More people are using solar power in Singapore today than before.
From 2013 Q4 to 2017 Q3, total Megawatt Peak (MWp) and total Megawatt Alternating Current (MWac) have almost increased tenfold.
In theory solar is a smart financial investment to offset high electricity costs
Singapore has a sunny and warm climate with about 12 hours of daylight and so, in theory, Solar is a smart investment to offset high electricity costs.
But first, why bother (If you are not that environmentally conscious anyways)? – for starters, the Carbon tax.
The Government believes that the most economically efficient and fair way to reduce greenhouse gas emissions is a tax on carbon emission.
As announced in the Budget 2017, Singapore will introduce a carbon tax on large direct emitters of greenhouse gases (GHGs) in an effort to achieve Singapore’s commitment to the Paris climate agreement ratified in 2016. As of now, the government is looking at a tax rate of between S$10 and S$20 per tonne of GHG emissions. (Source)
While Finance Minister Heng Swee Keat said, “The impact of the carbon tax on most businesses and households should be modest” because, as added by the Straits Time, “the tax will generally be applied to power stations and other large direct emitters of greenhouse gases, not electricity users,” (Source) it remains to be seen whether the tax imposed on power stations would be passed on to end-consumers like ourselves.
Reasonable people may argue that increase in energy cost as a result of the Carbon Tax is inevitable – and I think they are right.
“Most electricity here is generated using natural gas, which already results in relatively less emissions than other sources like coal, said Mr James Allan, a director of consultancy Frontier Economics.
Singapore’s land scarcity also means power generators have limited scope to invest in zero-emission energy sources like wind or solar power, he noted. This means the carbon tax will push up costs for power generators, which will in turn pass these on to consumers.” (Source)
Moreover, “during oil price fluctuations from 2011 to last year, the prices rose by as much as 35 per cent. As for households, there will be a 2.1 per cent to 4.3 per cent increase from current electricity tariffs, which means an extra $1.70 to $3.30 for an average family in a four-room flat with a $72 electricity bill, the NCCS said. Electricity prices have fluctuated up to 10 per cent between 2010 and last year.” (Source)
The carbon tax will likely result in a trickle-down effect through a rise in electricity tariffs. For businesses of all sizes, higher cost of electricity translates to a higher operation, fixed and variable (production).
So It is in every business’ interest to figure out how to cut their emissions – whether its through solar or otherwise, and consumption of energy from the main grid.
Now back to consideration for switching to solar (or not):
The calculation depends on many factors.
The main factors are:
- Production capacity of solar panels at your site
- Installation cost of solar panels and any pre-roof works
- Return on Investment
- Availability of incentives/subsidies/rebates
Production capacity depends on the direction that your roof faces and angle of roof.
Ideally your building should have a flat roof, however you may still produce sufficient energy with west or east facing roofs. A pitch of 30 degrees is also ideal, but nevertheless solar panels can be installed on roofs with angles from 0 to 45 degrees. Your installer can mount the panels at the perfect angle to maximise your energy production but it will cost more.
Production is also reduced if there are obstructions or shading of your roof.
Shadows cast on solar panels from trees or neighbouring buildings can significantly decrease their electricity production. While a building’s shadow may not be something you can change, tree branches can be trimmed to decrease their effect on your panel’s production. If these are present on your roof, the installer may be able to design the system around them, depending on the roof layout and size. Generally for a solar PV system, there should be 100 square feet of roof per kW, and the average system size in the US is between 5 kW and 7kW.
Installation costs goes up if your roof is old or needs work done before electricians can install the panels.
As a general guide, if your roof needs to be replaced within the next 5 years, it would be best to have your roof replaced before having your panels added. So if you are going to install them, you shouldn’t be planning on replacing the roof within the next few years. You should also be planing to operate there for a long time. Hence, solar is definitely a long term decision.
Note that you cannot install solar panels yourself
While the government has also made it quite easy for businesses to decide to go solar, as no licence is required for residential installations less than 1 MWac, you must get this done by a Licensed Electrical Worker (LEW).
