Podcast transcript Episode 3
[0:00:00]
Music track starts
Guest (clip): If we recognise that decarbonisation is happening.
Guest (clip): You just have to start somewhere and see what’s practical and what’s feasible in terms of reductions.
Guest (clip): Directionally, we know that this is going to be a really big thing for businesses over the next ten years.
Guest (clip): It represents one of the fastest routes for us to decarbonise as a country.
Guest (clip): Potential cost benefit
Guest (clip): It’s really powerful. It can mean we all move incrementally forward together before 2050.
[0:00:27]
Taylor: Welcome to The Net Zero Path for Business, a podcast delving into the process of transitioning to renewable energy and emissions reduction from the very beginning. It’s a show where we explore ways to not just survive but thrive as a business along the way.
I’m your host, Taylor Hawkins, and I’ll be bringing together industry advisors, experts, and businesses as we explore things like switching to EVs and the practicalities of going solar.
Join me as I ask our guests to share their stories of transition and the strategies that have helped them on their way. We’re presented by AGL, inviting you to join the change.
Taylor: As we dive into talking about our future ambitions for net zero, I would first like to acknowledge the leadership, knowledge and resilience of the Aboriginal and Torres Strait Islander peoples who have safeguarded the sacred lands and waters of this country, that we know as Australia, for thousands of years. May we strive to honour, learn from, and meaningfully partner with leaders of such calibre.
[0:01:27]
Taylor: Welcome back to the Net Zero Path for Business, and thank you for sticking with us so far.
We’ve got a great episode for you today on one of my favourite topics: solar energy. Australia is uniquely positioned to embrace solar as a renewable source.
We live in one of the sunniest places on earth. Our country has the highest solar radiation of any continent. In fact, it receives 10,000 times more solar radiation per year than our total energy consumption, which is incredible, right?
But it’s not just that. We have lots of land for large scale solar arrays and plenty of silicone in the form of high purity quartz to support solar cell manufacture too.
So going solar is a pretty appealing way to decarbonise here. But what are the considerations? And is it possible to make the switch without costing you an arm and a leg?
I feel very lucky to get to ask these questions to someone who’s been involved in solar from its earliest days, Josh Bower from AGL’s Energy Solutions business. I hope you enjoy.
[0:02:37]
Thank you for joining me today, Josh. I’m excited to chat about switching to solar with you. But before we dive in, can you tell me a bit about yourself and how you ended up here.
Josh: Well, I’ve been working in the renewable energy industry for about ten years. I studied business at university and when I left, I was looking for an opportunity to do something positive for the environment.
And I think about that time, renewables had just become subsidised in the UK, so I took an opportunity to join a startup. It was a pretty exciting time in my journey, certainly.
I think I was about the third employee in the door, and we did something like 300 residential solar installations in the first year, and the business grew from very quickly, from a handful of employees to about 50 or so by the time we moved out of residential solar and into the commercial and industrial space.
[0:03:22]
Then later I think around 2016 or so, there was a significant reduction in the level of subsidy, and it was clear the market was going to be completely flat.
So, it was either going to be a case of sitting around for a couple of years while waiting for the cost to fall to bring the return on investment back, or a case of taking a chance and heading overseas to do the same thing elsewhere.
So that’s when I decided to move to Australia, and I’ve been working in the space ever since.
Taylor: As an Aussie, I can’t pretend that I’m not pleased to hear that what we have to offer in this space is attracting other people from overseas.
But I’m going to jump straight in and ask what everyone is probably thinking, is it possible to switch to solar without costing a lot of money?
Josh: Well, the short answer is 100%, absolutely yes.
Firstly, the cost of installing solar has never been cheaper, and while the level of subsidy has also fallen year on year, the costs of installing solar have generally either kept pace or outpaced the reduction in the level of subsidy.
Meaning that the payback periods are also as strong as they have ever been.
[0:04:21]
Taylor: Well, that’s certainly fantastic to hear, and I know that the financial aspect of this is front of mind for so many people.
So what about for those businesses that don't have much capital available for investments like this?
