Businesses that want to save on energy bills and generate electricity from solar panels should consider doing so via a solar power purchase agreement (PPA), says Ko Chuan Zhen, a co-founder and the chief executive officer (CEO) of Plus Solar Systems Sdn Bhd.
The PPA model is a financing option that allows businesses to purchase electricity at a lower tariff rate from a solar energy company like Plus Solar, compared to the tariff the business usually pays an electricity distribution company like Tenaga Nasional Bhd (TNB). They will incur zero upfront cost to install the solar power system using this model.
This could be especially helpful to businesses eager to cut down on operational expenses during these challenging times. Ko observed this demand when he spoke to clients and industry players about their needs during the movement control order (MCO) period.
“They wondered how they can further save energy without incurring capital expenditure. This accelerated our efforts to introduce the PPA to the market and focus on promoting this to clients during and after the MCO period,” Ko tells Enterprise.
This solution was already available to businesses prior to the MCO period. According to him, the company saw a 500% increase in inquiries from businesses regarding solar PPAs during the MCO period.
Businesses that consume a lot of energy can consider a solar PPA. “It could be glove manufacturers, with whom we are working closely, rubber manufacturing factories and plastic packaging factories. It could also be hospitals and food and beverage factories that have a huge roof,” says Ko.
The discount on the electricity tariff rate depends on the individual business’ rooftop size, solar power system capacity, energy consumption and other factors.
Since the PPA model doesn’t come with battery storage, the businesses will still need to purchase a percentage of electricity from the electricity distribution company. This is the remaining amount of electricity demand that cannot be met by solar panels.
The contract period of a PPA generally lasts from 15 to 25 years. Each contract is customisable. Plus Solar is also be responsible for the maintenance of the solar power system throughout the contract period. After that period, the solar power system belongs to the business.
Of course, a solar PPA is not the only method available for businesses to install and pay for a solar power system. Businesses can also do an outright purchase of a solar power system.
These methods are suitable for different kinds of businesses. According to Ko, a PPA is suitable for businesses that do not want to incur an upfront cost or worry about maintenance of solar power systems.
As for outright purchases of solar power systems, companies that can afford to do so should opt for this solution, especially if they can qualify for the Green Investment Tax Allowance (GITA) and have employees that can service the solar power systems.
“They can also get financing or a term loan from banks. We work with over five banks where they can get this form of financing,” says Ko. Businesses that do not qualify for the GITA can consider signing a solar PPA, he adds.
Some of the other areas Plus Solar will be focusing on going forward are digitalising energy savings for building owners using artificial intelligence and Internet of things solutions as well as the Large Scale Solar 4 project recently opened for competitive bidding.