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CEFC to provide $120m to unlock Australia rooftop solar finance

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CEFC brings in US solar giant SunEdison to Australian rooftop solar market, and helps local manufacturer Tindo. All told, $186 million will be deployed to expand solar financing and power purchase agreements to avoid up front costs of rooftop solar.

The Clean Energy Finance Corp has announced funding of up to $120 million to help break down financing barriers to rooftop solar, and open up the market to renters and others by removing up front costs.

The commitments by the CEFC include $70 million in senior debt finance to bring US solar giant SunEdison to the Australian market and open up a range of new finance products that include leases and power purchase agreements. Sun Edison will provide a further $46 million.

The CEFC is also providing $20 million to help Tindo Solar, Australia’s only solar module manufacturer, offer similar products in concert with local groups Impact Management and Lighthouse Infrastructure

And it will also provide $30 million to encourage PPAs to a company backed by another US group, Angeleno Group and Australia’s Kudos Energy.

In a separate announcement, covered here, CEFC will provide $80 million in seed funding for a potential $580 million clean energy fund managed by Colonial First State to provide leasing to the commercial solar PV market, and other large renewable projects.

The CEFC is hoping to rapidly expand the solar market beyond the 3.4GW that has already been installed on 1.25 million households. It believes it can do this by removing up front costs and facilitating finance that encourages leases and power purchase agreements (PPAs).

sunedisonIt could have a transformative impact on the solar industry in Australia, and pose a major new threat to the generators that are already struggling to deal with the impact of rooftop solar on their bottom line.

The deal with SunEdison – and its entry into the Australian market – is the big ticket item. CEFC chief executive Oliver Yates says it will provide a boost to the commercial and residential solar markets in Australia.

SunEdison’s newly established Australian businesses will originate, design, install, own, operate and maintain the solar PV systems and lease them, or sell the power (depending on the contract) to customers, working with local partners.

“People will be buying electricity rather than panels,” Yates told RenewEconomy in an interview. “People will be selling electricity price advantage over the long term, rather than up front cost solution.

“We think it will help mature market quite rapidly. The focus will be on performance, maintenance and monitoring, which is critical for a maturing asset class.

The CEFC says existing barriers in finance that have held back the take up of solar power by the commercial and residential sectors. By removing the need for upfront capital and allowing the benefits to remain with the building occupants when a tenant moves, PPAs and leases will accelerate use of solar power across all sectors – including rental premises and those in multi-occupancy buildings.

It says customers will benefit directly with lower energy bills, with lease payments structured to provide an immediate financial benefit.

“While there has been widespread take up of solar PV by the residential sector in Australia, with about 1.25 million solar rooftops, there is still considerable untapped potential,” the CEFC says, noting that the commercial sector has lagged behind the residential sector with just 7 per cent of the market and represents a major opportunity.

One of the problems has been the upfront cost and the relatively long payback period of over five years. Many businesses operate with a three to five year payback threshold for their capital investments.

“The power purchase model overcomes this challenge as individual and commercial customers do not pay for the upfront purchase and installation of the equipment and customers can achieve immediate savings on their energy bills.”

“The relatively long pay back periods for rooftop solar have meant standard bank loan terms were not financially attractive to customers, said Pashupathy Gopalan, President, SunEdison Asia Pacific, Middle East and South Africa.

“With the CEFC’s finance, SunEdison is able to introduce a number of financing models to Australia, using our global experience, that will provide an immediate cost saving to customers and expand the use of solar resources here.”

tindo soalrThe Tindo deal, meanwhile, will allow the Adelaide-based company to build, install and own rooftop solar arrays and sell the power to building occupants under a power purchase agreement.

The program is also funded by the Solaire Income Fund, which is a joint venture between Lighthouse Infrastructure and Impact Investment Group.

Tindo will be targeting residential customers, small to medium- sized businesses and government bodies and hopes to use the model to grow its business and expand its operations. Currently, it produces less than 10MW of solar panels a year, miniscule by global standards.

“We have been committed to building an Australian solar manufacturing business using our local technical expertise and innovation and have built a strong base. But we have the capacity to expand the business and by offering PPAs to homeowners and the commercial sector more people can choose a quality, local product at no cost to them,” Tindo managing director Adrian Ferraretto said.

“The CEFC’s finance will help us to grow the business and bring an Australian solar panel offering to more customers.”

It says it will be able to provide electricity at 25c/kWh under this model, compared to rates of  between 34c/kWh and 40c/kWh currently in South Australia. There are no upfront costs.

The CEFC is also providing $30 million senior debt finance for a solar finance program delivered by an Australian company called Kudos Energy, and back by US-based Angeleno Group.

This will allow the companies to install and own rooftop solar arrays and sell the power to the building occupants under 15-year PPA. The CEFC believes this will be particularly attractive to commercial customers, renters and residential bodies corporate.

If an owner or tenant moves premises, they can assign the PPA to subsequent building occupants so they are not locked in long-term.