Josh: Thats a really great question, and especially relevant in the current high interest rate environment.
Traditionally, most of our customers have chosen to invest in the solar system themselves.
However, more recently we’ve found an increasing number of our customers are choosing to adopt alternative funding models, which typically take the form of either a conventional finance lease, which I expect most people listening will be familiar with, or what is referred to within the industry as a Power Purchase Agreement, or PPA.
It’s a great concept. So rather than deploying your own capex under a PPA, the PPA provider effectively agrees to build, own and operate the system and sell the generated electricity to what is referred to as the off taker, which would be the business at an agreed rate for an agreed term. Typically, anywhere from, say, 5 years up to a maximum of about 2025 years.
Compared to spending your own capex, a PPA offers several advantages.
[0:05:24]
First, as I said earlier, you haven’t had to invest your own money, so you can now spend that money on your business, where in most cases you will more than likely generate superior return on investment, given the typical payback for a solar system is in the range of 2 to 8 years.
Second, the solar system will perform exactly the same as if you had installed it, thereby conveying all of the same sustainability benefits that you would otherwise have achieved.
And third, it’s possible to structure the PPA so that they’re cash flow positive from day one.
So not only have you not had to spend any money, but you’ve also been able to generate electricity savings from day one and meet your sustainability targets, all whilst transferring all the associated performance risk onto someone else.
Taylor: It’s good to hear that these sort of new agreements and initiatives are coming in to make this process easier. Something that you mentioned before is this idea of incentives.
Can you tell us a bit more about what’s available?
Josh: Sure. There are two key federal schemes available under the renewable energy target. The first is the Small-scale Renewable Energy Scheme, which is applicable for systems up to 100 kilowatt. That’s the type of system you might install on a small business or say a supermarket, for example.
The second is the Large-scale Renewable Energy Target, which is applicable for systems over 100 kilowatts. So, think large warehouse or distribution centre, perhaps a large school, something like that.
[0:06:38]
Under the Small-scale Renewable Energy Scheme, customers receive Small-scale Technology Certificates, or STCs, which are calculated at the time of sale and typically applied as an upfront discount.
Whereas under the Large-scale Renewable Energy Target, customers receive large scale generation certificates, or what are typically referred to as LGCs, which are estimated at the time of sale but cannot be claimed upfront and must be claimed annually based on the performance of the system.
Some states also have their own state-based incentive schemes, and these do come and go.
For example, in Victoria there is the Victorian Energy Upgrades program at the moment, or VEU, which is applicable to systems of any size installed in the state of Victoria, and can be selected in lieu of either the Small-scale Renewable Energy Scheme or the Large-scale Renewable Energy Target.
And it sometimes pays to do that as well, for certain systems, sizes, and types.
[0:07:28]
Taylor: Wow. I’m sure I’m not alone in having many questions based off of all that information.
But to start a nice simple one. With all these systems available, how do you know which one is the right one for your business?
Josh: That’s a really good question. And this really depends on your drivers or what your drivers are for wanting a solar installation.
For example, some customers are entirely driven by return on investment, in which case, when it comes to sizing the installation, we may recommend a smaller installation which optimizes the resulting yield and minimises export.
In other cases, customers are more focused on sustainability, in which case we might recommend a larger system which might not generate the optimum return on investment but offsets a much bigger proportion of the customer’s electricity bill, thereby creating a greater benefit or greater overall benefit.
When it comes to things like component selection or product selection, the market has really moved on from the formative years where a lot of time was spent focused on those types of conversations.
For the most part, the market has matured to the point where it’s now relatively commoditized to the extent that I wouldn’t be surprised to see three quotes for an installation from three different providers with very similar componentry, for example.
[0:08:35]
Taylor: If we now put ourselves back in the shoes of the business owner, business leader. Aside from cost, what are a few other things that they should be thinking about before installing solar?
Josh: Selecting the right partner is really the most important thing for me because they should make your journey easy for you.
It’s a simple product and part of the reason it has been so successful to date is really due to that simplicity. However, any business that has had a solar installation completed will tell you the devil is really in the detail.
