How Food Manufacturers Can Benefit From an Onsite Solar PPA
Solar Power Purchase Agreements (PPA) in the commercial and industrial sectors have contributed greatly to the growth of renewable energy in Australia. According to the World Wildlife Fund (WWF), 70 major organisations in Australia have deployed solar power at a large scale between 2017 and 2019. Together they added over 2,300 megawatts of solar generation capacity, with an electricity output that could meet the needs of 1.3 million homes. The outlook is also promising for 2020, since there are 3,600 MW of wind and solar power projects in the pipeline, and solar power represents nearly 2,000 MW.
A solar PPA brings three main benefits for corporations, and the food industry is no exception:
- Avoiding the upfront investment in solar panels and other components, since the PPA provider assumes the cost of designing and installing the photovoltaic system.
- Achieving energy savings from the first month of operation, since the solar power system delivers electricity at a lower kilowatt-hour price than the local electric company. In other words, food companies don’t have to wait for a payback period before they start saving.
- Operation and maintenance are delegated to the solar provider, and these costs are already included in kWh price of the solar PPA contract. If any components fail during the PPA, warranty claims are also handled by the provider.
Solar power can be especially useful in the food and beverage industry, which consumes plenty of energy. Food production demands plenty of energy for purposes like process heating and cooling, pumping and facility ventilation. Lighting can also consume large amounts of energy, especially in food processing facilities that operate 24/7.
How Solar Power Improves Corporate Image in the Food Industry
Since the global population is always growing, the food industry must constantly expand its production capacity. However, this has a major environmental impact: the food industry requires uses plenty of land and water, and livestock produces large amounts of methane – one of the main greenhouse gases that has been linked with climate change. The environmental practices of the food industry are under constant watch from governments and NGOs, due to their potential impact.
The public is becoming aware of the environmental impact of many industrial sectors, and this includes food and beverage companies. Solar power and other renewable sources not only offer a reduction of energy expenses; food companies can also use these technologies to become more environmentally responsible and improve their corporate image. By becoming greener, food and beverage providers are more likely to establish business relationships with clients who share their values. Some clients are even willing to pay a premium for food and beverage products that follow sustainable business practices.
The food industry provides large amounts of organic waste, creating an opportunity to use biomass power. However, processing organic waste into biogas or biofuel is a complex process, and the ownership costs of biomass plants can be high. Also consider that biomass plants produce greenhouse gases from combustion, just like power stations that use fossil fuels. In other words, biomass power is renewable, but not free of greenhouse gas emissions.
Solar power systems are simpler to install and more affordable, while using a resource that is delivered for free – sunlight. Also, since solar panels do not involve combustion, they produce no carbon emissions while generating electricity. Solar panels also take advantage of the large rooftop areas and land extensions owned by food and beverage companies. In the case of ground-mounted installations, solar tracking mechanisms can increase the electricity output of photovoltaic arrays by over 20%.
How the Food Industry Saves Investment Capital with Solar PPAs
The food and beverage industry has several high costs other than energy consumption. These expenses include real estate costs, process equipment purchases, salaries, and material inputs like seeds, fertilizers and animal feed. While it is possible for food and beverage companies to purchase their own solar power systems, this requires capital that could be used to cover other expenses, or to expand production capacity.
By signing a corporate solar PPA, a food company can reduce energy expenses and greenhouse gas emissions simultaneously, without affecting its monthly cash flow. Actually, the power bill savings achieved by solar power can be reinvested to cover other expenses. Food companies can also use the capital saved by a solar PPA to improve energy efficiency, by upgrading their process equipment.
A solar PPA also provides another type of savings that is not evident upfront. When food companies get all their electricity from the local power grid, they are subject to the constant tariff increases from energy companies. In Australia, many homes and businesses have seen their electricity bills double within a decade. However, a PPA contract clearly establishes how the client will pay for the electricity produced by solar panels. In other words, a solar PPA also saves all the kWh price increases applied by power companies during the contract duration.
Additional Benefits of a Solar PPA in the Food Industry
Food and beverage manufacturing is not only demanding in terms of energy, since the industry also requires skilled labor. To deploy their own renewable energy systems, food companies must hire and train additional personnel for operation and maintenance. This increases the workload for managers, and new personnel must be hired and trained when staff members leave the company. However, operation and maintenance tasks are delegated to the provider in a solar PPA, and clients can focus on their core business.
After deploying solar power, food and beverage companies are also better equipped to adopt an emerging technology: energy storage. Currently, solar power is a very effective way to reduce electricity expenses. However, companies must still rely on other electricity sources when their power demand exceeds the output of solar panels, and also for cloudy days and nighttime operation. However, as energy storage decreases in price, it will eliminate this limitation of solar panels. The International Renewable Energy Agency (IRENA) has predicted costs reductions of up to 66% for energy storage by the year 2030.
To summarize, solar PPAs can achieve quick energy savings for food and beverage companies, improving their operating cash flow. The food industry can also improve its image with solar power, while reducing carbon emissions and becoming less dependent on fossil fuels.