Factories and farms will deliver the next solar boom: But watch out for PV and battery cowboys

Nearly one week after the federal government announced plans to expand the rooftop solar rebate to farms and factories – and all sorts of businesses in-between – industry is still buzzing with the promise of “insane” new demand from a market whose giga-scale potential sits largely untapped.

But ahead of the October changes to the Small-scale Renewable Energy Scheme (SRES) that will extend a roughly 20 per cent discount to rooftop solar projects ranging from 100 kilowatts (kW) up to 1 megawatt (MW), a few warnings and caveats are starting to emerge, too.

The first is that the potentially huge market for commercial and industrial (C&I) rooftop solar will not take off like a rocket and add hundreds of megawatts of new capacity to the grid within months, like, say, the Cheaper Home Batteries scheme has done.

That’s because the larger a rooftop solar project gets, the longer it takes to deliver – and the more regulatory and network standards that need to be met. It’s also because there aren’t as many companies around that specialise in C&I solar projects.

Smart Commercial Energy, one of Australia’s leading C&I companies based in New South Wales, says that solar projects up around the one megawatt mark can take around six months to complete, including in the early planning stages.

“You don’t go out next week and stick a megawatt of solar on a roof,” says Smart Commercial Energy’s chief sales officer Jon Vlatko.

“It takes a long time. There’s [company] boards involved. There are multiple stakeholders; decentralised decision making across multiple offices, sometimes even internationally.

“And then there’s often early works agreements and switchboard upgrades and structural roof upgrades and all sorts of things.”

And then there are the complexities and delays that arise on the side of the distribution network service providers (DNSPs), who have their own sets of processes and standards to navigate to connect larger rooftop systems to the grid.

“Streamlining of DNSPs …is one of our biggest bugbears and one of the biggest things – the biggest delays – that stands in our way,” says Vlatko.

“The bigger the system, the more investigation [networks] will do, and the more standards we need to meet,” Vlatko tells Renew Economy. “That’s the part that’s out of our control.”

The degree of network hoop-jumping is one of the things that federal energy minister Chris Bowen has promised to address alongside making the changes to the SRES, in response to feedback from industry that the wait for grid connection approvals is adding cost and complexity that eats into savings and puts some customers off, entirely.

“It’s not just that it hurts [customers] or hurts uptake; it hurts us, the deliverers, because the way construction payment schedules run is you’re waiting to get paid. It’s a cash-flow situation, and there’s already a lot of challenges around financing these projects,” says Vlatko.

“The DNSP issues are real and ongoing.”

The second concern that is bouncing around the industry since the SRES expansion announcement is that the new incentive – like so many rebate schemes before it – could attract so-called ‘cowboys’ to the industry, particularly in the heady early days of surging demand.

“The solar and battery market in the commercial world is absolutely going insane at the moment,” said chief technical officer at Symmetry Solar and director of Rethink Renewables, Paul Harmsworth, in a LinkedIn post late last week following the SRES announcement.

“And whilst I think this is great and it’s something that I’ve campaigned for my whole working career, which is now coming up to 12 years, I think there is a warning that needs to be heeded with it.

“In some instances, this attracts the wrong parties to the market. So, I would urge any prospective consumer to be asking the right questions of the parties that you are seeking to engage to build your solar systems,” Harmsworth says on LinkedIn.

“The most important question you can ask your your installer or your EPC … would be: Show me what you have built, and can I go and see it? And if the answer is no, then you potentially need to consider who you are engaging.

“We are not building a residential solar system x 10. There are a whole raft of different considerations when we start to build larger solar systems, including structural engineering, inverter capacity protection arrangement. The list goes on.

“You really need to understand what you’re building to ensure that your investment, whilst there’s a rebate attached to it, lasts for its 25-year warranted life. Because I have seen when this does not happen, and whilst it may appear pretty on the balance sheet or in a feasibility, we need to ensure that these systems stand the test of time.

“So, just a mark of caution whilst there is a flurry of activity – do your due diligence.”

Vlatko says he has had similar concerns, but thinks the degree of complexity and the level of specialist knowledge and skill needed to design and install C&I solar systems will help to weed out inexperienced players, seeking a piece of the rebate action.

“I was concerned, but I think [cowboys] are going to get found out because … they think they can do our job, but they don’t have the network and they don’t have the the amount of installers out there,” he tells Renew Economy.

“The complexity is, residential and commercial solar is not the same thing. There’s an imagination here that one’s [just] bigger than the other, but that’s not how it works. The bigger the system the more standards we need to meet.

“I think just the complexity and the slow sales cycle and all of the effort and engineering and analysis and pre-work that goes into large commercial installations means that it’s not going to be a crazy gold rush,” Vlatko says.

“It starts with that quality analysis – people need to know: is their system undersized, or what difference does this make to payback? And all that sort of data crunching is where it’s at. So that’s where the hard work and the experience will be invaluable.”

A third concern in the industry is that while the C&I sector is now finally getting a share in rooftop solar subsidies, it is still missing out on access to cheaper battery storage – with the exception of NSW, where the state’s expanded Peak Demand Reduction Scheme (PDRS) is stepping into the void, to some degree.

The suggestion from Bowen and others in the industry is that battery storage is much less important to businesses like farms and factories because much of their load tends to be concentrated over daylight hours, when solar is producing.

But Vlatko says that his company’s experience is that batteries are becoming an increasingly important part of the equation for C&I – and in some cases can shave significantly more time off payback periods.

“[Over the past decade] the trend’s always been let’s just minimise export … and now that’s not the case, because you want to get further off grid. You want to oversize the solar system, which is perfect for this STC rebate, and put a battery in so that you’re knocking off demand charges and also you’re powering your site at night too.

“I’ve made [a quote] recently where a 400 kW solar system was actually a worse payback for a chicken farm than putting a 400 kW system and 260 kilowatt-hours of battery, so it actually [makes sense] for them to put a battery in. The payback was was one year cheaper.”

Vlatko says that for Smart Commercial Energy, which services customers all around Australia, the difference in the level of demand the company is seeing from NSW, which has the new PDRS storage incentive, and the rest of Australia, is marked.

“The PDRS has been public for [just] two-and-a-half weeks… and the amount of battery quotes we’re doing is insane. …And I can tell you now, we are not having anywhere near the same interest from the other markets … so that just proves how much that rebate has activated [interest].

All things considered, however, the industry – which consulted very closely with the Smart Energy Council on its recent report calling for policies to unlock the “missing middle” of the solar market – is very pleased with Bowen’s move to expand the SRES to more C&I customers.

“This lever, the STC, definitely was one of our top five suggestions. So they’ve nailed it,” says Vlatko.

“For us, there are three [customer streams] that have been activated or that we’ve seen movement from as a result of that announcement.

“One of them is … old proposals, that now stack up better. We’re now going back and and quoting everyone who we’ve quoted in the last six to 12 months [and saying] you know what, that five-year payback is probably just a bit too much. Now it’s a three-year payback. So now they’re really interested.

“The second one is customers that we know undersized their system to meet STCs previously …and we are proactively going to them saying now you can have that size that you really should have [had] in the first place,” he says. 

“And the third one will be complete greenfield. You know, people who have only thought about it for years, but haven’t been in touch with any suppliers to have anything analysed yet, and they’re coming sort of out of the blue. 

“It’s a great first step,” says Vlatko. “We’re stepping in the right direction, but it’s not the end of the game by any means. This is just one lever, and there are many levers we need to pull.”

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