The economics of commercial-scale solar farms in Western Australia

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 commercial activities may.

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

The primary driver for taking up solar farming anywhere 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 a local electricity retailer. The details as to why solar farming–and solar PV in general–is an attractive investment in WA are outlined in the points below.

Federal government subsidies for solar PV

In order to realise the environmental benefits of solar power–in particular its ability to reduce greenhouse gas emissions–the Australian Federal government has introduced a number of incentive incentives that make solar PV systems 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, in its current form, mandates 20% of Australia’s electricity generation to come from renewable sources by the year 2020, and creates the framework by which this goal can be reached

The Federal Government has required carbon polluting electricity generators and heavy industries to surrender a set number of Renewable Energy Certificates (RECs) every quarter. These ‘liable entities’ may either purchase RECs from 3rd parties or install their own renewable power generation facilities to create them themselves. RECs can be either Small-scale Technology Certificates (STCs) or Large-scale Generation Certificates (LGCs).

For 100kW solar systems or smaller: STCs through the SRES

The eRET’s Small-scale Renewable Energy Scheme (SRES) provides an up-front discount in the form of STCs on solar PV installations and solar farms up to 100kW in size. The amount by which a solar farm’s outlay will be reduced through the SRES depends on the solar farm’s size and location–regions that receive more sunlight will be allotted a greater number of STCs–as well as the price at which they are able to sell their certificates.

For systems greater than 100kW: LGCs through the LRET

Systems over 100kW in capacity may be accredited to create Large-scale Generation Certificates (LGCs) through the Large-scale Renewable Energy Target (LRET). LGCs are created on an ongoing basis once the generation system is up, producing power, and accredited, and therefore do not constitute an up-front subsidy. As with STCs, however, returns on these larger systems and their generation capacity are nevertheless determined in large part by their location and climate.

The price of STCs and  LGCs fluctuates with supply and demand. Current spot prices can be found on the Clean Energy Council’s website:

Attractive return on investment (ROI)

In WA, there is currently no State Government-backed Solar Feed-in Tariff incentive scheme, although Synergy customers (in and around Perth) may receive 7c/kWh for solar power that they export to the electricity grid under their Renewable Energy Buyback Scheme (REBS). There are also differentiated Feed-in Tariffs for renewable energy in the northern part of the state (the Horizon grid), although many of these may not apply to larger solar systems.

It may be possible for solar farm owner to enter into power purchase agreements (PPAs) with their electricity supplier and get paid a rate for each kilowatt-hour of solar power that they send back to the grid. This is the minority of cases in WA at the moment, 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. So securing a PPA, although key for commercial solar power project developers, is not necessarily always the best option for small- to medium-sized businesses, who may benefit more from self-consumption.

Lower overheads from decreasing solar technology costs

The cost of installing a solar PV system has fallen dramatically–as much as 70% in the past few of years by some estimates–and is expected to continue falling for the foreseeable future. A recent report by the reputable consultancy firm McKinsley estimates that unsubsidised solar power will be cost-competitive with coal and nuclear power by the year 2020. For the time being, however, the purpose of subsidies is to levelise the cost and improve affordability for the average customer.

Virtually maintenance-free investment

Solar systems–unless they are perched on solar trackers–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.

What is the typical commercial solar farm size in WA?

As mentioned above, Western Australia does not currently have a state government-sponsored Solar Feed-in Tariff for newly installed solar systems. Unless a PPA is in place, the solar farm size best suited to your needs will therefore depend on your daytime electricity demand and agreements made with the local electricity retailer.  Since any solar electricity exported to the grid will only earn the system operator/owner a few cents per kilowatt-hour (and only if an agreement is made with the retailer), it is imperative to select 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.

How much electricity will my solar farm generate?

Each solar power system has its own ‘peak’ rated 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 the presence or absence of shading. Most postcodes in WA fall into REC Zone 3 (read about REC Zones), but there are also a number in sunnier REC Zone 2. Depending on the location, system owners can expect between about 3.8 and 4.2 hours of “peak sun hours” per day, averaged across the year. In such conditions, a 30kW solar system would produce between 114 and 136 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 mid to long-term 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 through Solar Choice

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 Western Australia, as well as 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.

Examples of commercial solar power tenders managed by Solar Choice in WA

120kW commercial solar power installation across Mowanjum Aboriginal Corporation near Derby

80kW rooftop solar power system in Derby

55kW worth of solar panels across roofs at Bali Hai resort, Broome

© 2012 Solar Choice Pty Ltd

James Martin II