Every business’s needs are unique and finding a partner who will work with you to not only recommend the right solution, but also deliver that solution in a way which minimises the impact to your business and then be around to rectify any problems over the lifetime of the installation is really pivotal.
Taylor: When I think of solar panels, they’re an amazing piece of technology and leaving them outside all the time makes me a bit nervous.
I’m curious, is maintenance as difficult as maybe you’d think it is for taking care of your solar panels?
[0:09:27]
Josh: I think the short answer is no.
However, historically, as an industry, I think we have really failed to convey the value of operation and maintenance.
And therefore a large number of solar systems out there are not really being maintained at all, which is really a terrible result for the industry and for professionals like myself, as those systems often fail to live up to the customer’s expectations, and that is damaging for the industry as a whole.
So there are really two key components.
The first is preventative maintenance, which is a regular inspection typically conducted on the anniversary of the system’s commissioning date but can be more or less regular depending on the size of the system and the nature of the site.
For example, if it’s a small system on, say, a school, that regular inspection might be every two years, just because it doesn’t really pay to do it more regularly.
But for example, if that installation is significant or on a high-risk asset, let’s say a hospital, for example, then you might be doing quarterly inspections.
[0:10:22]
It really just depends on the nature and the situation. And that inspection is really there, like for example, you might take your car in to get serviced annually. It’s really there just to ensure that the system is operating as it should be, and to conduct essential servicing in line with the manufacturer’s warranties and so on, but primarily to identify problems before they arise.
The second component is performance monitoring and corrective maintenance, and this too is often overlooked.
So that’s where we or another operation and maintenance provider monitor the performance of the system on a continuous basis and then when we identify a fault, we either rectify the fault remotely or we send someone to site to rectify the fault, thereby ensuring that the system is offline for as little time as possible.
When this doesn’t happen, or you don’t have that type of program or regime in place, what we typically find is those faults don’t get noticed or identified for often weeks or months or in some rare cases it has been years where we’ve had system owners contact us and query why the performance of the system hasn’t been, you know, how it was sold to them or what they had potentially expected.
[0:11:32]
And it’s typically just because there’s a very simple fault in the system which could have been very easily rectified that hasn’t been rectified in a timely fashion.
At the same time, the cost of these programs is relatively inexpensive, and typically we would always build that cost into the business case upfront. So then when you’re considering O&M after the installation has been completed, it shouldn’t really be, I guess, considered as an optional extra.
It’s something that was part of the initial investment or business case for the system, and therefore something that you expect to pay, as opposed to something that you have to pay, if that makes sense.
Taylor: Well, I’m incredibly pleased that we’ve been able to cover everything from security, safety, maintenance, all the way through to the big picture opportunities and the why for solar.
But before we go, is there anything else you want businesses to know?
[0:12:23]
Josh: Well, selfishly, I think I would like more businesses to consider investing in solar.
And what I’d like all businesses to know is that we and many other providers out there typically offer a no obligation initial feasibility analysis, which really makes it easy for businesses to understand what the potential cost benefit is of installing a solar system.
So, through that initial analysis, we will work with our customers or you, to identify or understand what your specific needs are and then working from a desktop basis typically.
We will then conduct an analysis and present back to you an initial feasibility study based on which you can then decide whether to invest more time or conduct a detailed investigation or move forward with an installation or, I guess, a fixed fee proposal.
And equally, when you’re making that decision, you want to ensure, obviously, that that business is not only going to be there in the next five or six years.
But also you want to select a partner who potentially is going to come back in five or six years, or maybe even sooner than that, and start to talk to you about some of the other things that might add value to your installation, such as battery storage and so forth.
[0:13:29]
So it’s free. And as I say, it takes very little time to complete.
So, if you’re wondering whether to install a system or what that could look like for your business, then please get in touch.
That would probably be my takeaway comment for business owners when thinking about investing in the solar system.
Taylor: Battery storage is certainly something that we want to keep front of mind, and I am pleased to say we have a whole episode dedicated to looking at those storage solutions. If anyone is interested, you will be hearing plenty more about that.
