Free Introductory Reports on Successful Solar Strategies

8/14/2019 Free Introductory Reports on Successful Solar Strategies

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RECs Catastropheand Creditable Solar Solutions

1 st Free Introductory Report on Successful Solar Strategies

An free solar power industry report by Warwick Johnston, SunWiz, October 2009

Copyright Warwick Johnston 2009

Cover Image: Mykl Roventine and Warwick Johnston Licensed under Creative Commons


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Introduction

This free report provides a succinct insight into why the REC price is almost certain to be low for theforeseeable future, and provides insights into what can be done to manage your REC Risk.

Over 200 hours of research have gone into this report. It has been offered for free in the interests of the solarpower industry, as an industry that is forewarned can take action to ensure its future prosperity.

This free report is supplemented be by three more reports that will be released over the course of a week.Together these show:

why the REC price is likely to remain low and volatile what impact this could have on the solar power industry and, crucially, strategies for solar success whatever the REC price.

This free introductory report has been abridged so that the whole industry can quickly read and understand itskey implications. A wealth of supporting information than provides the bigger picture has been collated anddocumented into the Successful Solar Strategies report this information helps readers more deeplyunderstand the drivers behind REC prices, the risk to their business, and what they could do to prosper inuncertain and difficult times.

There are a lot of background information and assumptions that omitted from this concise document.You should not act upon this information without first researching and confirming its applicability toyour situation.

The full picture fills 80 pages, and contains advice that will assist the readers business to prosper. To ensurethe competitive advantage of the reader, a limited number of reports will be made available over the period21 27 October 2009.


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ForewordIt is official: the REC Catastrophe that was predicted has occurred.The problem is: the Solar Credit Crisis is not about to go away.

In this introductory report, youll learn:

What experts opinion is on the future REC price What will keep the REC price low until the window of

opportunity for PV has passed Why the REC price is volatile, and how this could eat into your

profits What you can do about it

Expert Opinion on the REC price

Experts agree on the bleak prognosis for RECs for the foreseeable future:

Our analysis suggests that on the basis of current subsidy proposals, the REC market may besignificantly oversupplied by [PV, SHW, and Heat Pumps] in the period to 2015, all stand to beaffected by this oversupply and we advise careful consideration of the implications Carbon MarketEconomics 1

REC prices are likely to be depressed as the new supply isabsorbed... The recent collapse in prices is arguably partly driven more so by the massive incremental supply to come from PV solar as announced in the recent budget UBS

Consulting

2

We are forecasting an oversupply of RECs for the next few years this is likely to keep a downward pressure on REC prices . Ric Brazzale, Managing Director,Green Energy Trading: 3

Why the REC price is low, and why it will continue to be.To answer this question, we need to consider the background to the Renewable Energy Target. But considerthis, the most crucial consideration: Already by October, there are 5 million more RECs on the market than areneeded for 2009. And 2010 requires only 4.4 million more RECs to be surrendered than in 2009. So next yearstarget may already have been met. Up until recently, electricity retailers were buying up RECs (thus keepingthe REC price higher than what it would otherwise be with such an oversupply) so they dont have to buy nextyear when their shortfall penalty increases to $65. As retailers dont need to buy many RECs next year, expecta low REC price for 2010.

Heres a pictorial summary of the situation:

1

www.carbonmarkets.com.au/text/FoREsight3.pdf 2 UBS Consulting, July 20093 http://www.environmentalmanagementnews.net/storyview.asp?storyid=1034595&sectionsource=s0

Read Successful Solar Strategies for full expert quotations on further reasons the REC

price is likely to be poor for a long time ahead
http://www.carbonmarkets.com.au/text/FoREsight3.pdfhttp://www.carbonmarkets.com.au/text/FoREsight3.pdfhttp://www.carbonmarkets.com.au/text/FoREsight3.pdfhttp://www.environmentalmanagementnews.net/storyview.asp?storyid=1034595&sectionsource=s0http://www.environmentalmanagementnews.net/storyview.asp?storyid=1034595&sectionsource=s0http://www.environmentalmanagementnews.net/storyview.asp?storyid=1034595&sectionsource=s0http://www.environmentalmanagementnews.net/storyview.asp?storyid=1034595&sectionsource=s0http://www.carbonmarkets.com.au/text/FoREsight3.pdf


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As depicted in the figure above, the REC price is set, like any market, by supply and demand. On the demandside is the Renewable Energy Target (RET) and GreenPower, both of which create the need to purchase andsurrender RECs. The demand for RECs has limits that are known in advance with a high degree of accuracy. Onthe supply side, a number of renewable energy technologies compete to supply the required number of RECs.If supply is less than demand, then a shortfall penalty ($65 from 1/1/2010, which is equivalent to a post-taxliability exceeding $90) is paid. However, if REC supply exceeds demand, then the REC price is established bythe technology that can most-cheaply create RECs for this reason, PV competes with other renewable energytechnologies for a share of the REC market.

On the demand side, the graph shows the number of RECs that mustbe surrendered each year under the old MRET and the expandedNational RET. While the curve trends up, indicating the requirementfor more and more renewable energy generation each year (left axisof the graph), the additional amount of generation in each year isnt huge (shown in bars and read from the graphs right axis) 4,400,000RECs more in 2010 than 2009, and 2,325,000 RECs more in 2011 than2010.

