To solar or not to solar for your early learning service?

Brian Mills > X-Alt Solar

Conjecture and uncertainty still seem to reign regarding the merits of solar for early learning (childcare) services. To understand its merits, one should understand the product itself.

People are aware that solar is used to generate electricity. But what is it?

Also called “Photovoltaics”, solar is the direct conversion of light into electricity at the atomic level. Solar panels comprise cells that take sunlight and convert it into electricity. These cells combined into one solar module (panel), have a notable electricity output. A number of modules combined into an array have a combined output that has a significant impact in powering a building like your childcare facility. Source: (How do Photovoltaics Work? | Science Mission Directorate, 2020) Many solar panels have for example a 370w rating and comprise of 60 cells. Modern technology has found a way to cut these cells in half resulting in a split-cell panel, providing enhanced electricity generating benefit in the event of shading or parts of that panel becoming soiled. These panels are known as split-cell panels. Electricity generated by solar panels is in the form of Direct Current (DC). The electricity your building uses is Alternating Current (AC), so it needs to be converted. To convert DC into AC, one needs an inverter. The more obvious items in a solar system are the panels (modules) and the inverter. Power generated by the solar system then partially replaces the electricity used from the grid.

Benefit

Does solar have benefit for the early learning sector? In most cases we analyze, yes! Solar provides noticeable electricity cost savings. In the below example, solar generated 1,317kWh of electricity in the reflected week. 834.2kWh was used in the building and 483kWh was exported to the grid. Instead of using 1,604.5kWh from the grid, the service used just 770.3kWh. Assuming 25c/kWh cost for electricity from their retailer, in the reflected week alone, they have saved $208.55 (834.2kWhx$0.25). Assuming they are getting 10c/kWh Feed

in Tariff, they have also generated $48.30 in “revenue”.

The simplified summary is:

Pre Solar: A $401 spend on electricity (1,604kWhx25c). Post Solar: They have saved $208.55, have paid $192.58 for grid imported electricity, but have generated $48.30 in “export” revenue. The net position now is a $144.28 spend. Net benefit in the reflected week is a $256.72 saving. This adds up considerably over the course of a year and over several years. With potentially a $0 down outlay and cash flow positive budget impact, it makes sound financial, economic and environmental sense.

In the reflected week, the net benefit generated by the solar is close on the equivalent of about 10-hour wages for one of your staff members.

Source: Solar Analytics readout on a system installed at a Child Care Centre by X-Alt Solar. Call 1300 925 876

Proven Solar Benefits include: Cost reduction no Capex requirement FULL instant asset write off (check with your accountant) Contributes toward sustainability commitments

Quality Solar Solutions

Proven to save money for Child Care Centres

Visit: www.x-altsolar.com.au/childcareqld.html

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Call 1300 925 876 Email: cutcosts@x-altsolar.com.au Visit: www.x-altsolar.com.au/childcareqld.html

Finance

Finance options for solar are varied and relatively straightforward to obtain. Popular options are: i. Outright Purchase: The most capital intensive of all the options but the cheapest. Under the recently announced

Federal Government Instant Asset Write Off (IAWO) extension, solar can be purchased and the full amount of that purchase can be written off as a depreciated expense, bringing a cash flow benefit in that financial year. It is my understanding too that should the business suffer a loss in the year the asset is purchased, the written off amount can be claimed against tax paid the previous year. ii. Chattel Mortgage: The borrower owns the system from day one and can claim the expense as a depreciated expense in full in the year of purchase under the IAWO.

Interest payments are also usually tax-deductible.

Repayment periods vary between 2 to 10 years and can be structured to be cashflow positive. I.e. the savings and inflow generated by the solar exceed the repayments. iii. Operating Lease: Typically, between 2 to 10 years, lease repayments are usually tax deductible in full.

Ownership of the system passes to you at the end of the lease period. Again, a benefit of the lease option is it can be cashflow positive when structured so that the repayments are less than the savings. Any tax deductions claimed add to the cashflow positive nature of the lease. iv. Power Purchase Agreements (PPA’s): The PPA provider installs and retains ownership of the solar for a predetermined term (usually 10 or 15 years). Power from the solar is sold to the building owner or tenant at a discounted rate off their retail electricity price after discounts. Maintenance is the responsibility of the PPA provider over the PPA term. At term end, ownership of the solar usually reverts to the building owner. PPA’s are either consumption based, or production based. Disclaimer: Please verify the above information and its suitability to your organization with your accountant prior to making any decisions. A big benefit of utilizing a finance option is the ability to obtain solar with no capex and experience an immediate cashflow positive benefit to your budget. Most solar finance options do not require company financials.

In summary, solar does benefit and we have little hesitation in advocating it for almost every early learning service we assess. Tread carefully and use a trusted provider (like X-Alt Solar) in assessing what benefit your service may derive and ensuring you obtain a system of sufficient quality to provide ongoing benefit for years to come. Brian Mills can be contacted on cutcosts@x-altsolar.com. au for any questions relating to solar in general, or for your service.

Source: Science.nasa.gov. 2020. How Do Photovoltaics Work? | Science Mission Directorate. [online] Available at: <https://science.nasa.gov/ science-news/science-at-nasa/2002/solarcells>