21 June 2016
Renewables for industry
An innovative way for building owners and tenants to fund renewable energy upgrades more cheaply will be expanded thanks to a project supported by the Australian Renewable Energy Agency (ARENA).
ARENA is partnering with the Sustainable Melbourne Fund (SMF) to make it easier for owners and tenants of commercial and other non-residential buildings to take full advantage of a finance mechanism called an Environmental Upgrade Agreement (EUA).
EUAs are a tri-party finance mechanism that can be used to finance upgrades to commercial and non-residential industrial buildings more cheaply. The building owner can take out a loan to pay for renewable energy and environmental upgrades to their existing building but now, instead of paying the lender directly, their local council can acts as a collection agent, using the existing council rates process to collect the loan repayments which is then passed on to the lender.
Council rates must be payed ahead of other creditors, therefore EUAs provide greater security for lenders who may then offer lower interest rates to the landlord – meaning renewable energy is cheaper to install.
ARENA CEO Ivor Frischknecht said the funding will see EUAs rolled out across Victoria. The process will simplify and streamline EUA contracts, which are new and complex.
“The idea is to get more volume and get them much more standardised so it’s potentially as easy as filling out a form (for a loan) to set up EUA tri-party agreement,” he said.
“Tenants also benefit from upgrades to their building, gaining cheaper power bills and lower building running costs.”
These upgrades can range from boiler and chiller upgrades and waste or pollution reduction systems, through to on site power generation and storage, including solar power systems and batteries.
Supported by $425,000 of ARENA funding, this $915,215 two year project will see SMF work in partnership with Local Governments to develop and set up their own EUA funding mechanism, including putting together standard procedures and review mechanisms to make the process of setting up tri-party EUA agreements easier. SMF will also work with local businesses to develop projects that can be funded.
So far Victorian five councils have taken up the opportunity: City of Greater Bendigo, Hobsons Bay City Council, Wyndham City Council, Greater Shepparton City Council and Maribyrnong City Council.
Mr Frischknecht said, “this project aims to expand the EUA marketplace across at least 15 Local Government Areas, where it is estimated that between 500 – 700 Megawatts (MW) of rooftop space exists within the manufacturing, warehouse, distribution and storage industry sector. If just five per cent of those buildings landlords were to install solar renewable energy upgrades, they could generate an estimated 25MW of clean energy.”
“However, I wouldn’t be surprised if over the next 10 years it weren’t more like 20 or 30 per cent of those buildings put solar on their roof. If they use EUAs they will do it more cheaply than they would otherwise.”
Already, Keech Australia are planning to install a 15 kW solar energy system installation and lighting upgrade to their manufacturing facilities in Bendigo using financing through an EUA. SMF have also had interest from a brewery to install a 22kw solar energy system using an EUA, along with enquiries from hotels and retail shopping stores, food manufacturing, and other agricultural properties, including refrigerated cool stores for orchards and wineries.
Previously, EUAs were limited to the City of Melbourne. But recent local government legislative changes allow them to now be offered across Victoria by all councils. This is paving the way for similar EUA arrangements to be replicated across other states, such as New South Wales and South Australia.