Demand Supply

As youll read in theSuccessful Solar Strategiesreport, AGL has around A$1 billion [in wind farm projects] ready to go, and well over $2 billion more inthe i eline


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Consider carefully: 4.4 million RECs may sound large, but 1.5 kW systems generate 155 RECs in Zone 3. Thusit would only take installation of 28,400 PV systems to fully meet the increase in RET from 2009 to 2010. Thesituation is worse in 2011 half as much increase in deployed renewable energy is required. If the REC pricecreeps up in 2012, the reduction in solar multiplier will continue to make life tough for PV. For this reason, thePV industry needs to become independent of RECs.

On the supply side, the PV industry - well capable of installing 30,000 systems per year - competes not only

with other renewable energy technologies but also with itself. Furthermore, the Solar Hot Water industry,already a dominant creator of RECs, is in rapid expansion mode on the back of the $1600 federal rebate itreceives in addition to other state rebates.

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The REC price is prevented from going too high by the availability of freePV or Solar Hot Water Systems. If the REC price gets near $50, then youcan have free solar PV and free solar hot water systems competing for ashare of the REC market. As the REC market isnt that large, it wouldnt belong before supply exceeded demand and the REC price would dive again.

Large-scale renewable energy technologies are also competing to createRECs, with over 800 MW of wind power ready to be deployed in the next1-2 years 4, and up to 6000 MW over the next 10 years 5

The figure below conceptually illustrates the piece of the pie that the PV industry has to compete foramongst other suppliers. Solar Hot Water systems had already created 5.4m RECs in 2009 by September,capturing 55% of the market this year. Other renewable energy technologies have created 5.4m in recent

years, but modelling performed by Carbon Market Economics

- plus otherrenewable energy technologies such as bagasse, landfill gas, etc. A high REC price hastens the development of these power stations, which can flood the market with RECs and thus lower the price dramatically. Therefore,PV businesses cannot expect a high REC price anytime in future.

6

suggests that wind farms alone may createanother 2m RECs over the next 1-2 years. The 10,000 schools 7

within the National Solar Schools Program couldgenerate about 1m RECs, and the 63,000 system backlog of Solar Homes and Communities Program couldgenerate 1.3m RECs. How many RECs are needed from Solar Credit PV systems?

4 Carbon Market Economics, Renewable Generation Projects 2009 2028, Revised Final Report, January 2095

Australian renewables law to spark wave of wind projects, BusinessGreen.com, 21/8/096 Carbon Market Economics, Renewable Generation Projects 2009 2028, Revised Final Report, January 2097 http://www.abs.gov.au/AUSSTATS/[email protected]/MF/4221.0

Solar Credits ????

Excess RECs onMarket

SHCP 1,300,000 Backlog Was 8% of total

market

Solar Schools Up to 1,000,000

SHW 5,400,000 by Sep

2009 >55% of total market

Other RETs Historically

5,400,000 extra 2,000,000 in

2010?

As youll read in thecomplete extended report,solar hot water systemsare economic at a lower REC price than even wind requires
http://www.abs.gov.au/AUSSTATS/[email protected]/MF/4221.0http://www.abs.gov.au/AUSSTATS/[email protected]/MF/4221.0http://www.abs.gov.au/AUSSTATS/[email protected]/MF/4221.0http://www.abs.gov.au/AUSSTATS/[email protected]/MF/4221.0


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In summary, here are the threats that face your PV business:

There is a huge oversupply of RECs available on the market perhaps enough to cover 2010.. Subsidised sectors such as Solar Hot Water, Solar Schools, and the Solar Homes and Communities Plan

continue to supply RECs almost without regard to their price The REC price is prevented from getting much above $50 by the resulting free solar systems Other large-scale renewable energy technologies could flood the market with RECs in coming years The Solar Multiplier means very few systems can be installed before the REC requirements are met.

The following graph puts this all together into an outlook for RECs supply and demand. While it is difficult toestimate the exact amount of RECs that will come from each sector in future years, combining analysis of anumber of scenarios with some sensible assumptions allows the exploration of likely outcomes. Consider that:

There may be 18 million RECs available by the end of 2009, 8 million more than needed This would mean 2010s requirement of 12.5 + 1.9 = 14.4 million RECs (RET + GreenPower) would only

require creation of 6.4 million RECs. Existing wind farms and other renewable energy power stations create 5.6 million RECs per year. Solar Schools and Solar Credits are likely to produce 0.6 million RECs in 2010 This leaves at least 0.2 million RECs required in 2010 between PV and Solar Hot Water

The major unknown for 2010 and 2011 is the performance of Solar Hot Water. Considering that it has alreadycreated 5.4 million RECs this year, it seems likely that it will easily create 0.2 million RECs in 2010. The graphbelow shows scenarios of a 10% contraction of SHW to end of 2009, and a 75% and 50% contraction(conservative and highly conservative estimates) for 2010, and the same levels of SHW deployment in 2011.

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There are many conditions and assumptions that relate to the modelling and the presented graph that are detailed in the Successful Solar Strategies report. Reading Successful Solar Strategies is essential inorder to understand how these numbers were created, and what it could mean for your business.

