Author: Alicia Webb
Contributor: Barry Hendy

In this article we look into some of the key considerations for developing community solar parks. The process involves many steps and a wide range of people, consultants and organisations. Solar power is still quite expensive relative to other generation sources, however, there are a range of grants and incentives to investigate. Solar prices are continually dropping and of course, it helps that Australia is one of the sunniest countries on earth.

Main topics covered in this article include:

Identifying a location

A good site for a solar park is one that is sunny, accessible, preferably flat, unshaded and close to a good connection point to the electrical grid. How sunny a place is does not vary significantly over short distances, so access and grid connection are likely to be the primary drivers for site selection.

Like any renewable energy project, the energy generated will be directly related to the energy resource available. In simple terms; the more sunshine the more energy generated, and so the more revenue generated. Typically, coastal areas will have a less sunshine than inland locations (around 20% less), so solar parks are going to work best inland. In the eastern states, solar parks work best inland of the great dividing range. That doesn't mean that solar parks near the coast should be completely ruled out, but it will be harder to make the economics work with the reduced solar resource.

Solar parks are virtually silent and present very little risk to flora and fauna and as such they can be located close to infrastructure, forests and houses. The amount of space required will vary depending on the technology but is typically 3 to 5 ha per megawatt installed, plus some buffer area around the park. As an example, the Ballarat solar park has an installed capacity of 300kW and a footprint of 15,000 square meters (1.5ha), about three quarters of the size of an AFL football field.

Project scale

Choosing the right scale for your project will be the result of investigations into various aspects of building a solar park. The two most important inputs into your project scale selection will be:

  1. The project capacity restrictions that apply to various state government feed in tariffs
  2. Grid connection options and associated costs

Other factors that may impact scale include:

  • Available land for your solar park
  • Project budget
  • Community investor interest, i.e. how many people are likely to want to be a part of the project
  • Project viability

Economics

Determining your projects’ economic feasibility is likely to be the most critical part of development and should be considered early in your planning process.

Developing a project requires a balacing act between 3 key areas:

  • Cost: How much will it cost to build in $/Watt
  • Revenue: What revenue will be returned from the energy generated in $/kWh
  • Return on Investment: What do the owners require as a return on their money invested in the project, as a % return.

These three factors must be balanced to achieve a project that is viable. If you can build a solar park for less money, the revenue you get will generate a better return for the owners who paid less. If you can sell the energy for more, owners will get a bigger return on the investment made. If the economics don't stack up well, you will only offer a low return to investors, making it harder to attract investment.

Project costs

The main project costs are likely to include:

  • Development costs associated with feasibility studies, planning and design, community consultation, development applications and approvals, and environmental impact assessments.
  • Capital expenditure on the procurement of a site, plus construction of the solar park and its associated infrastructure, such as powerline upgrades and grid connection.

The overall cost of the project is measured as "Dollars per Watt", and can be expected to be in the order of $4.00/W to $6.00/W. The value can easily be higher if the project is small, remote, or has complications in the grid connection.

The cost of a project can be offset or reduced by seeking a government grant.

Determining project revenue

Sources of revenue for a project include:

  • Sale of energy generated.
  • Renewable Energy Certificates.
  • Potential future revenue when a price is put on carbon in Australia.

Revenue will be offset by any ongoing operational costs including adminstrative costs and maintainance.

A key requirement of your project will be to establish an "Energy off-take agreement", i.e. someone to buy the energy produced, preferably for a good price. This could be directly from an energy consumer if the project is located "behind the meter" of a large energy consumer, but a typical solar park will be exporting energy directly onto the grid, requiring either a feed-in tariff or a Power Purchase Agreement (PPA).

Grants available in Australia

Eligibility for government grants and incentive programs can help improve your project’s financial viability. This can be very helpful when demonstrating viability to potential investors. It's a good idea to check with Federal, State and Local Governments, as well as a range of non-government organisations, as grant programs and incentives change frequently.

Once you've identified a grant, it's worth contacting the administering department to find out if the funding criteria apply to your project, and that the funding is still available.

Feed-in tariffs

Many state governments have a legislated feed-in tariff for solar power systems. This means they pay eligible owners of solar power systems a premium rate for some or all of the power their system produces. Some states, such as the ACT offer a feed-in tariff for medium to large scale projects. See Feed-in tariffs for more information.

Power Purchase Agreement

If there is not a Feed in Tariff on offer, then your project is going to need a Power Purchase Agreement (PPA) with a partner energy retailer or possibly a large enregy user. The PPA will set the terms and price for what will be paid for the energy generated and delivered to the grid.

While a PPA is a complex legal agreement, the prime question is the price it pays for energy, with a secondary question of the 'escalator', i.e. the annual increase in the price. The PPA price is typically expressed in 'Dollars per Megawatt-hour' or $/MWh, but is also often quoted in the more consumer-related 'cents per kilowatt-hour' ($.00/kWh). $0.20/kWh is the same as $200/MWh.

