Buildings present a unique opportunity to mitigate climate change and also enhance sustainable development. According to a 2007 United Nations Environment Programme (UNEP) report, the buildings sector, globally, is responsible for 30 to 40 per cent of worldwide energy consumption and up to 40 percent of all greenhouse gas (GHG) emissions. In Singapore, air-conditioning alone comprises 40 to 50 per cent of our buildings’ electricity consumption.
While the buildings sector holds the dubious honour of being the largest contributor to anthropogenic GHG emissions, the good news is that it also has the greatest capacity to reduce these emissions. Significantly, the Intergovernmental Panel on Climate Change (IPCC) has suggested that sizable reductions in emissions from the buildings sector can be made at zero cost or at relatively low levels of investment.
The outlook for residential PV systems is less optimistic in Singapore since more than 80 per cent of Singaporeans reside in high-rise buildings, which lack roof space that can be privately utilised. Despite these circumstances, there is still room for solar PVs in the city-state. Ground-mounted plants and residential PV systems are not the only means to harness solar energy. Innovative programmes can be implemented to overcome the space constraints in the Republic.
Rooftop leasing involves utility companies renting existing roof space to install solar panels for the purpose of large-scale electricity generation. Two California utilities, Southern California Edison and Pacific Gas & Electric, have embarked on large-scale commercial rooftop leasing programmes in order to install 500 megawatts of new capacity from rooftops.
The utility companies intend to lease rooftop space from owners of large properties such as schools, warehouses and shopping malls and install 1 to 2 megawatts of solar power capacity at a time. The electricity generated will be fed into the existing electricity grid. These leasing programmes follow the “Renewable Portfolio Standard” that was enacted in many places in the United States, which requires a certain percentage of power supply to be met through renewable sources.
Utility companies in Singapore can emulate their American counterparts. Roof space is perhaps the only plausible space for the installation of PV systems in Singapore. The large capacity of a leasing programme can derive benefits from economies of scale though bulk orders of solar panels and long-term contracts. This will diversify our energy portfolio and ensure stable electricity prices throughout the leasing period.
The price of electricity generated from fossil fuel power stations varies with the cost of fuel (oil, gas or coal), while the price of electricity generated from solar systems is based on the initial cost of purchasing the equipment and maintenance cost. This locks in the electricity price, which remains fairly stable during the lifetime of the system.
The Singapore government is unlikely to implement a feed-in-tariff scheme for private owners of PV systems and there is no guarantee that excess electricity can be sold. In addition, property owners need to adhere to numerous rules and regulations before qualifying as electricity vendors. While the lifetime of a solar system is about 20 to 25 years, tenants who would use the power tend to have shorter tenancy periods of five to six years.
As a result, many owners of warehouses and office buildings are not inclined to commit to PV installations due to the uncertainty involved in ensuring the long-term availability of tenants who will purchase the electricity generated. These issues can be avoided by implementing rooftop leasing schemes since utility companies are already active in the electricity market and thus accustomed to selling electricity. In addition, property owners benefit from a convenient and reliable income in terms of rent.
Solar financing schemes
Solar financing schemes allow property owners to adopt solar PV systems if they are either unwilling or unable to make upfront payments for them. Solar leasing or solar rental is not synonymous with rooftop leasing; solar leasing involves “renting” solar panels from a company for a period of about 20 years. In the US, the cost of such a scheme is an affordable monthly rent, of between US$100-200 depending on system specifications, compared with at least US$15,000 for buying a PV system. The scheme purports to be more convenient than a self-owned system as the solar provider typically provides maintenance, repairs and guarantees the performance of systems installed during the entire lease period.
The savings for households currently involved in solar leasing programmes range from US$10-40 per month. Some critics point out that the savings are not as significant as those accrued through self-owned PV systems. Despite this, solar leasing remains a viable and convenient option for green-minded homeowners who wish to switch to solar, even if the reductions on electricity bills are small. A similar financing scheme in the US is the Solar Power Purchase Agreement (SPPA) in which property owners allow a company to install solar panels on their rooftops (the panels are also owned, operated and maintained by the company). Property owners obtain electricity at a discounted price compared with the existing retail price of electricity from traditional utilities, which remains fixed for the rental period. The company profits from tax breaks and income from selling excess electricity generated.
This differs from solar leasing in the sense that homeowners do not pay any rent for the panels, and costs are incurred only upon usage of electricity. In other words, there will be no cost to homeowners on cloudy or rainy days when the PV system is not producing any electricity. Such solar financing schemes could provide private property owners in Singapore, who would like to install residential PV systems, a way to overcome prohibitive capital investment requirements.
HDB and Punggol eco town
Solar financing schemes seem to have taken root in Singapore. The pioneer SPPA in Singapore is currently being initiated by the Housing Development Board (HDB) in the eco town of Punggol. HDB has installed solar panels in other precincts over the past five years, but this will be its first outsourced project. A tender launched to select a solar service provider was closed in May 2011, but the results have yet to be announced.
As the developer of significant high-rise residential blocks in Singapore, HDB is uniquely suited to such programmes and its experience will pave the way for other property owners outside of the public sector to take up solar leasing schemes. The main obstacle to adapting solar financing programmes in Singapore is that such programmes usually require generous funding from the government. While a host of clean energy incentive schemes such as the Clean Energy Research and Test-bedding Programme, Solar Capability Scheme and Market Development Fund could provide the necessary funds to kick-start solar leasing start-ups, they need to become self-sustaining to ensure their viability in the long term. Even if grid parity has not been achieved for solar at the moment, alternative solar schemes may be viable in anticipation of electricity price hikes.
Rachel Wong is an energy analyst at the Energy Studies Institute. This article originally appeared on www.siew.sg.
The Energy Studies Institute is a Co-organiser of the Singapore Energy Summit, which is part of the Singapore International Energy Week from 31 Oct to 4 Nov 2011. For more information, visit http://siew.sg/.