QFF Energy Savers Plus website
So you want to do something about your high electricity costs but it’s going to cost money…
There are a number of financing options available to farmers considering energy efficiency projects. Deciding which option is best will depend on the existing credit limits of the particular farm and the type of project that is being planned.
The QFF Energy Savers Plus page contains links to the following financing options (loans) and funding options (grants or rebates).
Financing options
Financing is where money is lent for a project and must be repaid over time – either in a conventional loan repayment schedule, or out of the energy cost savings for the projects. There are a number of options, and three are discussed here:
- Energy efficiency loan.
- Energy Services Agreement.
- Solar Power Purchase Agreement.
- Funding for new renewables through the Australian Renewable Energy Agency
- Funding emissions reductions with the Emissions Reduction Fund.
Each of these financing structures have advantages and disadvantages. The choice of product depends on the farm’s specific requirements.
Energy Efficiency Loans
Energy efficiency loans are becoming available in the marketplace. These loan products are tailored to overcoming barriers to energy efficiency implementation. In practice these loans are similar to equipment financing with preferable rates or longer loan periods.
Advantages:
- Reduced upfront costs for the project
- Interest charges can have tax advantages
- Repayments are generally fixed and known in advance
- Finance is potentially at a discount to market rate for energy efficient products and loan periods can be longer than otherwise offered
Disadvantages:
- Interest rates are generally higher than commercial loans/mortgages
- There are limited number of firms offering these products
The Clean Energy Finance Corporation (CEFC) has made $300m available to the agriculture sector and is working with commercial lenders such as NAB and CBA as well as a number of non-bank financiers to make low interest finance available for energy efficiency and renewable energy projects. The CEFC presentation on the QFF website includes a number of example projects financed by CEFC. Farmers can access these loans through these commercial banks.
Queensland Rural Adjustment Authority (QRAA) offers Sustainability Loans which can provide Primary Producers with finance up to $650,000 to cover capital costs to achieve a more productive and sustainable primary production enterprise. These can cover a range of projects including energy efficiency and renewable energy equipment.
Energy Services Agreements
An Energy Services Agreement (ESA) provider designs, constructs, owns and operates equipment. The end-user pays fees to cover operation and maintenance costs, including energy costs, and to repay the capital and implementation costs. The fees are indexed to CPI, labour rates and in some instances can be decoupled to energy price escalation. A customer can typically purchase equipment at the end of the ESA term.
An ESA provides the end-to-end delivery of energy efficiency and renewable energy projects. Finance can be arranged using any of the finance options above, or can be provided by the ESA provider.
Advantages:
- No or reduced up-front cost
- ESA is off balance sheet
- Payments are tax deductible (operating expense)
- Implementation and operating risks are transferred to the ESA provider
- The ESA provider has an incentive to maximise energy savings. They guarantee savings or the customer only pays for the output of the equipment
Disadvantages:
- Can be a higher cost than using other finance options in isolation, due to transfer of risks to ESA provider
- ESA suppliers will generally not undertake projects that do not require significant on-going maintenance
- ESAs may only available for large projects
There are numerous ESA providers in the market, including:
- Websters Group offers Energy Efficiency Partnerships of $5,000-$50,000 for farm efficiency upgrades.
- Global Clean Energy Finance provides solutions to large size agribusiness with project costs of $150,000 and above.
Solar Power Purchase Agreements (PPAs)
A Solar PPA is a financial mechanism where a provider installs, owns and operates a solar photovoltaic (PV) system on your property, selling you electricity generated on site at an agreed tariff, and agreed escalation rate. A number of companies are now offering Solar PPAs.
Advantages:
- No capital cost for the project
- An Agreed energy price for the life of the contract for the power generated from the solar PV system
- The provider is responsible for maintenance and performance
Disadvantages:
- May not suit strongly seasonal businesses
- You will receive two invoices – one from your current retailer for grid electricity and network charges, and one from the Solar PPA Provider
- Minimum contract periods may apply
Funding options
There are currently a number of options to gain some funding or rebates for energy efficiency and renewable energy projects.
Businesses interested in the potential of renewable energy may be eligible for grant assistance from the Australian Renewable Energy Agency (ARENA) which was established by the Australian Government in 2012. Its priorities for new investment includes solar energy for irrigation and the use of renewable energy in industrial processes.
The Emissions Reduction Fund (ERF) is the Australian Governments market-based mechanism to encourage a reduction of greenhouse gas emissions. Individuals and Businesses can create Australian Carbon Credit Units (ACCU) by implementing projects with verifiable carbon emission reductions. ACCUs can then be sold in regular reverse auctions or on the voluntary market. Projects can consist of a large energy efficiency project on a single site, or a group of aggregated projects.
More information and links to the programs above are available on the QFF Energy Savers page HERE.