A Sydney shopping centre solar-and-storage project shows how the economics of batteries have shifted, says RACV Solar CEO Andy McCarthy.
Business owners love certainty. If you can lock in your price of energy for 30 years – and the price is right – who wouldn’t say no? What’s interesting about the power purchase agreement between CEP.Energy and the owners of the Narellan Town Centre shopping precinct in southwest Sydney is that it includes a premium ingredient: battery storage.
Batteries might be becoming more popular inclusions on residential systems but they’ve struggled to meet economic measures for commercial buyers. The project at the Narellan Town Centre, where 4MW/10MWh of Tesla storage is being matched with 2.6MW of rooftop solar, looks like a turning point.
“I don’t think it’s long – we might almost be there – where you have to add battery storage to a commercial project to improve the return on investment,” says RACV Solar CEO Andy McCarthy.
With feed-in tariffs falling to near-zero, and with the value in grid services, frequency control and FCAS opening up to owners, a well-designed battery system with an appropriate amount of solar is going to deliver “a very comfortable return for investors who aren’t getting anything from money in the bank,” McCarthy says. “Solar with storage is the new growth industry, more than just standard grid-connected solar.”
The new growth industry
At Narellan, RACV Solar has entered into an engineering, procurement and construction arrangement with CEP.Energy to deliver stage one of a project that will eventually extend to 20MWh of storage with 10MW of solar, all of it behind-the-meter. That’s very big. Stage one alone is RACV’s largest installation to date.
The battery will be used for “the whole value stack”, McCarthy says, including FCAS, grid services and energy arbitrage.
The system will be owned by CEP.Energy, who will rent the roofspace from the Narellan Town Centre, who will sign tenants up to 30-year agreements to buy clean energy. RACV has a 15-year operations and maintenance agreement with CEP, with an option for the next 15 years.
Solar module prices have been slowly rising, driven by rising shipping costs and supply shortages of polysilicon, silver, aluminium and glass. “We’ve been planning this project for a while and we managed to secure everything at the price we needed,” he says. The cost of compliance is also increasing, McCarthy says, “which is probably a good thing, to be honest.”
The commercial and industrial solar industry has come a long way in a short time, McCarthy tells EcoGeneration. RACV has been working in commercial solar since 2014, at which time it considered itself to be “best in class by a long way,” he says. “There were some very poor commercial solar companies [back then].”
A lot has changed. These days, McCarthy says he is very impressed by the median level of quality among RACV’s peers in commercial solar. “It’s come a long way in the past three years in particular,” he says. The majority of commercial EPCs are “doing a really good job”, and McCarthy is hearing the same from contractors. “If you treat your installers with disrespect and you don’t plan a job well, you’ll lose good delivery teams,” he says.
AGL’s recent acquisition of Epho and Solgen is the beginning of a wave of purchases, he says. “The industry is definitely going through a period of consolidation. There are a lot of conversations going on in a lot of companies about mergers and acquisitions; the M&A space is really heating up.”
As the big companies tumble about in a game to increase market share, it’s an opportunity for smaller companies to focus on niche services (especially battery storage, he says) or feel the cold in no-man’s land.
“Companies with between 30 and 60 staff might be the ones that will struggle,” McCarthy says. “You have all the compliance and overheads of a large company but you don’t really get the economies of scale.”
There is a lot of work ahead – but are there enough people to do it? “Good installers are very busy,” he says. “Good battery aggregators and integrators are as rare as hen’s teeth.”
If the news is heavy with announcements of large companies working on battery projects, this should be balanced against a shallow pool of talent. McCarthy suspects many may be learning on their feet. “It is an area we need to be investing heavily in,” he says. “I am a bit concerned. We have to start addressing the skills shortage before we keep feeding the stimulus in at a residential and commercial level.”
If there aren’t enough installers skilled to work on storage, it will become a case of lassoing anyone in to get the job done. “And we all know the potential risks in that.”