But thank you again for chatting with me today, Josh. It’s been very insightful.
Josh: Thank you.
Taylor: Next, I wanted to share another story with you.
It’s from the Salvation Army, who initially started with solar for cost saving, but it has really set them on their sustainability journey.
Take a listen.
[0:14:18]
Robert: Robert Johnston, Group Commercial Manager. I’ve been involved with the solar from its inception with the Army.
I was part of the group that essentially got it going again, simply because of the questions that were being asked about why we were spending so much money on power.
And that came up in a number of meetings and then a discussion with one of our officers where he introduced me to the concept throughout the Army of what’s called Creation Care.
And that was the trigger or the concept that broke the nexus between how are we going to get this done?
Creation Care is a belief system that the Army officers and the Salvationists believe is that the resources that were being provided through the creator we need to take care of as part and parcel of looking after the planet. You know, another way of describing it, I guess.
And so, I was coming from it from a commercial point of view, and then it linked nicely with the environmental and net zero type programs that flowed from this solar.
So, once we started to do the analysis, the economics proved to be pretty sensible. And, I mean, it just made sense.
[0:15:37]
So from there, it’s borne a number of other activities, such as our ESG stuff, our Net Zero Program, and the Environmental Care and Responsibility, our GHG reporting and so forth and so on.
So it has morphed into a much larger project overall, but it’s still very isolated in the sense that everyone knows that the solar is going on.
We’re now in the process of building our own solar farms. So it has increased in importance quite significantly internally.
The beginning of it was, again, it was driven by economics and the fact that we could prove quite easily that by installing solar, we were going to be saving the organisation money, which could then be used for other purposes.
And so it was an easy sell, really. One of the key tenants of the Army was, okay, well, we need to be able to use the resources that we’ve got to best perform possible.
But it was also, we were instructed: Okay, you can put solar on the roofs of our properties, but you can’t spend any money.
[0:16:46]
A lot of the Army have been taken kicking and screaming to where we are, that we’re now wanting it on every property we can do. So, it’s gone from don’t spend any money to when are we going to get solar on this roof?
Now, it’s a pushback, okay, we’ll get to it eventually. And so, we’re in a situation where we don’t have to sell it anymore. The opportunities come to us internally.
I think we’ll probably; we’ve got about another 20 or 30 to do, I think, and that will come to an end, and then we’ll continue to roll out on our residential sites.
The accountant in me is very easily convinced. When you look at the numbers. You’ve got to remember these things have a lifespan of 20 years. Or in terms of our solar farms, they’re 30 years plus.
So, it’s not a spend, it’s an investment. And we look at it very differently when you say, okay, well, these things are going to pay for themselves in a maximum of six years.
[0:17:48]
Robert: That’s in situations where there’s been extensive costs, but in, on roof stuff pays for itself within four to five years. I mean, that’s 20-25% return.
There’s not a lot out there that competes with that in terms of return on investment.
So, it’s a no brainer from that perspective. I mean, that’s why it’s so popular. That’s why there’s so much solar in the middle of the day, where prices are actually zero or negative.
And, well, may it last, because the more that we can bring down prices for people, the better off we all are.
There is a correlation between the number of times our services are called upon in emergencies that have been created by climate. I mean, there’s a vast increase in the number of flood events. There’s a vast increase in the number of major storm events. That is not an accident. That’s been caused by something changing.
[0:18:47]
And there’s a correlation between us having to dip into our reserves and resources to help people out in those situations. And so, why would we want to contribute to making it worse?
And so, the more we can do to offset that and not be a contributor, it lowers out the draw on our resources as well.
So you know, you’ve got to start somewhere. So if we can clean up our own house, then that’s the way we do it.
TSA is an unusual organization. The social side and the mission side do amazing work and we just try to make sure they’ve got the resources to run with it.
[0:19:27]
Elyse: I’m Elyse Anderson, I’m the Environmental Projects Coordinator and I work with Bob and also a net zero working group that we’ve got going on with team members from across Salvation Army and all our different departments.
