When constructing my small shopping centre, I was faced with an array of decisions — from the architecture to the types of shops I’d like to have within. But one pivotal choice stood out in terms of long-term returns and sustainability: the solar energy system. Specifically, should I opt for a 99kW system or go a notch higher to 100kW?
On the surface, it might seem like a negligible difference — just 1kW. However, when it came to Australian government incentives, this 1kW difference had considerable implications.
As I delved into the intricacies, the first question that arose was, what are LGCs? LGCs, or Large-scale Generation Certificates, are typically provided for solar installations that are 100kW or larger. They act as a form of tradeable currency, with each LGC representing one megawatt-hour of renewable energy fed into the national electricity grid. LGCs sounded attractive, with the potential for ongoing annual revenue. A 100kW system would naturally push me into this category.
However, the alternative for systems below 100kW was Small-scale Technology Certificates (STCs). As I investigated small-scale technology certificates, I discovered that STCs provided an upfront discount on the solar system’s cost. This meant immediate financial relief for me, rather than the ongoing revenue stream of LGCs. The comparison wasn’t simple.
Cash Flow Implications: The upfront discount from STCs for the 99kW system would mean a significantly reduced initial investment, helping with the shopping centre’s overall construction budget.
Market Volatility: LGC prices can fluctuate based on demand and supply. While the annual revenue seemed promising, there was an inherent risk attached to the market’s unpredictability.
Simplicity: Managing and trading LGCs requires a more hands-on approach, with ongoing administrative and reporting obligations. On the other hand, STCs offered a straightforward, one-off benefit, keeping things simple.
After weighing these factors and speaking with financial advisors and solar consultants, it became clear: for my specific needs, the 99kW system with its STC benefits was the optimal choice. The immediate financial benefit, combined with the reduced administrative complexity, meant that I could focus on other aspects of my shopping centre’s development.
The process taught me a valuable lesson: sometimes, it’s the seemingly small decisions that make the most significant difference in a project’s success.