The graph clearly demonstrates that even with significant contraction in SHW, there are enough banked RECs

to cover most of 2011 levels. PV RECs are necessary to meet the target only if HW retreats to its 2008installation level, and there is no other renewable energy power station development. However, the majorplayers have 6000 MW of wind development representing billions of dollars of investment, and thedeployment of 800 MW of wind can create 2 million RECs. In summary, not much need for PV systems tocreate RECs, and the phantom RECs they create exacerbate the problem. Thus the future of the PV industrymight be quite constrained.

It is not all bad news! In the Successful Solar Strategies report, a number of ways of rapidly gainingsignificant market share are explored.

Although weve discussed the piece of the pie that remains for the PV industry, remember that if a wind

farm is financially viable with $35 RECs, or there is high demand for solar hot water systems even with $30RECs, then it is likely that the REC price will remain near that level. Thetechnology that can survive with the lowest REC price is likely to gaingreatest market share, and if the PV industry has difficulty selling systemswhen RECs are less than $40, then there could be significant downsizingwithin the industry. So too, if one company within the PV industrydiscovered a way to sell a large volume of PV even with a REC price of $25,then the rest of the (PV and renewable energy) industry may suffer.

A number of ways of successfully and profitably selling PV systems even without RECs are presented indetail in the Successful Solar Strategies report.

REC Price VolatilityThe REC price is quite volatile, which can have a huge impact upon yourbusiness. Because RECs take three weeks to register and clear, andbecause PV businesses are now highly exposed to and dependent uponREC prices, any significant movement in REC price can hurt both in theshort- and long-term. Consider that the past 18 months has seen $7-10price falls happen over the course of weeks. A $10 drop in REC pricecan cost your business $1550, evaporating your profit . If youveinstalled 20 systems in the last two weeks thats $31,000 you mayhave to wear and then try to carry on business with a higher salesprice.

There are a number of reasons the REC price is volatile. Like any market, the REC market is subject to playersperceptions of what the price will do in the future. This can easily be influenced by governmentannouncements, or the construction of a new renewable energy power station. The REC market gamed infavour of the buyers, further complicating matters. In simple terms:

The buyers only have to surrender their RECs once per year. They have all year to strategically make

REC purchases. If they have RECs in the bank, they can wait indefinitely before their next purchase.

Read the completeextended report for four ways to beat REC pricevolatility , including how toavoid the worst time to sell RECs

Over ten almost-untapped markets for profitable NET Feed-in Tariff exploitationare presented in a bonusre ort


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There are a huge number of sellers whose cashflow and livelihoods depends upon selling their RECsso that they can continue to install solar power, solar hot water, and heat pumps. These pressuresmean that they need to sell, often at below-market rates. Also due to this reason, any suddendownwards shift in RECs price can unleash plenty more RECs from desperate installers wanting to cuttheir losses. For reasons explained above, the buyers can simply wait until the price bottoms out

before taking advantage of the situation.

Stable SolutionsSome of the solutions include making conservative REC assumptions, sharing the REC risk, and understandingREC price cycles. Of course, the best strategy is to become independent of the REC price altogether. How to doall of this is explained in detail in the Successful Solar Strategies report.

SummaryTo summarise the threats to the industry, and to the success, sustainability, and prosperity of your business:

2010s RET has effectively already been met, keeping REC prices low for at least the year ahead. SHW installations also act as a significant supply of RECs A flood of Solar Credits could supply the entire REC

requirements for the coming years Other subsidised markets including schools and SHCP backlog

will also contribute to supply RECs, independent of REC price Other large-scale renewable energy projects that have been

waiting for an expanded RET will be deployed, leading to bulkincrease in supply of RECs.

REC market forces favour the buyers in the market

Although market forces also act to stabilise the REC price, the REC multiplier creates a high degree of sensitivity to REC price fluctuations for the solar power industry.

Granted, its unlikely that all of the above comes true to its fullest extent that would be a nightmare scenario.Its more likely that a low REC price would dampen development of certain renewable energy technologies andof particular projects. However, some renewable energy technologies are supported by direct governmentrebates, grants and commitments these projects may be less impacted by a low RECs price, and thuscontinue to create RECs and thereby keep the REC price low? Furthermore, solar power businesses are fivetimes as exposed to REC price fluctuations than other technologies.

Many market analysts have suggested that a low REC price is likely for the foreseeable future. Unfortunately, aPV industry that was solely reliant upon RECs would probably generate far fewer RECs if certificate pricesdropped to $10 the industry would grind to a near-complete halt.

This is something nobody wants to occur. Like you, I wish to see the industry shine,to succeed in covering Australia with solar power. For this reason Im presenting youthe opportunity to learn how to make your business prosper, whatever the RECprice. The problems identified all have solutions and theyre detailed in theSuccessful Solar Strategies report, which youll get a further sample of in our nextFree Introductory Report, due for release later this week.

Learn what the REC price islikely to be: Discussion oneach of these points isexpanded upon withinSuccessful Solar Strategies.


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The Successful Solar Strategies report can help your business to prosper. It will be released on 21 st October2009.

