Notes from Neil’s meeting in Melbourne with James Pearce of ENM Solutions on 29th October

James had offered to meet several weeks ago so Neil took up his offer with the following agenda: to clarify the basis of an offer to our fellow owners that spells out (a) each item of cost involved in the setting up of our first stage embedded network, (b) the most advantageous/feasible formula for financing it with associated pay-back period, (c) how its billing system would work including relative returns to owners/occupiers c.f. to the Body Corporate, (d) a first-cut description of timing and costs of a second stage.

Initial capital costs                                          $

Solar Panels                                                        46K [being $69 – $23 Small Scale Certificates]

Upgrades required                                          36K [cabinets, CT Chamber, new MDB] for Embedded Network                                could be $3k less

Smart Metering                                                <$5K

Setting up Embedded Network                  $9K [meetings with Owners to gain consent, Negotiation with AEMO, etc]

TOTAL                                                                   $96K

EN Running Costs

$15/customer/month= $270×12=$3240 pa

Financing

Annual profit                                                      $7-8K  [p.11 of Tender – Est Annual Benefit Table]

James thinks feed-in tariff revenue would be negligible

Potential sources of funding:

                Sydney Council Grant                                     $25K

                Strata Capital Fund                                          $20K [cost of new MDB]

                Borrow from Strata                                         $20K [repaid from annual profit over 3 years]

                TOTAL                                                                   $65K

Shortfall                                                               $96-65K=$31K [could be funded via <$2K Owners’ levy, i.e., $430/quarter for 1 year]

 

Potential benefits to Owners/customers

James notes the following Preliminary Owner Benefits to consider:

  • Lower than best in market electricity prices
  • Value of customer receiving clean energy without paying a premium
  • Value of generating clean energy
  • Property Value increase
  • Reduces tenant electricity rates to below ‘best in market’
  • Strata law makes Individual owners unable to incorporate solar independently
  • Ability to view and manage consumption (through the incorporation of smart metering).
  • Potential for Battery storage and EV Charging in future.

We didn’t get to (c) and (d) of my agenda but we discussed the possible process from here.  I asked whether it would be feasible for him and the SolarPro staff to contribute to a series of information sessions to brief the owners and tenants on the proposed technology and its installation, the operation of the embedded network, and the billing and customer service arrangements.  James affirmed that this would be feasible, noting that he and his partners see this as a very important breakthrough project that they want to support.  In addition to this information sharing process, AEMO regulations require that James conduct meetings to enable potential customers to each informed consent to the retrofitting of an embedded network.

 

Attendance at Sydney Council Committee meeting, 15th October

As noted above, we learnt earlier that our request for a Demonstration Grant of $80K was not granted but the recommendation going to Council was for $25K.  Applicants are advised that the Council, sitting as a Committee, is prepared to listen to submissions from Grant Applicants so Alex and Neil decided to take up this opportunity even though the submission time is limited to three minutes.  As it turned out we were the only applicant under the Environmental Programs category to attend and speak for our bid.

Alex spoke to the following points:

  1. This is an important initiative that will potentially open up the three quarters of City of Sydney dwellings in Strata schemes to renewable energy installations, a development that has been blocked to date.
  2. We have travelled a long and complex journey which has been thoroughly documented to inform others. Our innovation is to demonstrate a roadmap for other Strata schemes that has not existed previously.
  3. Being the first to retrofit solar and an embedded network in a Strata scheme has proved to be challenging and involved a big time and cost commitment.
  4. The proposed $25,000 is not enough. We really need the $80,000 we budgeted but, if that is not available, we could deliver a staged project with a grant of $50,000.

After he finished the Lord Mayor asked one of the officers to comment and he reinforced Alex’s point regarding the difficulty involved in getting Microgrid approval and that this was an important initiative.  The Chair then informed us that they would seek further information and re-consider the decision at the Council meeting next week.  We thought that this was as good an outcome as we could have hoped for and that it was worth the trouble of attending and waiting nearly two hours.

Notes of Meeting on 9th October, 2018

We were pleased to welcome Bo from Unit 7 to our team at this meeting.  Bo’s professional expertise is in Finance and, as we have certainly arrived at the point where this has become our major preoccupation, his support will be very helpful.  Thus, the subject of project costs and methods of financing was the sole focus of this meeting.   In addition to bringing Bo up to speed on the project so far, the email we had received from James Pearce of ENM Solutions on 24th September was the subject of most of our discussion because in it he provided a breakdown of retail energy costs, network charges and market charges.

We made two major decisions about our approach from this point; first, we will limit our projections horizon to 10 years on the assumption that longer than this would be too far for the Owners to see relevance to their interests, and second, in the immediate term we will adopt a staged approach as follows.

Stage One will be limited to

  1. the installation of solar panels and microinverters to the whole of Block A providing 35 kW of generation capacity (although this size is significantly bigger than was recommended by Wattblock in their Feasibility Report we have decided that it makes sense to install the larger number of panels while we have the crane required on site);
  2. the replacement of the existing main switchboard to increase its capacity to 100 amp, adopting James’ suggestion of using the current cable from the substation and the current meter cabinet for sub switch boards;
  3. the replacement of the existing meters with Smart meters for all Units and the installation of a parent meter interface with the Grid.

The above would enable the establishment of our Embedded Network. Stage Two would involve the installation of a Battery in two or more years when they are projected to have dropped significantly in cost.  Stage Three would involve up-grading the main switch board to 200 amps to increase the Network capacity to provide electric vehicle charging when a demand has been demonstrated.

It has become our view that the upgrading of the Main Switchboard capacity and installation of Smart meters should properly be seen as a necessary capital expenditure for the Body Corporate since several of the tenderers noted that our current system is not compliant with current regulations.  Thus, we will recommend to the Annual General Meeting that the upgrade costs be incorporated into the Strata’s on-going capital expenditure budget.

We endeavoured to identify the range of potential project financing sources. These include:

  • Obviously, the most important is the Sydney City Council’s Demonstration Grant which we reckon will be between $20 and 80K.  Our new team member, Bo, sees this as crucial if it can be at the upper end.  [Stop Press.  At the time of writing an email has just been received saying that the Council officers have recommended that we be granted $25K – less than we had requested but still the highest of the four groups recommended for funding.  We expect the Council to endorse this recommendation at its meeting on 29th October.]
  • The second source could be a proportion of the Strata’s current Capital fund which stands at about $97K at present; certainly we would hope that this would be the source of the finance for the new Main Switch Board.  From our perspective, since this capital earns only a bit over 1% pa at present, putting a proportion of it toward the Embedded Network with its benefits amounting 5-10% makes good sense.
  • A third possible source of finance could be a modest levy on each Owner (in this regard, in a recent email James Pearce of ENM made the following point “Realistically for 18 owners an investment of approximately $4,000.00 each would be the same as all 18 owners putting their own 2.5 kW system on their roof (from a cost point of view)”.
  • Perhaps the least desirable possibility would be to borrow the capital and Luci’s investigations for the Council Grant Application revealed this cost to be 7% of the borrowing.
  • Further discussion led us to ponder the idea of asking the Owners to pay, say, the next four years of the capital component of their quarterly levy in advance.

Calculating and quantifying the potential benefits for Owners, over and above the environmental benefits, is extremely complex but critical to the case for introducing the embedded network.  In essence, we have to produce and advocate for a Business Case that justifies the introduction of a solar energy embedded network.  This case must identify potential savings, the payback period, cost estimates, our benefits measurement plan, and the implementation and impact plan.