Installation costs also depends on the type of roof on your building (which affects the type of mount for your solar panels.) You will have to check with your prospective solar installer for exact the cost of installation.
“But hey, solar pays for itself and I can sell electricity back to the grid to subsidise my own electricity right?”
Its true that consumers can subsidise their own electricity by producing and selling it back to the grid.
Any solar energy produced is first used to offset your own consumption during that period. Any excess solar energy will be exported to the grid. You may receive payment (based on the prevailing low-tension electricity tariff minus grid charge) from electricity distributers by way of a credit adjustment to the monthly electricity bill. Consumers can be paid for selling excess solar electricity back to the grid depending on their contestability status.*
*Currently, a commercial and industrial consumer with an average monthly electricity consumption of at least 2,000kWh is eligible to become contestable. Instead of buying electricity at the regulated tariff from SP Services, they can choose to buy electricity from electricity retailers.
When can you start seeing savings?
Some companies provide payment options to allow savings the day the system is live, where as others come with an upfront investment and provide greater returns over time. If you take a loan for the solar panel system or qualify for a lease, you can often reduce your monthly electric bill immediately. If you decide to do a pre-paid power purchase agreement, or buy the system outright, you will have an upfront expense, but save more in the long run. You also need to check the electricity buy back rates if you are planning to produce surplus energy to be sold to the grid.
Hence, depending on these various factors, it might take different number of years to decades to recoup the cost of solar and begin to see savings.
Moreover, for switching to solar, you should take into account the availability of (dis)incentives and rebates in Singapore
Most businesses need to weigh their cost to the environment against their profit margins because they need to be competitive and well… stay in business. The availability of incentives and rebates from the government goes a long way in shaping decisions to switch over to solar or other energy efficient sources.
As of now, the government does not subsidise solar directly
As explained by EMA on their website:
“Adopting subsidies such as Feed-in-Tariffs (FiT) distorts the energy markets and increases costs for consumers. Hence, it is important to price energy correctly and send the right price signals to both consumers and investors.
Instead of subsidies, Singapore has taken proactive steps to introduce regulatory enhancements to facilitate the entry of renewable energy when such technologies become commercially viable. The Government’s support for renewables also comes in the form of funding for Research & Development to develop capabilities within the industry.” (Source)
Instead, businesses (and building owners) are incentivised to be energy efficient in general.
The National Environment Agency (NEA) encourages people and private sector to take ownership of common urban living spaces and environmentally practices through grants and incentives such as:
Energy Efficiency E2F is designed to support companies in the industrial sector to be more energy efficient. It encourages owners and operators of facilities to:
- Integrate energy and resource efficiency improvements into their development plans early in the design stage;
- Conduct a detailed energy assessment for their facilities to identify energy efficiency improvement opportunities; and
- Invest in energy efficient equipment or technologies.
It grants up to 50% of the qualifying costs capped at $600,000
Your current electricity bill is the largest factor in determining how much you’ll save by installing solar. (Currently, from 1 Jan to 31 Mar 2018, the domestic household electricity tariff is 21.56 cents per kWh. Details of commercial electricity tariffs are available at SP group.) Since you pay your utility company for every kilowatt-hour (kWh) of electricity you use and you need to know if the cost of solar (including the interest from loan, installation and maintenance cost) is sufficient to subsidise the savings from generating electricity from the sun.
Switching to solar power maybe good for your business if:
Nett cost of switching to solar(installation, incentives, rebates, and subsidies) + reduced energy consumption + surplus from production is lesser than continued consumption of electricity from the grid.
What is your energy consumption profile like?
Depending on the nature of your operations, air-conditioning, boilers, or lighting may be the largest contribution to your bill. If you find that the electricity consumption from heating and/or cooling to be contributing a large portion of your bill, perhaps Trigeneration solutions are better at reducing your cost. It may even be cleaner than solar generation.