It contains invaluable analysis and industry insight that can contribute to your success. It provides a more detailed assessment of the RECs supply market, and provides four strategies for

managing the risk of a sudden drop in REC prices. It includes payback graphs that can assist you to sell solar power to your customers It explores in depth more than ten strategies to sell an abundance of profitable solar systems,

including opportunities to exploit while the REC price is moderate, and advice on how to capitalise ona high REC price.

It demonstrates profitable ways to sell solar power even if RECs were worthless. It provides a financial analysis of commercial installations, with favourable outcomes Plus industry-proven sales advice, some of which is based on successful international PV sales models. Plus a list of untapped target markets highly suitable for net Feed-in Tariffs Plus much, much more.


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About SunWiz Solar Energy Consulting:

SunWiz has extensive knowledge of all facets of solar energy:

solar photovoltaicsolar heating and coolingconcentrating solar power

solar dryingpassive solar design

SunWiz is able to provide the following services related to solar energy systems:

Award-winning PV System DesignTender PreparationProcurement AdviceIndependent Tender Evaluation

Business Opportunity Identification andEvaluation

System Performance Monitoring andReportingTechnology EvaluationFeasibility Studies

Installation supervision and sign-off

Warwick Johnston, manager of SunWiz has:

Won two awards for Best Australian Solar Power SystemManaged the delivery of over 600 kW of PV systemsBCSE/CEC Accreditation (Design and Supervise) and Membership (pending board approval)Completed a Masters in Renewable Energy (November 2009)Been awarded a fellowship for solar air conditioningBeen a member of the PV directorateBeen the treasurer of ANZSES (Victoria)Presented at a number of conferences

Consulting projects that Warwick has been involved with include:

Opportunity identification for PV inclusion in Tsunami reconstruction on behalf of an internationalNGOPV opportunity identification and pre-feasibility studies for a number of local councilsPV opportunities investigation on local council sporting pavilionsIdentification of 10 MW of untapped renewable energy resources in one council areaAnalysis of Victorias off-grid market potential for renewable energyPre-feasibility study for two 250 kW tracking PV power stationsEnergy Efficiency Opportunity Assessments for large electricity users

Phone: +61 (0)413 361 534Address: PO Box 263 Bangalow NSW 2479

Accreditation #: P1902

Member: ANZSES, ISES, ATA, EWB


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Larger Systems:More Profitable

Less RECs Exposure2 nd Free Introductory Report on Successful Solar Strategies



Cover Image: David Blaikie Licensed under Creative Commons


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Introduction

This free report demonstrates why larger systems offer favourable benefits to your business and yourcustomer, and are essential for your business prosperity during periods of moderate REC prices.

Over 200 hours of research have gone into this report. It has beenoffered for free in the interests of the solar power industry, as anindustry that is forewarned can take action to ensure its futureprosperity.

This free report is supplemented be by three more reports that willbe released over the course of a week. Together these show:

why the REC price is likely to remain low and volatile what impact this could have on the businesses like yours

in the solar power industry

and, crucially, strategies for solar success whatever theREC price.

This free introductory report has been abridged so that the wholeindustry can quickly read and understand its key implications. Awealth of supporting information than provides the bigger picturehas been collated and documented into the Successful SolarStrategies report this information helps readers more deeplyunderstand the drivers behind REC prices, the risk to their business,and what they could do to prosper in uncertain and difficult times.


The advice in this report is of a general nature only and should not be relied upon, in and of itself, by readers. Before making any decisions or commitments based on the content of this report, it isrecommended that readers discuss their individual circumstances with their own professional accounting and investment advisors. Should a reader wish to tailor the advice in this report to his/her particular circumstances, please contact the author.

The full picture fills 80 pages, and contains advice that could assist the readers business to prosper. To ensure

the competitive advantage of the reader, a limited number of reports will be made available over the period21 27 October 2009. If you have received this report without registering your email address on thewww.SunWiz.com.au then you might miss out!

Over the course of this week you'll see the three elementary pieces of the jigsaw puzzle that fit together with synergy and present businesses a roadmap to solving the REC Crisis
http://www.sunwiz.com.au/http://www.sunwiz.com.au/http://www.sunwiz.com.au/


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RECs Catastrophe a recapIn the RECs Catastrophe introductory report, we learned of the threats to the solar power industry, and to thesuccess, sustainability, and prosperity of your business:

2010s RET has effectively already been met, keeping REC prices lowfor at least the year ahead.

Deployment of other large-scale renewable energy projects thathave been waiting for an expanded RET would lead to a bulkincrease in supply of RECs.

SHW installations act as a dominant supply of RECs Other subsidised markets including schools and SHCP backlog will

also contribute to supply RECs, independent of REC price REC market forces favour the buyers in the market Although market forces also act to stabilise the REC price, the REC

multiplier reduces the amount of PV systems needed to meet theRET. It also creates a high degree of sensitivity to REC pricefluctuations for the solar power industry.

In Strategies for Solar Success Part 2: Larger Systems, More Profitable, LessREC Exposure, youre going to learn one strategy you could employ whenthe REC price is at a moderate level. Part Three will be made available laterin the week, and will extend upon Part Two, informing how you might maximise your revenue from Feed-inTariff Target Markets. These are just tasters of the full content available in the Successful Solar Strategiesreport, which covers this material and much more in far greater depth.

