Solar leasing may unlock Australian commercial-scale PV market

Dutch-based solar PV developer Photon Energy is to launch a new financing model – including a leasing option – that could unblock the biggest untapped solar market in Australia, commercial-scale solar installations.

Photon announced this week that it will offer commercial customers the choice of two difference financing offerings. One is a hire purchase agreement, similar to a lease, and the other is a power purchase agreement that could allow the user to buy the system at a later date.

Solar leasing has become the dominant form of finance in the US solar market, where it accounts for three quarters of all domestic installations. The attraction is zero upfront payments and immediate savings on electricity bills.

The solar leasing market is yet to take off in a major way in the domestic market in Australia – although several companies do have offerings – but Photon believes innovative finance is the key to unlocking the commercial scale solar market, which currently accounts for just 5-10% of the overall market.

Michael Gartner, who heads Photon Energy Generation Australia, the local subsidiary, says the commercial solar market in Australia could reach 500MW a year, pushing the total solar PV market back above 1GW a year for the first time since the generous feed-in tariffs were ended.

Leasing could account for half the commercial market – which would include shopping centre owners, property owners, processing plants, and food companies, and installations above or below the 100kW size.

Gartner says the company “tested” the model on a 144kW installation in the ACT, and is now looking to roll it out on a national scale.

Financing will initially come from a 40 million bond that the Dutch parent company issued this year, but it hopes that Australian banks will also climb on board as they get comfortable with the model.

“What we want to do is to kick-start the market and give banks confidence that these structures actually work. That would then help turn this into a more sophisticated, structured finance approach,” Gartner told RenewEconomy.

Gartner says the sweet spot for the market is multiple installations of just under 100kW (so it gets renewable energy certificates upfront rather than on production).  “Our target market is on customers with multiple sites. That’s where it makes most sense.”

He sees portfolio is the “multiple megawatts” and a total value of around $100 million under the scheme. Larger installations also work, although they need to be structured differently.

He says that many commercial users could supply up to one third of their electricity needs with rooftop solar. The value of such installations would depend on the rate, and the structure, of the company’s contract with the local utility.