Yates says the CEFC is working with a range of other Australian and international financial institutions, solar providers and manufacturers to introduce new financing programs to accelerate and widen Australia’s uptake of solar technology.

PPAs have an extensive history in the US and have been widely adopted by both residential and commercial customers in the States where they are available. While PPAs have been used in Australia for larger-scale projects they have rarely been used for smaller businesses or the residential sector.

“Once we done this there will be stats around for how these things perform. Other financiers will step in, and rooftop solar will become a normal securities asset class. There is so reason why this is any different.”

 

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  • Jo

    I wish such funding was available for community energy projects.

    With such a backing community energy projects could be financially viable and might be even competitive with commercial lenders.

    • michael

      what’s to say communities can’t enter PPA’s with providers? if you island your system and commit to paying higher prices, then I’m sure someone would step up to the plate and provide the power

  • John Bromhead

    The 25¢/kWh price will undercut the retail price but is over 15¢/kWh greater than the wholesale cost of electricity. The difference in wholesale and retail price pays for the fixed costs of operating the non-generating part of the electricity system.
    Participating householders can only benefit if these costs are passed on to their neighbours.

    • Tim Buckley

      John
      The average 2014/15 power price for residential customers in Australia is 29c/kWh. Sure, wholesale electricity costs 5c/kWh. The distribution and transmission entities have gold plated the grid and now charge 15c/kWh to all residential customers in Australia on average. Did we ask these government bodies to gold plate the grid for the last decade? No! Who profited from this? The state governments, not the electricity customers who now have had enough and have put solar on their rooftops to stop this waste and to reduce their own financial pain. At some point, the State government has to stop profiteering at ratepayer expense, and write-down the grid. This will give a cost saving to the benefit of all electricity users. Alternatively, the government can keep its head in the sand and keep screwing ratepayers through their 15c/kWh grid tax. If they choose this later option, even more ratepayers will put in solar, then add in battery storage, and keep buying more energy efficiency devices – all in order to reduce their electricity costs. The person adding solar, or putting in energy efficient devices is not hurting their neighbour – it is our wasteful state governments. Put the blame on the guilty party, please.

  • juxx0r

    I don’t get what’s so wonderful about turning a 5 year payback into a 15 year payback or turning 13c/kWh into 25c/kWh.

  • Ronald Bruce Jones

    What is really needed is a decent return on the power you generate and put into the grid. At the moment you are being skinned by the electricity retailers

    • Blair Donaldson

      Exactly. It should be a one for one option. Currently the retailers pay peanuts to the generator but make money onselling electricity homeowners have produced, and they charge ridiculous connection fees to add insult to injury. You’d think smart retailers would be changing their business set up to work with homeowners using solar power – for the mutual benefit of both parties.

      • michael

        they own the grid, so the small generator is a price taker, simple really. if you don’t like the price they are offering to buy for, sell to your other customer…

        • Blair Donaldson

          Easier said than done. Given the grid was initially financed by the public and there is only one grid, competition is effectively non-existent because almost all the suppliers play the same game. Its anti-competitive.

  • Ronald Bruce Jones

    I recently recieved a letter from my electricity retailer informing me that the cost of my power was to rise by about $1.30 PW & $3.50 a qrtr, this was before the repeal of the carbon tax The cost now is about is 36.883 cents with the gst included peak consumption and I wonder if this was in anticipation of the repeal of the c/tax. This allows the retailers to gather more money so they can dribble some of it back to you or you might get a small credit so they don’t have to give you anything!

  • Margaret Page

    Could this PPA model be something Councils could back by promoting it to communities and also to developers of strata units by offering a further incentive for participating in climate change adaptation? I wonder if local Councils elsewhere such as in the US have backed this type PPA model to encourage solar leasing with the aim to help communities transition to clean energy? If Councils got behind it, communities would have the assurance that it was an OK thing to do.

  • ac baird

    It’s taken years of aggressive-regressive work but a rational electricity market is now stuffed and will soon be “plinthed”, a monument to greed mixed 50-50 with stupidity. All that remains to complete the perfect storm is a really good ENSO event for all conservative-reactionaries to enjoy, praying for rain and importing wheat. At last! A use for the “priests-in-schools” program giving “hands-on” advice to the kiddies for rain-making. I can also now see why the CSIRO fund-gutting was so prescient, providing really USEFUL money for the quarter billion for priests. BRILLIANT! As a recent poll points out, Australians rate the Tony de l’Abbottoir as a superior VISIONARY. L-O-bloody-L! Which means that Australians come last as visionary voters but way ahead as collectively fick. Fank goodness I haven’t said what I REALLY fink.

  • Zvyozdochka

    I expect a furious reaction to this provocation from the CEFC.

    • Alen

      Yes it will be interesting to see, once solar leasing becomes more widely known in communities there really will be no stopping the solar revolution, although it could have already past this point and is well and truly unstoppable… I wonder how this will affect the value of the Queensland power assets, considering the already high uptake of solar in the state and the potential of leasing to attract even more customers.