If you havent alreadyreceived your free copy of RECs Catastrophe, [email protected]
mailto:[email protected]:[email protected]:[email protected]


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Moderate REC price?It becomes more difficult to sell 1.5 kW systems for little out-of-pocketexpense to the consumer when the REC price is below $50. How can solarpower companies thrive and prosper when their bread-and-buttercustomers desert them on the back of a $23 REC price? This sectiondemonstrates one strategy that successful solar businesses can use whenthe REC price is at a moderate level.

Sell Larger Systems!Although 1.5 kW systems attract the greatest solar credits-per-installed Watt, the system price that thecustomer sees on this system is also highly sensitive to fluctuations in the REC price, as shown in the graphbelow.

For example, if your 1.5 kW GST-inclusive system price is $11,946 andattracts 155 RECS, your customer pays $4,196 if RECs are $50, but $8,071 if

RECs price halves to $25. The customer sees this as a doubling in thesystem price for no apparent reason . The price of larger systems remainsproportionally more stable as REC price fluctuates. Under the samediabolical situation, a customer interested in a 5 kW system only faces a25% increase in price rather than a 100% increase.

Although there may be fewer customers willing and able to pay $25,000 fora solar system, it stands to reason if you get such dedicated, high-qualitycustomers may be more tolerant of a $1,000 change in system price than acustomer interested in a $4,000 1.5kW system.

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Read the extended report for four strategies for moderate REC prices, plusone strategy to use toadvantage if the REC priceagain becomes high

The extended report demonstrates ways to attract high-value, loyal, quality-seeking, payback-minded customers interested in largesystems


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Observations:

The payback of a 1.5 kW system is highly dependent on REC price. The payback of a 10 kW system ismore stable.

At $30/REC, the payback is longer for a 1.5 kW system with 25% of exported power (13 years) thanfor a 10 kW system with anything more that 40% export.

SummaryLarger systems can help offer businesses like yours the following benefits:

Increased per-system profits Proportionally lower exposure to REC price fluctuations Lower variability in customer price with REC price movements Less price-per-Watt at low-moderate REC prices Less proportion of system cost that must cover advertising overhead Greater likelihood of exporting power, and thus greater likelihood of quicker payback

Other Strategies for a moderate REC priceOther strategies for a moderate REC price that are described in the Successful Solar Strategies report are:

Target Zone 1 & 2 Learn how this strategy increases your RECs by 11-17%, and could increase the annualreturn on investment for business customers by 2.5% even at $30 REC prices.

Bulk Installation Learn how this strategy can mean large sales and significant cost savings, including 3example markets

Focus upon customer experience learn why quality and customer experience as essential features of thesolar credit sector.

Like you, I wish to see the industry succeed in covering Australia with solarpower. There are many more great solutions to the REC Catastrophe includingone strategy to use when the REC price is high, and four strategies to use whenthe REC price is low. A favourable outcome is demonstrated for commercialcustomers even when the REC price is zero! Youll get another free sample of

these strategies later this week.


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The Successful Solar Strategies report could help your business to prosper. It will be released on 21 st October2009.


managing the risk of a sudden drop in REC prices. It includes payback graphs that can assist you to sell solar power to your customers It explores in depth seventeen strategies to sell an abundance of profitable solar systems. It demonstrates profitable ways to sell solar power even if RECs were worthless. It provides a financial analysis of commercial installations, with favourable outcomes Plus industry-proven sales techniques, incorporating successful international PV sales models. Plus a list of untapped target markets highly suitable for net Feed-in Tariffs Plus much, much more.


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Maximum Feed-in Tariff Revenue3 rd Free Introductory Report on Successful Solar Strategies



Cover Image: Nozee Le Snoop and Warwick Johnston Licensed under Creative Commons


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Introduction

This free report does shows how to legitimately target net Feed-in Tariffs as part of your effective salesmessage, bringing you all the benefits of selling larger systems that were described previously.

Over 200 hours of research have gone into this report. It has beenoffered for free in the interests of the solar power industry, as anindustry that is forewarned can take action to ensure its futureprosperity.

This free report is supplemented be by three more reports that willbe released over the course of a week. Together these show:

why the REC price is likely to remain low and volatile what impact this could have on the businesses like yours

in the solar power industry

and, crucially, strategies for solar success whatever theREC price.

This free introductory report has been abridged so that the wholeindustry can quickly read and understand its key implications. Awealth of supporting information than provides the bigger picturehas been collated and documented into the Successful SolarStrategies report this information helps readers more deeplyunderstand the drivers behind REC prices, the risk to their business,and what they could do to prosper in uncertain and difficult times.



The full picture fills 80 pages, and contains advice that could assist the readers business to prosper. To ensure

the competitive advantage of the reader, a limited number of reports will be made available over the period21 27 October 2009. If you have received this report without registering your email address on thewww.SunWiz.com.au then you might miss out!

http://www.sunwiz.com.au/http://www.sunwiz.com.au/http://www.sunwiz.com.au/


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2010s RET has effectively already been met, keeping REC priceslow for at least the year ahead.





