Solar Power Benefits for Companies in Western Australia

24th Aug 2020

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Western Australia is not connected to the National Electricity Market (NEM), and this limits the choice of electricity providers for companies. Businesses in WA must typically pay between 30 and 40 cents per kilowatt-hour, which means that power bills represent a large portion of their operating expenses.

Depending on where a company is located in Western Australia, different conditions apply:

  • The South West Interconnected System (SWIS) covers the region around Perth, from Albany to Kalbarri. Electricity consumers in the SWIS can only choose an electricity provider if they use over 50,000 kWh per year. Otherwise, they are subject to a regulated electricity price from Synergy.
  • Businesses outside of the SWIS can choose their electricity provider regardless of consumption. However, Horizon Power is the only option in many parts of regional WA.

In both scenarios, most companies can expect to pay over 30 cents/kWh. However, this also means that onsite generation systems can achieve high savings, and this includes solar power. Perth is also characterized by low solar power costs, which improves the financial performance of the technology.

How Expensive Electricity Increases Solar Power Savings

Australia has many favorable conditions for solar power systems: abundant sunshine, low technology costs and government incentives. Local electricity prices are also among the highest in the world, but this means that solar power savings are also among the highest.

With favorable conditions, one kilowatt of solar power capacity can be expected to produce over 1,500 kilowatt-hours per year. To get an idea of the space requirements, consider that one kW of capacity is roughly equivalent to three solar panels.

Based on these assumptions, a 100-kW solar array can produce over 150,000 kWh per year. For a company paying 30 cents/kWh in Western Australia, this is equivalent to $60,000 in annual savings. Considering that a 100-kW solar PV system can cost around $100,000 – $120,000, the direct payback period is less than two years.

Two years is only a small fraction of the service life of solar panels, which normally have a service life of over 25 years. There are some system components that need an earlier replacement, such as inverters, which are typically rated for 10 years. However, this is still longer than the typical payback period of a solar power system in WA.

Corporations also have the option of signing a solar PPA (Power Purchase Agreement), where the solar provider is responsible for upfront costs, operation and maintenance. In return, the owner agrees to purchase the electricity output during a specified term. Since the kWh price in the solar PPA is set lower than local tariffs, the energy savings can start immediately without a payback period.

Energy Storage Systems for Businesses in Western Australia

Solar power is more valuable when it can be consumed directly, since the feed-in tariff paid for exporting electricity to the grid is often low. In the case of Western Australia, the feed-in tariff established by the government is only 7.135 cents/kWh, which is much lower than the kWh prices charged to homes and businesses. Higher feed-in tariffs are available in regional WA, but they are limited by location and system size.

The electricity generated by solar panels is more valuable when it can be consumed, since it saves the full kWh price. The following is a simple example that demonstrates the concept:

  • Assume a solar power system produces 10,000 kWh in a month.
  • If all this electricity is exported to the grid at 7.135 cents/kWh, its value is $713.50
  • However, if the owner normally pays 30 cents/kWh, that amount of solar generation can save $3,000.

In this example, the electricity from solar panels is four times more valuable when consumed. This creates an excellent opportunity for energy storage in Western Australia, since it multiplies the value of any solar generation that is not consumed immediately.

Actually, many companies in Western Australia have already deployed their own microgrids, combining solar power and energy storage. The upfront cost of battery arrays is still high, but it becomes a viable option when kilowatt-hours from the local network are very expensive. For example, the Agnew Gold Mine in Leinster, WA, uses a microgrid that combines 18 MW of wind power, 4 MW of solar power, and 16 MW of gas power. These generation systems are complemented with a battery system that has 13 MW of power and 4 MWh of storage capacity.

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