Feasibility study

An important part of the planning process of any project is the feasibility study. This is essentially a process of considering and analysing the technical viability of the project in the context of all of the social and environmental costs and benefits, as well as the economics. Eventually, your work on the feasibility will form a report which you can show to third parties.

Matters to consider include:

  • The reasons behind the project, and the goals it hopes to attain.
  • The power output requirements/goals (more than one scenario can be discussed here if necessary).
  • Revenue estimates and other financial matters.
  • The available site(s) for the project, and any associated costs and benefits.
  • The predicted solar resource at the site(s)
  • Any environmental or social concerns at the site(s) including endangered species, proximity to houses etc.
  • Description of current solar technologies along with their costs and expected outputs.
  • Description of proposed project including number of panels and area required.
  • Description of other equipment required including inverters, transformers, tracking equipment if applicable.
  • Investigation into grid connection options (with expert input)
  • Cost estimates of project capital expenditure
  • The eligibility of the project for grants, tax concessions and other incentives.
  • Who the likely financiers/projects investors are.
  • The comparative costs of alternative energy sources.
  • Site, environmental or social factors that may impact on the project's development and affect the project costs.

Grid connection basics

Connection to the electrical grid is an important and expensive technical component of any generation project. Grid connection options need to be investigated and taken into account from the very beginning of your project development. Expert consultants can help you undertake a grid study, which involves modeling to determine the effect your solar park will have on the electrical network under different generating conditions.

The electrical grid is broken into two main parts — distribution networks and transmission networks. Community scale projects will almost always connect to the distribution network, which has a lower voltage. Before you begin investigations, you need to find out which distribution network service provider (DNSP) operates in your area. This should be straightforward to find online. As examples, here are DNSP service area maps for:

NSW
VIC

Once you know which company you're dealing with, you can begin discussions about the project. We've outlined some of the key milestones below.

Milestones

Below are some of the major grid connection milestones.

Project stage Grid connection milestone
Pre-feasibility
  • Initial discussions with distribution business
Feasibility
  • Obtain estimate of grid connection cost from distribution business
  • Obtain independent report on grid connection options from consultant
Detailed assessment
  • Technical investigation of grid connection
  • Preparation of application to connect
  • Obtain development approval for any new power lines
Planning and approvals
  • Submit application to connect, including payment of fee for detailed design (if required)
  • Receive offer to connect, negotiate if required and amend if necessary
Prior to construction
  • Accept offer to connect

Community consultation

As with all community-based projects, it's important to begin consultation with the community as early as possible. The more informed and included people feel from the very early planning stages, the more likely they are to become investors later on. Good consultation should aim to:

  • Improve community and stakeholder understanding of the project's aims, benefits and likely impacts.
  • Incorporate community ideas and improvements, as well as increase the community's support and sense of ownership for the project.
  • Address any concerns early on, especially those that may impact on or even prohibit the project's development.

Investor interest survey

Once you have built a list of contacts in the community (generally those who are interested in or supportive of your project), an investor interest survey is a fast and easy way to gauge interest. Essentially, a survey of investor interest involves contacting all of your supporters to gain feedback on the project concept, and determine their interest in investing.

Stakeholder consultation

It is likely that you will need to consult with local government, state regulatory and planning authorities, and community interest and industry groups. Formal approvals are likely to be required from a number of authorities, and it is the developer's duty to determine their approval requirements.

Detailed assessment

Prior to lodging a planning application, you will need to undertake detailed technical assessments of your proposed project. These will typically include studies on:

  • Visual impact
  • Noise
  • Flora and fauna
  • Aboriginal cultural heritage
  • Traffic
  • Bushfire
  • Social and economic effects
  • Water and land management

You may also need to write environmental management plans for the three phases of: construciton, operations and decommissioning.

Planning application

All generation projects need to lodge a planning application with the relevant statutory decision-maker (either the local council, state or the federal government) for the change of land use. Planning approvals for community-scale solar parks are usually the responsibility of the local council, with appeals taken to the relevant state government department.

It's important to seek planning approval early in the development cycle, because if approval is denied, your project can't go any further. On the other hand, you need to do sufficient feasibility and assessment work so the decision-maker can assess the merit of your project and its compatibility with existing land uses. The trick is to do enough work to get through the planning stage, but not more than that, or you may be wasting time and money.

In the planning application you need to describe comprehensively the solar park proposal and all its associated elements. For example, the number of solar panels and the total area required. If a planning permit is granted, development can usually take place up to the maximum 'envelope' or quantity granted approval. A development can be smaller in quantity or size than approved, but never more.

More information

The federal government's Solar Homes and Communities program
Solar Credits program, Frequently asked questions
The ACT's feed in tarrif page
Horizon Power in WA feed in tariff page
Solar Cities program
NSW Solar Bonus Scheme - Frequently asked questions
The Office of the Renewable Energy Regulator's Small Generation Unit Owner's Guide

Related articles

Solar project basics
Solar photovoltaic
United States — Ellensburg Community Solar Project
Grid connection