Why Your Business Doesn’t Need a Solar Feed-In Tariff

You may be under the impression that commercial solar PV is only viable with a high solar feed-in tariff (the amount paid per unit by your electricity provider for any exported solar production). While it’s true some electricity providers do offer commercial feed-in tariffs, the value offered is generally quite low, and in some cases non-existent. A feed-in tariff is a great bonus, but it should be seen as just that – a bonus.

A feed-in tariff is not necessary to make the business case for solar stack up. After all, the real value of solar is in displacing the amount of electricity you have to purchase from the grid, not the value of the export. Unfortunately, it’s these massive savings that are all too often overlooked.

Let’s take a look at an example…

The manufacturing plant shown below has a peak rate of 34 cents/unit and an off-peak rate of 11 cents/unit, with an annual usage of 110,000 units. The manufacturing facility only operates during the day Monday to Friday and has a small night time load. Their average monthly bill is around $2,600.

The graph below shows what the site’s average weekly load profile looks like before solar. This is based on the site’s actual electricity consumption data which has been obtained in 30 minute intervals.

Now let’s look what happens if we were to install a 40kW system on the premises…

If we overlay the anticipated solar production with the site’s electricity usage data we can work out how much of the site’s demand will be met by the solar system and how much will still be required from the grid.

The graph above shows the pre and post solar average weekly load profile. You can see that on the weekends when the site’s usage is low, the site’s grid demand drops to zero – all of the demand is being met from the solar system. The solar production on the weekends would significantly exceed demand, meaning most of the production at these times will be exported to the grid. Of the total 68,000 units produced by the solar system, approximately 70% will be consumed on-site and 30% will be exported to the grid.

If the manufacturing plant’s electricity supplier does not offer a feed-in tariff:

30% of the production is worth nothing at all. It’s at this point people often jump to the conclusion that solar power isn’t going to be financially viable – how can it be if 30% of the production isn’t worth anything? The answer is simple: the focus needs to be on the 70% that is consumed on-site, rather than the 30% that is exported.

To work out the value of the solar production consumed on site we need to split out how much is consumed during peak and off-peak times. Solar production consumed on-site in peak times is worth 34 cents/unit (the site’s peak rate) and 11 cents/unit during off-peak times (the site’s off-peak rate).

Our analysis shows that 62% of the solar production is consumed on-site in peak times and 8% in off-peak times (which added together gives us our total 70% consumed on-site). From this, we can work out that the solar system would save the manufacturing facility over $15,000 in year one.

The 40kW solar system would reduce the site’s annual grid usage from 110,000 units to 61,000 units (a 45% reduction) and the business’s average monthly bill would drop from $2,600 to $1,300 – that’s a 50% saving!

If our manufacturing plant’s electricity supplier offers a feed-in tariff of 7 cents for any exported solar production:

The 30% of solar production that has been exported would give us an annual benefit of just over $1,400 ($119 a month). Compare this to the savings of over $15,000 a year ($1,300 a month) generated by the solar production consumed on site, which is over 10 times more than the feed-in tariff value.

When it comes to assessing the viability of commercial solar, the focus should not be on the value of the feed-in tariff on offer, but rather the value of the electricity we can offset through solar.

If you would like to work out how much solar could save your business, please call us on 1300 074 669 or request a call back for a free, no-obligation assessment with one of our energy consultants.

To see examples of businesses already benefiting from solar, check out our Commercial Case Studies page.

Information is correct as of May 2016.