When Primo Smallgoods decided to install the country’s largest rooftop solar array, it wasn’t thinking of anarchy, nor of saving the world or going off-grid. It was just rational economics.
“This made sense up in Queensland: there’s a lot of sunshine and the roof is very large. It all stacked up to make a good business case,” says chief operating officer Bruce Sabatta, who is always on the hunt for efficiencies in energy supply for the freezers and refrigeration systems of the southern hemisphere’s largest ham and bacon producer.
“This is finding a way to try to future-proof our efficiency as well as pick up on the sustainability piece.”
Covering about 25,000 square metres of rooftop at Primo’s plant in Wacol, southern Brisbane, the 3.2 megawatt installation will replace almost 20 per cent of the site’s demand for power from the grid. The industrial market for rooftop solar is expected to triple next year as more businesses turn the roofs of their factories and warehouses into power plants.
By 2050, solar systems installed “behind-the-meter” – generating power on-site that is not supplied from the centralised grid – are expected by Bloomberg New Energy Finance to make the consumer the most influential electricity generator in the country. Solar will by then meet by far the majority of demand during peak daylight hours, with batteries playing an increasing part after hours.
A sign of what’s to come was reported by the Australian Energy Market Operator last week, when it noted a new record for minimum grid demand in South Australia. Rooftop solar was generating so much electricity during the middle of the day on Sunday, October 21, that it reduced demand for power from the grid to its lowest ever.
The result is that swings in demand required from the grid are becoming bigger and more common, creating challenges for AEMO’s forecasters as they try to calculate the next day’s grid demand and ensure sufficient flexible generation can be brought online.
Australia’s rooftop solar boom has until now been led by households enthusiastically snapping up subsidies and feed-in tariffs and harnessing the “free” power of the sun to power their devices and air conditioners. But the economics are increasingly making sense also for businesses, which will fuel an acceleration of rooftop solar from the already frenetic pace of installation put by Audrey Zibelman, chief executive of AEMO, at a world-leading rate of six-and-a-half panels a minute.
“We expect a massive boom in larger rooftop systems,” says Kobad Bhavnagri at BNEF, which sees Australia becoming the most decentralised energy system in the world after Brazil.
“In time, when that comes to its fullness, it will dwarf what we’ve seen on residential rooftops.”
BNEF expects that by mid-century rooftop solar and behind-the-meter batteries will make up 44 per cent of Australia’s total power capacity, representing a massive shift of value away from centralised power stations.
For commercial and industrial users of power, who pay much lower prices than households and who tend to make more financially rational decisions, it has taken longer for the economics of solar to develop.
“But we see now that it does stack up for small and medium enterprises … and in the early 2020s we think that will pretty much cover all types of large energy users,” Mr Bhavnagri said.
Philip Graham, one of the founders of Clean Peak Energy, which stitched together Primo’s solar supply, is expecting the commercial and industrial market for rooftop solar to reach 300 MW next year from this year’s 100 MW-plus, already up six-fold from two years ago.
The trend is part of what Energy Security Board chief Kerry Schott described this month as a state of “anarchy” in energy supply, created by a combination of cheap renewables, transmission constraints, “dumb” distribution grids and policy failures on emissions.
But Mr Graham, Citigroup’s former head of utilities investment banking in Asia, says the sheer scale of the rooftops and of the energy consumption of industrial customers means the efficiency of such systems beats household rooftop hands down. He compares the horde of 5 kilowatt residential rooftop systems with their costly up-front subsidies and their impact on grid stability unfavourably with a 1 MW installation for a large industrial consumer.
For those with suitable buildings, rooftop systems can also be more economic than solar power purchase agreements, or solar PPAs, where an industrial customer typically contracts for power from a utility-scale solar farm.
Mr Graham said typical prices of $50-$70 a megawatt-hour for a solar PPA rise north of $100/MWh for a delivered price, which includes transmission and distribution costs, the retail margin and “load shaping”, the cost of hedging to deliver firm supply.
“By building a large system on a rooftop we can be inside of that on a cents per kilowatt basis behind-the-meter because we don’t have to pay all the extra charges,” he said.
“So from an economic perspective it’s far more efficient in pricing to be looking at large rooftop solutions because you don’t have to go through the whole cost structures to deliver paddock-based power stations into the site.”
At Wacol, Clean Peak paid for and owns the rooftop system with its panels supplied by Todae Solar, and sells power to Prime under a fixed rate, 10-year deal. There is no reliance on feed-in tariffs as all the energy is used on site, while Clean Peak takes the risk on the Renewable Energy Certificates it generates.
“The reason it’s working for us is we are constantly running that facility, we don’t have a lot of downtime,” said Mr Sabatta, noting the deal also helps contribute to the international sustainability targets of Primo parent company JBS.
“We start seeing savings from the first year and that continues throughout the usable life of the panels. We are hoping for 30 years out of these at least.”
While Primo has no need for batteries at Wacol, Mr Graham sees storage as critical for Clean Peak’s future, to reduce the price risk on its supply contracts with corporate customers.