Benefits of Larger Systems a recapAs shown in Part Two of the Strategies for Solar Success Introductory reports, larger systems can offer thefollowing benefits:

Increased per-system profits Proportionally lower exposure to REC price fluctuations Lower variability in customer price with REC price movements Less price-per-Watt at low-moderate REC prices Less proportion of system cost that must cover advertising overhead Greater likelihood of exporting power, and thus greater likelihood of quicker payback

Big Systems are only one small part of the solution to the REC Crisis. But they are a fundamental to thesolution. Like a jigsaw puzzle, the overall picture only becomes clear when the pieces lock in together. But BIGSystems are like the corner puzzle piece the rest of the puzzle becomes easy once this piece is found.



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Low REC Price: Target Feed-in Tariff At a low REC price, solar power systems cease to be simply a cheap buy, and more sophistication is requiredin selling the benefits of solar power. At $24/W, 155 RECs onlymean a 30% discount on a 1.5kW system.

Why would a customer spend $8,000 on a system if it will onlyoffset $300 a year in electricity? If that same system earned$1,200 a year, then it might be a sound investment - but anextraordinarily difficult claim to justify, one that could leavecompanies inviting legal action (the Australian Financial Reviewrecently reported on this topic 8

If your business operates in a state with a net Feed-in Tariff, then your customers could be earning upto four times as much revenue from their solar power system.

).

The conservative practice of quoting annual revenues of $200-$800 per kW of solar power might have beenacceptable when the customer was receiving a free system, but it doesnt offer much confidence to customersnow paying significant amounts of money for their solar power system.

Although it may be difficult to estimate a customers electricity usage patterns,you can be certain of two things:

The solar power system installed has to be larger than the customersbase daytime load if they are to export power and thus take advantageof the feed-in tariff.

Large systems are more likely to export more power than smallersystems, for the period in which the customers loads are met by a solarpower system will be longer for a larger solar power system, and thesystem will export more power during that period.

Thus, a customer can create substantially more revenue by both decreasingtheir daytime power consumption AND increasing the size of their system.If you have data supporting a claim that a larger system is a betterinvestment, you might more easily convince your customers to increasetheir system size. This could quite possibly mean more profitableinstallations, lower REC exposure, etc. You might also be able to cross-sellenergy efficiency services, and in doing so create a better customer

experience that means they are more likely to promote you to everyonethey know.

Wouldnt it be great to have data that showed that a larger system is a better investment? Wouldnt it helpyou sell more kW if you could show a 2 kW system paid for itself faster than 1.5 kW?

8 Matthew Dunkley, Solar Sales Pitch Could End in Hot Water, Australian Financial Review, 26/9/09

The extended report containsa graph of measured datathat demonstrates that a1 kW system typically exportsinsignificant amounts of power

Other cross-sellingstrategies that canbuild your businessresilience aredescribed in theextended report.


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Graphs such as the ones in last weeks report on larger systems are useful they show that the payback for ahigh-exporting large system is quicker than that of a low-exporting small system. But they dont say what a1.5 kW system exports on a typical house. Theoretically a 2 kW system will export more, but its impossible tosay how much more without measured data.

Fortunately, this data exists. And it allows us to produce this graph, which combines the likely amount of power to be export from various size systems, for three typical residential power consumption levels. Hereswhat it looks like for NSW Zone 3 with $24 RECs.

The complete Successful Solar Strategies report replicates these graphs for NSW Zone 2 & 3,QLD Zone 1 & 2 & 3, Vic Zone 3 & 4, SA Zone 2&3, and the ACT. These graphs assume the proposed NSW net Feed-in Tariff passes in its presently proposed form.


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This clearly demonstrates that for a system price that iscommonly achievable by most of the industry, and at$24/REC, a 5-10 kW system installed on an average housepays for itself far more quickly than a 1.5 kW system.

All the evidence for this graph is included in thecomplete report. The extended report covers each Zone of each state with a Feed-in Tariff.

Admittedly, most of these graphs have focussed on Zone 3NSW. How do the paybacks of larger systems compare Australia-wide?

The South Australian and Queensland Feed-in Tariffs allow for up to 30 kW in three-phase installations. This could mean even higher export percentages that justify evenlarger systems.

This graph shows that in order to achieve


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So, its difficult to sell on price alone when the REC price is $24, but it may still be possible to sell on payback, if youre able to target specific markets of opportunity. But its important to act swiftly. The following graphconveys a message that isnt commonly discussed the Feed-in Tariffs are to be reviewed after a limitedamount of PV has been installed.

Already SA has reached their threshold for FiT review, and Queensland is rapidly approaching its own. NSWand Victorias FiT wont last too long at todays installation rates. Although the process of reviewing SAs FiT itclearly demonstrates that this highly valuable opportunity to sell on good paybacks may not be around forlong.

Summary When the REC price is low it becomes to sell PV systems on their low upfront price A wiser selling strategy may be to sell PV systems on their payback time This is difficult (and legally risky) to advise without appropriate evidence to justify your claim The evidence is available that could make it easier to sell systems on payback, and to sell larger

systems, with their associated benefits to your business. PV systems can have a rapid payback, depending upon a

number of circumstances

Like you, I wish to see the industry succeed in covering Australia withsolar power. Payback is just one way of evaluating whether it is financially wise to install a solar power system. There are morestrategic ways of selling commercial systems that are covered in theSuccessful Solar Strategies Report, including financial and tax analysis.These are introduced in the final part of the free Solar StrategiesIntroductory Reports. A favourable outcome is demonstrated forcommercial customers even when the REC price is zero! But youll haveto buy the Successful Solar Strategies Report to have the completepicture.

