They are offering 15 year contracts where a customer who installs a 5 kilowatt solar system will pay as low as 11 cents per kilowatt-hour for power generated by the system. They also have a 16 cent per kWh offer for 3 kilowatt systems on a 7 year contract term where you can then buy the system outright at the end for just under $1000 or roll the contract over.
This is a revolutionary price breakthrough for the customers in south-east Queensland and South Australia where the offer is available. For those in South Australia Origin Energy charges between 34 cents to 41.5 cents for power from the grid. In South East Queensland it’s between 25 to 30.6 cents.
It means Australian households and businesses rather than receiving some of the most expensive electricity in the world will now have access to some of the cheapest in the world.
But there’s a bit of a catch.
You pay 11 cents whether or not you use the power from the solar system. For that proportion of generation that you end up exporting you’ll lose money. If you were with Origin Energy as your retailer, they are prepared to pay 6 cents for exported power in SE Queensland and 5.3 cents in Adelaide, so you’ll be 5 to 5.7 cents out of pocket for each kilowatt-hour you export.
But you aren’t restricted to Origin as your power retailer under this offer. If you were to go with say Click Energy in SE Queensland then you could obtain as much as 12 cents for exports, but you pay for it with higher charges on power you consume from the grid.
So really this deal is best for those customers who have high power consumption over the daytime period and therefore would consume most of the generation produced by the system.
Based on even a 3 kilowatt system many households, particularly those that also use gas for heating and water heating in Adelaide, would end up exporting a very large proportion of such a system’s output. So it’s probably not such a good deal for them.
The only thing that really might stop small businesses with reasonable daytime loads going with such an offer is that they can get reasonably priced finance themselves for such a system, or they lack suitable roof space. Even if they are a tenant rather than the owner of a premise, you’d expect with such a low power price subsequent tenants would readily sign-up to such an offer provided they too had enough daytime load to soak up the power generation.
In terms of arranging finance themselves, with some shopping around it is possible to obtain a solar system for around $1000 per kilowatt fully installed in major metropolitan regions provided you have a tin roof. With 10% finance over a ten year term you’d need to get an average of 11.5 cents per kilowatt-hour to pay the loan back for such a system. And after that the cost is effectively zero.
Probably a better way to look at it is that such a system would deliver over $110 in free cash flow per annum for every kilowatt installed, based on SE Queensland power price structures and assuming the business consumed all the power over the weekdays while exporting all of it on the weekend. Under Adelaide power pricing structures such a system would deliver $160 in free cash flow per year per kilowatt installed. After the loan is paid off it will then deliver about $300 per annum. Not a bad low risk return on $1000.
Up until very recently residential sector has dominated solar installations in Australia. One of the prime reasons why business have been less interested has been issues over accessing finance. But with Origin Energy’s offer (and no doubt others scrambling to match it), one would expect a similar solar boom might be just around the corner for business rooftops too.
This article was sourced from The Business Spectator