms up to 100kW in size anywhere in Australia. The amount by which a solar farm’s outlay will be reduced through the eRET depends on the solar farm’s size and location–regions that receive more sunlight will be allotted a greater number of STCs.

For projects larger than 100kW, no up-front rebate is available through the eRET. However, such solar PV systems will receive what are in effect a sort of Solar Feed-in Tariff in the form of Large-scale Generation Certificates (LGCs) under the eRET. LGCs are created as a system produces electricity and feeds it into the electricity grid. The Federal Government has required carbon polluting electricity generators and heavy industries to surrender a set number of LGCs every quarter, many of which are purchased from 3rd parties–such as those who operate large-scale solar systems. The price of an LGC fluctuates with supply and demand (see the current LGC price at CleanEnergyCouncil.org.au), but they can be sold on an ongoing basis to provide a revenue stream for the system operator/owner.

Attractive return on investment (ROI)

In WA, where there is currently no Solar Feed-in Tariff in place, a solar farm can provide its owner savings on electricity bills by reducing the need to purchase power from the electrical grid at rates that are set to rise by up to 20% in Western Australia in the year 2012, and by as much as 37% nationally by 2014. Investing in a solar farm would be particularly advantageous for premises that consume the bulk of their electricity during daylight hours–namely, most businesses.

Solar farm owners in WA may also be able to work out power purchase agreements (PPAs) with their electricity retailer and get paid a rate for each kilowatt-hour of solar power that they export to the grid additional to the LGCs. This is the minority of cases in Western Australia to date, however, and if such an agreement were reached it is likely that none of the solar power may be earmarked for self-consumption by the system owner–it will all need to be exported to the grid.

Lower overheads thanks to the decreasing cost of solar PV

The cost of installing a solar PV system has fallen dramatically–as much as 70% in the past couple of years by some estimates–and is expected to continue on this trajectory for the foreseeable future. A report by the consultancy firm McKinsley estimates that unsubsidised solar power will be cost-competitive with coal and nuclear power by the year 2020. In the meantime, the purpose of subsidies is to levelise the cost, making it affordable to the average customer.

Low maintenance investment

Solar systems–unless they are perched on solar trackers, which are considered uneconomical in light of the sharp drop in solar PV prices in recent years–generally have no moving parts and require very little in the way of maintenance or inputs once they are installed and functioning.

Tax benefits for businesses with solar farms

ABN holders may be able to claim depreciation and GST credit on system production.

Typical commercial solar power installation size in Western Australia

As mentioned above, WA does not currently have a state government-sponsored Solar Feed-in Tariff. Unless a PPA is in place, the solar farm size best suited to your needs will therefore depend on your daytime electricity demand. Since any solar electricity exported to the grid will result in only a nominal per-kilowatt-hour credit (maximum 8c) to the owner’s electricity bill, it is financial wiser to invest in a system size whose production will not exceed electricity demand. Depending on the home or business, the best system size may be as small as 5 or 10 kilowatts (kW), or upwards of 50kW, 100kW, or larger. Solar Choice has overseen the installation of a number of large-scale solar systems in WA.

Typical power production for commercial solar installations in WA

Each solar power system has its own nameplate capacity. Real solar system output relative to this figure will ultimately depend on the quality of the components (are they functioning to specification?), the weather, and shading. Most postcodes in Western Australia fall into REC Zone 3 (read about REC Zones), but there are also a number in more sun-blessed REC Zone 2. Depending on the location, system owners can expect between about 3.5 and 4 hours of “peak sunlight” daily, averaged across the year. In such conditions, a 30kW solar system would produce between 105 and 120 kilowatt-hours (kWh) on an average sunny day. Assuming an electricity rate of 20c, self-consumption of all this power would result in a power bill savings of $21 and $24 per day. With electricity rates set to rise significantly in the near future, solar PV will become an increasingly attractive way to insulate against soaring power bills.

Commercial-scale solar power and solar farm tender management & financing

Solar Choice Commercial has been managing tenders for large-scale solar projects since 2009, and is well-positioned to find the best-value solar system deals for customers throughout WA, as well as NSW, Queensland, and the rest of Australia. Additionally, for larger systems, a unique financing package for commercial solar power is available exclusively through Solar Choice. Benefits include: No capital expenditure and instant parity with commercial electricity tariffs. Contact Solar Choice to learn more.

(Top image: 80kW commercial-scale rooftop solar installation in Derby, WA, tender managed by Solar Choice Commercial.)

© 2012 Solar Choice Pty Ltd

James Martin II

Contributor at Solar Choice
James was Solar Choice's primary writer & researcher between 2010 and 2018.

He is now the communications manager for energy technology startup SwitchDin, but remains an occasional contributor to the Solar Choice blog.

James lives in Newcastle in a house with a weird solar system.
James Martin II

Comments

  1. This is gonna save my rear. Something about pictures for my finances helps me to understand that I still don’t make enough to by everything i want

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