020,000

40,000

60,000

80,000

100,000

120,000

NSW VIC Qld SA ACT

k W

Feed-in Tariff Caps

Since 2000 Since 2009 FiT Review Threshold

What if you could tell your customers that investing in asystem was like putting money in

the bank and earning an interest rate of 12% AFTER tax?!!! Findout how in the Extended Report

The extended report contains even morestrategies for a sellingwhen the REC price islow; strategies that arent dependent onRECs or a Feed-in Tariff


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Commercial Systems:Wise Investment Targets

4 th Free Introductory Report on Successful Solar Strategies



Cover Image: Alan Cleaver and Warwick Johnston Licensed under Creative Commons


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Introduction

This free report demonstrates the highly favourable opportunities in the commercial PV market.

Over 200 hours of research have gone into this report. It has been offered for free in the interests of the solarpower industry, as an industry that is forewarned can take action to ensure its future prosperity.

This free report is supplemented be by three more reports that have been released over the course of a week.Together these show:

why the REC price is likely to remainlow and volatile

what impact this could have on thebusinesses like yours in the solarpower industry

and, crucially, strategies for solarsuccess whatever the REC price.

This free introductory report has beenabridged so that the whole industry canquickly read and understand its keyimplications. A wealth of supportinginformation than provides the bigger picturehas been collated and documented into theSuccessful Solar Strategies report thisinformation helps readers more deeplyunderstand the drivers behind REC prices,

the risk to their business, and what they coulddo to prosper in uncertain and difficult times.

There are a lot of background information and assumptions that omitted from this concise document. You should not act upon thisinformation without first researching and confirming its applicability to your situation.


The complete picture fills 80 pages, and contains advice that could assist the readers business to prosper. Toensure the competitive advantage of the reader, a limited number of reports will be made available over theperiod 21 27 October 2009. If you have received this free introductory report without registering your emailaddress on the www.SunWiz.com.au then you might miss out!

http://www.sunwiz.com.au/http://www.sunwiz.com.au/http://www.sunwiz.com.au/http://www.sunwiz.com.au/


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2010s RET has effectively already been met, keeping REC priceslow for at least the year ahead.





Larger Systems and Feed-in Tariff Targeting a recapAs we saw in Parts Two and Three of the Strategies for Solar Success Introductory report series, using a Feed-inTariff sales-pitch could be a sensible approach:

When the REC price is low it becomes to sell PV systems on their low upfront price A wiser selling strategy may be to sell PV systems on their payback time It is difficult (and legally risky) to advise of payback without appropriate evidence to justify your claim The evidence is available - it calculates the amount of power export based on typical consumption Selling PV systems on payback could make it easier to sell larger systems, with their associated

possible benefits, including Increased per-system profits Proportionally lower exposure to REC price fluctuations Lower variability in customer price with REC price movements. Less proportion of system cost that must cover advertising overhead

PV systems can have a rapid payback, depending upon a number of circumstances



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Commercial SystemsPayback is just one way of evaluating whether it is financially wise toinstall a solar power system. Business customers might be more likelythan residential customers to have access to the $65,000 it can costto install a large solar power system. However, many businesses alsowont be interested in anything less than a three year payback. Whatif you could tell your customers that investing in a system was likeputting money in the bank and earning an interest rate of 14% AFTERtax over at least the next 20 years?!!!

This is possible, through the savings available to commercial customers.

The first part of their saving is the GST. Business customers that are registered for GST effectively get a 10%discount. Unfortunately, they also pay at least 10% lower electricity rates than residential customers, becausethey can claim back the GST on their electricity bill. That evens up the payback calculation, but at least gives

you the chance to quote prices that are in effect 10% lower.

Solar power systems that are installed for business use (namely reducing electricity bills) can claimdepreciation over the 20 year effective life of the asset. As seen in the figure below, over the course of its life,depreciation can mean a further $15,000 saving on a $60,000 (ex GST) solar power system, assuming a 30%company tax rate applies.

As part of the budget stimulus measure, the Federal Government made selling solar systems to businesses alittle bit easier. As part of the Investment Allowance: small business and general business tax break , smallbusiness entities (those with less than $2m turnover per year) are entitled to:

An additional tax deduction of 50 per cent of the cost of eligible new tangible depreciating assetswhere the business commits to investing in the asset between 13 December 2008 and 31 December 2009 and first uses the asset, or installs it ready for use, or (in the case of new investment in anexisting asset) brings the asset to its modified or improved state on or before 31 December 2010. 9

9 http://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/00175431.htm

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

0 5 10 15 20 25

Year

Depreciation

Capital value

Post Tax DepreciationSavings

Accumulated Post TaxDepreciation Savings

Learn of the effective returnon investment for all states

with Feed-in Tariffs, for avariety of system sizes andREC prices in the completereport
http://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/00175431.htmhttp://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/00175431.htmhttp://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/00175431.htmhttp://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/00175431.htm


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Larger businesses (those with turnover larger than $2m per year) that commit to spending a minimum of $10,000 before 31/12/09 and are installed prior to 31/12/10 are eligible for a 10% tax break (they were eligiblefor 30% if they committed to purchasing prior to 30/6/09).

