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Limitations of industrial solar systems and how to overcome them

While renewables have been grabbing headlines over the past couple of years, there are some inherent issues surrounding the technology. PACE explains.

Recent cost reductions in solar technologies, and a changing energy landscape, has seen a wave of industrial businesses install industrial solar PV systems to slash their electricity bills.

As other businesses look to do the same, it will pay to do the research and understand exactly how maximum ROI can be gained from solar. This is because the nature of the sun, the energy market, current technology availability and the way industrial operators are billed, means less can be gained from installing solar panels on their own.

But businesses are seeing solar’s value, for example first movers like Sanjeev Gupta, SA Water CEO Roch Cheroux, and Kingspan CEO Gene Murtagh, have all announced “Net Zero Energy” projects that will harness solar in some way.

These projects have some commonality: they harness energy management systems, storage and often a mix of renewables. Such systems are being called Distributed Energy Resources (DER), and they’re set to power 60 per cent of Australia by 2050.

Here is why solar alone is not enough.

Solar is non-dispatchable energy, so is wasted if not stored

While traditional power sources are dispatchable, and can dish out power whenever needed, the sun’s energy is intermittent and without storage, solar can’t supply electricity on demand.

But it does generate considerable energy supply in the day. Increasingly, more solar electricity is being produced than can be consumed.

So, to gain the most from solar, the business, or industrial operation should capture excess energy with storage, or look at demand response activities to shift loads, or operate when solar is at its peak.

There are three markets that commercial and industrial scale businesses with renewables can operate within, provided they meet certain criteria:

  • Solar feed-in tariffs
  • Renewable energy credits
  • Ancillary market(s)

Solar feed-in tariffs

Historically, solar feed-in tariffs have been influential in getting the residential market on board. But like the residential market, the commercial feed-in tariff rate has reduced from a round 40 cents per every kilowatt hour (kWh) sold back to the grid, to just 8c/ kWh with a standard supply rate of 33.91c/kWh and peak rate around the 50c/kWh mark. The financial incentive to sell solar to the grid has vanished.

Renewable energy credits

Accredited commercial, industrial or utility businesses with surplus renewable energy may be able to sell Large-scale Generation Certificates (LGCs) to coal-fired generators or electricity providers who are required to purchase a set amount under the Renewable Energy Target scheme.

Ancillary markets

If an operation can supply the grid with temporary high bursts of power when it’s needed, you may gain from ancillary markets that have typically been set aside for commercial power generators. The sell back rates are attractive. But solar panels alone don’t entitle you to operate in the market. The Australian Energy Market Operator (AEMO) sets strict performance parameters and requirements including having a control system, high-speed data record, high-speed metering, and telemetry protocols to enable communication between an operation and the utility.

AEMO also says that sophisticated renewable generation like DER systems are enabling more large-scale businesses to join the ancillary market.

Entry into the ancillary markets and the LGC market could yield a healthier return than only opting for solar feed- in. Entry depends on the size and set up of a solar system. Typically, these markets require users to meet high standards of control systems and data for record keeping and communication with the utility. Plus, the way businesses are billed means they get less bang for their buck. In line with the Australian Energy Market Commission regulations, business and residential customers will (or soon will) pay cost- reflective tariffs. This means the way a company is billed reflects the ‘“actual demand” a user puts on the grid not their cumulative usage.

The Actual Demand Charge is usually calculated based on the maximum recorded “demand” or usage in the peak and shoulder periods since the last meter read. The “level of demand” is worked out by how much electricity needed in any one 30-minute interval.

Can solar offset actual demand?

There’s an obvious incentive for businesses to reduce actual demand and level out their load. While solar can offset the amount of grid energy you use, its intermittency can limit the ability to consistently reduce demand.

But control systems and sub metering as part of a DER system can:

a) show users which systems and devices consume the most power.

b) automatically draw from on-site generation units such as solar, generators or stored energy to offset grid demand.

Solar alone cannot reduce demand charges at all times of the day, and year. Some of the answer lies in having a mix of energy generation types on-site and program them to run during energy intensive processes to “shift loads” and offset grid demand charges.

Standard grid connected solar is designed to disconnect from the grid and stop producing energy when the grid goes down. If it remains ‘on’, it’ll feedback power out to the grid – which is highly dangerous for any repair or maintenance works required.

Solar won’t necessarily protect the business from grid instability – businesses should protect themselves from downtime risk with a system that can safety isolate itself (called “islanding”) to keep producing backup electricity during disturbances. DERs and microgrids offer such functionality.

While the return on solar isn’t as clear cut as some might think, there’s enormous opportunity for businesses to take advantage of industrial-solar scale energy generation. It will pay to understand exactly how the market, technology and one’s own sub-systems and electricity contract interplay to impact a user’s energy needs.

The nature of the sun’s intermittency, the feed-in schemes and markets, the grid and billing charges, means that in order to gain the most from solar, control systems, data, telemetry and communication systems and/or other renewables and backup systems may be required.

Doing due diligence will help users make the right decisions to secure the businesses’ energy reliability as other companies move into the market.

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