Australia’s secret commercial solar program

Down south, where the bearded men live, innovation abounds. And commercial solar is no exception – with a clever program paving the way for the sector's surge.

I actually really like Melbourne. There, I said it and yes I was born in Sydney.

Every time I go to Melbourne I always, without fail, find something new, creative and fascinating. From its quirky street art, to its staggering array of hidden laneway and rooftop bars this city has an amazingly strong self-identity and it seems to breed an inimitable Melbourne style. I had such a good time there, that I'm growing a beard (because apparently if your dad doesn't have a beard, you've got two mums).

I was in Melbourne at the invitation of the City of Melbourne to speak on the topic of how to choose a great commercial solar provider; testament to the growing demand that the city can sense, and it wants to help. An engaged audience of almost 150 business owners were perched on the edge of their chairs throughout the presentations from several speakers, eager to understand how to proceed and how the city can help them.

Despite the solar market doldrums that we are currently experiencing nationally and intense competition, it's just possible that as usual Victoria might suffer less than other markets, in part because the appetite to act and think creatively is so strong in that state.

It was in conversation with the Sustainable Melbourne Fund's Scott Bocskay, that I had a light globe moment. The first was the the SMF is actually a lot like what the Clean Energy Finance Corporation was supposed to be, before it got trampled in the post-election-commitments-despite-huge-merit stampede. The SMF is even better though because it's up and running, nimble, successful and has an even broader mandate than the CEFC.

The second was that, yet again, those clever little Victorians have been busily creating a program that not only has staggering potential, but helped win the City of Melbourne an international award, is targeted at commercial building owners and could be the beginning of a new revolution in collaborative support for and growth of commercial solar.

It's their secret solar program.

Let's take a step back for a minute and look at three major problems for commercial solar in Australia.

The first is how to find the buildings and, perhaps more importantly, the owners given that so much commercial property is leased.

The second is, if it's leased there is a split incentive issue; the tenant wants solar or the owner wants solar but tenancy and ownership changes overtime and the purchaser doesn't always get the benefits of reduced energy costs if solar is installed.

The third is access to capital. Sure we can get leases, extend mortgages, and so on, but getting money costs money and sometimes it can cost so much it breaks the deal.

The SMF has addressed these three issues, which has the potential to radically change the game for commercial solar.

They developed a program called the EUA (Environmental Upgrade Agreements) which is essentially an evolution of the US-based PACE program, which worked successfully for a while but then stuttered during the GFC.

Simply put, an EUA is an agreement between owners, tenants, lenders and local government that solves the problems described by:

– Helping to map, quantify, educate and connect commercial building owners with solution providers;

– Secondly, and crucially, it allows councils to collect loan repayments (on behalf of the bank) through council rates which remain attached to the building, irrespective of changes to the tenants or owners;

– Thirdly, by underwriting the risk and supporting the process, it lowers the interest rate by a lot; typically 50 per cent.

It looks like this:

Graph for Australia’s secret commercial solar program

Now, to be clear, EUAs have been around for a couple of years and the SMF has been in existence for even longer, but the program has been historically focused on supporting energy efficiency and waste management activities which are utterly worthy of support but just don't seem to be able to shake of the lingering odour of boring nerdiness. Few people are convinced that there is salacious appeal in swapping a light globe or installing a soft start motor, despite the merits. But solar power? Everyone gets that; it's tangible, it's on a million rooftops and it's visible.

So, the SMF and the City of Melbourne have shifted their emphasis a bit and, to put it bluntly, would like nothing more than to see thousands of commercial rooftops covered in solar panels. They have even mapped the potential (excluding the CBD) and it's a very nice 20MW opportunity.

You want steak knives? Okay then, it gets better.

It was in a conversation about the EUA program that I learned via a casual comment that these are also available in New South Wales!

This has to be the nation's best-kept secret solar program because no less than five local councils have followed the SMF's lead and adopted the program in NSW. A key difference between Victoria and NSW is that the SMF is in place to act as an independent facilitator with a core focus on rolling out the program, which overcomes the tension between a council which might fine you for leaving your bins on the street on one day and try to convince you to sign up to a program on the next. Word on the street is that this is slowing the uptake here, but also that discussions are underway to solve it.

Now as usual, I'm being mildly flippant and have previously been referred to as "the Big Kev of Solar" for my excitability. I was broadly aware of the EUA and SMF and knew that the City of Melbourne and its many bearded colleagues have been very active in all sorts of ways (like Moreland Energy Foundation, for example). However, it's the change in focus and heightened sense of enthusiasm for commercial solar that is new and I applaud this much needed incentive which could kick-start commercial solar.

Gentlemen; start your engines.

Nigel Morris is director of SolarBusinessServices.