The 50% tax break could means that your customers $60,000 (ex

GST) solar power system could mean they pay tax on $30,000 lessincome. This is equivalent to $9,000 extra post-tax income 10

This graph presents how a $65,000 solar power system may ultimately cost the customer less than $30,000 inpost-tax out of pocket expense. This is the amount that is needed to be paid back by the (GST-adjusted,company tax-adjusted) electricity generated by the solar power system.

. Thats a15% saving for small businesses, but only a 3% saving for largerbusinesses, but only if they act quickly. Naturally, time-limitedincentives could also greatly assisting you in closing your sale.

So, the million dollar question: what is the return on investmentfor a solar power system? How can you assist your customers inmaking prudent financial decisions? The most appropriate metricto use is typically the Internal Rate of Return, which is equivalentto the amount of post-tax annual compounding interest rate thatwould be received if the same amount of money was invested in abank loan.

The following two graphs answer this question for a 10 kW system in NSW and for a 5 kW system in Victoria.They show that over a 20 year period, money invested in a solar power system could earn its owner a post-taxcompound annual interest rate of over 14%. To me, an interest rate of 14% sounds more appealing than a fiveyear payback, especially if thats post-tax declared income. The situation in Victoria isnt as lucrative, but stillfavourable in certain cases. At $30/REC, the maximum IRR jumps to 15% in NSW Zone 2.

Each REC Zone in South Australia, Queensland, New South Wales, Victoria, and the ACT are graphically presented in the Successful Solar Strategies report, along with a sensitivity analysis on the price of panelsand tax break. If you act before Friday 23/10/09, youll also receive a bonus spreadsheet that allows you toenter in your own costs and determine the payback and IRR for your situation.

10 at the 30% company tax rate

Learn more about the Risksinvolved with an investment in asolar power system (and howthese risks can be minimised) inthe Complete Extended Report.

Its wise to act quickly to take

advantage of the tax break. Learnabout how greatly it affects yourcustomers financial decision inthe complete extended report


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The graphs clearly demonstrate that in order to achieve reasonable return on investment in States with a netFeed-in Tariff, a high proportion of generated power must be export. Indeed, an IRR of 18% could be reached if 100% of power can be export from a 1.5 kW system located in NSW Zone 2 with $30 RECs. Exporting 100% of power from a 1.5 kW system is not likely, but exporting a significant amount from a 10 kW system is quiteachievable, depending upon the power consumption of the site to which its connected. The challenge thenbecomes to identify and target businesses with large roofs and low daytime power consumption

Over 10 virtually-untapped target markets with potential for high export power are included as abonus in the Successful Solar Strategies report, if you act quickly upon its release.

Youll also have to act quickly to take advantage of the Tax Break, which contributes about 3% to these IRRs.

The figures presented in this document are based on personal research and ATO taxation advice, and use the

most general, conservative tax assumptions possible. For the same reasons, treat the advice given within thisdocument as advisory in nature only, and consult a taxation professional as appropriate.

These graphs use aconservativeperformanceassumption. Highperformance

installations couldhave even greaterfinancial merit.

A system whosepayback is longerthan the duration of the Feed-in Tariff willhave poor financialoutcome, as itsincome dwindles inits twilight years.


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ConclusionThis is pretty exciting stuff, and quite a journey. After glimpsing thebusiness risks involved with RECs and seeing what the REC price is likelyto do and how it could seriously affect your business for the worse,perhaps you were thinking of closing down shop. Yet weve just had asmall insight into how lucrative the Strategies for Solar Success can be.Weve just seen a bright future for strategically-minded solar powersystem installers, even without RECs. And theres so much more depth,detail, strategies, target markets, marketing material, sales strategies,ways to mitigate RECs risk, the list goes on. Even the challenge of identifying target markets for large, Feed-in Tariff eligible, highly exporting systems has been taken care of.

Comments on the Complete and Introductory ReportsThis is a very well researched report, appropriately attributed, and with good direction back to sourcematerial. As a text book on the very specific subject of renewable energy certificates (RECs), it is the only document I have seen that covers the subject so comprehensively.

- Bruce Hannam, President, SEIA (Sustainable Energy Industries Association Inc).

Our Company could hardly wait for the rebates to be removed. Since this has happened we have sold morelarge systems than the entire time of Rebates. As you say in your emails large systems provide the only gaineconomically and genuine reduction of green house gas. Reduced RECS do not effect these larger systems (asyou have pointed out). I look forward to a spreadsheet that will show kWhr daily usage versus solar daily delivery with approximation of feed in tariff credits.

- Brian Springer, Springers Low Voltage Specialists

Just read your first report. I think it is outstanding. I thank you for making this public to the solar installers of the country.

- Mark Hickey, Nickel Energy

Plus further endorsements from the CEO of Australias largest PV REC trader, ATRAA founder and 2 nd longestestablished (30+ years) solar company, Partner in a CleanTech Venture Capital firm, and more


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