Yeah, the solar is kind of, like Bob said, one of the things that really got us started, and mainly the big reason for that, is it’s pretty much the lowest hanging fruit when it comes to decarbonisation.
Our scope two emissions, one of our emissions hotspots, really, and really also the easiest to tackle because you’ve got the environmental gains and then also you have the economic savings that come with solar as well.
And because it is one of our hotspots as well, that’s kind of why we’re trying to stick solar on as many of our properties as we can.
And so at the moment, we’ve got over 3 megawatts installed.
And then, like Bob said, we’re exploring solar farms and continuing to put solar on as many of our rooftops as we can. We have presence Australia wide in cities and also in some really remote towns.
[0:20:30]
We’ve got our core buildings in our church services. We have various social services and aged care services as well. And probably the most prominent and the one that I guess most people would know about is our Salvo stores.
You know, I’m kind of in a small area at the moment and we have a Salvos store. Yeah. So that’s kind of our profile.
We’re still pretty early on in our decarbonisation journey, I guess.
We’ve only just really started in the past couple years doing our greenhouse gas accounting so we actually understand the scope of our emissions.
And from that as well, we know, kind of, where we can best and most feasibly decarbonise well.
So, like I said, solar was one of them. That’s just quite easy to make significant reductions to our scope two.
But across TSA, we’re also looking at an electric vehicle fleet transition as much as we can. We’re pretty confident that we’ll be able to reduce our scope one through that kind of transition.
Also, just other sustainable procurement practices as much as possible.
[0:21:30]
And also, I’d like to mention that Salvo stores have actually been involved in this space for over a century through the circular economy work that they do with their clothing and furniture, recycling, giving everything a new life, diverting waste from landfill.
That really has a significant role in not just our own decarbonisation, but just Australia’s decarbonisation in general.
Once you get the solar started, it really speaks for itself.
Like Bob said, with our savings from having the solar put those funds back into some of our social mission services and other community services.
So, it really is all just, it just makes sense, really. You just got to get started.
There’s also a bit of a change that also needs to happen once you’ve got solar on the rooftops, because, you know, what use is solar if most of your business runs at night?
Elyse: So there’s definitely an educational piece as well about telling people on site, you know, we’ve got solar, it’ll be most functional between these hours.
So therefore, you should try as best as you can to change your behaviour and kind of tailor your operations to make the most of the solar.
Otherwise it’s just getting fed into the grid or you’re just purchasing as usual from the grid anyway. So, education is a big part of it as well on the ground.
We’re not, we’re not a typical business, you know, we’re a charity, but across the business world in general, everyone’s kind of seeing that ESG is such a fundamental part of just engaging with the community.
[0:22:57]
And if you’re taking care of your Environmental Social Governance principles, then you’re giving the people in your community reason to trust in what you can provide the community.
Especially, as you know, we offer all these social services. So climate change will affect the most vulnerable the most significantly. And our services are to help the people who are the most vulnerable in our community.
So, it really makes sense that we would prioritize ESG and try to, you know, not contribute to the reason why some of these people are facing even further hardships.
So, it just makes sense ethically, I think, and just logically that we would do our part to kind of see the change that we want to see across not-for-profits charities and then also businesses as well.
If a charity can do it, I don’t see why businesses can’t as well.
[0:23:49]
And also there is the creation care part of it.
And we just have a lot of other, like staff and employees and some of our volunteers and our officers who just genuinely care about the social good we do and also about environmentalism in general. So, I think we’ve got a good moral foundation to kind of push ESG as much as we can.
[0:24:14]
Taylor: I always love hearing about businesses dipping their toes into sustainability and then really diving in.
It just goes to show, if a not-for-profit can figure out a way to fund it, then for-profits should have a good chance too.
Speaking with Josh, it sounds like as long as you find a great partner and consider incentives before you race ahead to install, there’s really never been a better time to go solar.
As I mentioned, we will be digging into energy storage next episode. So, if that excites you, stay tuned.
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