Updated: Sep 17, 2019
The main driver for self-consumption in Singapore is the fact that the Levelised Cost Of Energy (LCOE) is in many cases lower than the contestable electricity price. According to the study on the profitability of commercial of self-consumption solar installation in Singapore, it showed the results of a detailed market study on the drivers for the future electricity prices in Singapore and found that the electricity prices are forecasted to rise in the medium term, reinforcing the business case for self consumption in Singapore. Since LCOE for solar in Singapore is already cheaper for many sectors than the grid electricity price, the Electricity Market Authority (EMA) of Singapore has decided to introduce a “net-settlement” compensation scheme for excess electricity injected into the grid. Essentially, the system owner will be compensated the fair market value for electricity generated, which in many cases will be equivalent to the current electricity price minus the grid utilization charges. It is nevertheless more attractive for commercial rooftop owners who will be exporting excess electricity to the grid.
Investment decisions by companies
For commerce & trade, manufacturing, and heavy-duty industry, the payback period is between 8-9 years, which is typical for an infrastructure-related investment, but often too long to prompt a company to invest. Executives tend to make investment decisions for a period of 3-5 years. Each business could have a different way to measure the effectiveness of their system. Some companies value an investment that will have higher returns over its lifetime, while others will value a shorter payback period. Some customers highly valued the brand impact. Having solar on the roof promotes a responsible image that resonates well with customers and employees. Many also view rooftop solar as a Corporate Social Responsibility (CSR) initiative that pays back itself and has a large impact on the lives of those around them. Another key investment benefit is the ability to use solar energy to hedge electricity prices for the future. Investing in a solar system will provide reliable power generation at a known cost, below the expected future market electricity price. Innovative financing models for solar are already available in Singapore. An external party can own and operate a solar installation on the tenant’s rooftop and sell the electricity just like an electricity retailer. With such an arrangement, the parties sign a so-called “Power Purchase Agreement” (PPA). The tenant can benefit from immediate savings from their discounted electricity price without the hassle and need for an upfront investment.
Benefits of Solar PV System
The Singapore government has introduced measures to reward building owners who install solar PV rooftop systems. One such example is the Building and Construction Authority (BCA) Green Mark Scheme, which acknowledges non-residential building owners for their environmentally conscious practices and rewards them accordingly. Rooftop solar PV system owners receive credits which can contribute to a higher Green Mark tier rating, from certified to Gold, or Gold to Platinum. In some cases, a customer can receive up to 20 Green Mark points by installing rooftop solar PV system. For instance, a rooftop owner in Singapore was seeking a way to increase their Green Mark ranking from Gold to Platinum. They conducted an analysis of their building and found that there was available unused rooftop space for a rooftop solar system. Solar Era worked with the rooftop owner to identify the financial gains and other associated benefits of a rooftop solar system and concluded that it would be the right investment to reach their objective. From a corporate brand perspective, customers are becoming increasingly aware of global warming and environmental issues, and thus look up to companies who are environmentally conscious. Furthermore, the labor force is increasingly conscious of these environmental issues and it is a sense of pride for them to be working for a company contributing towards sustainable practices. Finally, an installation will also contribute to Singapore becoming more energy independent as well as diversifying the national power generation landscape. This is important to mitigate the impact of international shocks in the energy commodities industry which could negatively impact Singapore’s economy, and in return affect local businesses there. In short, apart from the economic returns on investment, the societal gains are very high because it contributes strongly towards a company’s brand, raises the morale of employees, supports the development of self-sustaining and diversified national power generation, reduces electricity costs significantly and provides government-sponsored financial benefits.
The stakeholders in the solar industry, such as solar panel manufacturers, distributors and installers, need to re-position themselves and make the most of the opportunity for self- consumption to succeed in the market. If self-consumption is being used to measure the benefits of solar PV system installations, professional advice, planning, and implementation are necessary in order to align the products with the company‘s electricity requirements. Solutions could also include storage and smart building management solutions, etc. in the future. It will no longer simply be a matter of generating as many kWh as possible and feeding it into the grid to maximize the feed-in tariff. The winners will be those who invest in an intelligent installation. The greater complexity opens up new and exciting development opportunities for innovative companies as well as creating skilled jobs and an exciting new industry for Singapore and beyond.