The Financial and Environmental Case for installation of solar for Medical Centres

Emissions and Costs in Australian Health Care

Since the 2015 Paris Climate Agreement annual global fossil fuel emissions have continued to grow year on year by an estimated 4%[1] to ~ 36.8 Giga-tonnes of CO₂. This represents a 61% increase to 1990 levels and puts the world on track for a 2-5° increase in temperature by 2100.

In Australia approximately 33% of domestic emissions currently come from electricity production, with CO₂ emissions from the electricity used in Victoria’s public health care system alone estimated to be around 700,000 tonnes/annum.

Electricity used to power an average medical imaging practice in NSW with an onsite MRI and CAT scan produces approximately 12 tonnes of CO₂ every month, and for a facility of this size power costs can be anywhere from $60,000-$100,000/annum. Electricity usage in the health care sector is thus not only a contributor to domestic emissions, but also represents a significant ongoing operational cost to health care providers.

Despite the costs and environmental impacts, reliable electricity is essential to modern medicine and there are few options available to health care providers to reduce costs and emissions.

Options for Cost and Emissions Reductions

As large power users, costs associated with electricity retail contracts may be managed through a tender process, and a portion of power may be guaranteed by the retailer to be carbon neutral, although this can come at a price premium. Large electricity users also have the option to engage in separate power purchase agreements (‘PPAs’) directly with wind or solar farms for a fixed portion of their power needs. However, smaller private health care providers generally do not use enough power for this option to be available without them entering into an agreement with other customers as an aggregate group. This can complicate the process and incur additional legal fees. A simpler and more cost-effective way to guarantee a power price and emissions reduction over the longer term is through the installation of an onsite solar array.

Based on the expected annual power supplied to a medical imaging centre by a 30kW rooftop solar system, the total cost of electricity produced over the 7-year financing period will be $0.08 for each kWh[2]. If the health care provider chooses to remain on premises past the 7-year period, the cost of power supplied by the solar array will continue to decrease as the original loan becomes amortised. For example, over a 10-year period the cost of the electricity produced by the solar array might equate to $0.05/kWh, and over a 14-year period the cost will decrease further to something around $0.04/kWh.

This is of course an attractive proposition for managers in the sector who wish to reduce operating costs. Particularly as the avoided retail power costs more than offset any loan payments for the system, creating a positive impact on cashflow from system commissioning.

Considerations for Sizing Solar Arrays

Due to the variable nature of solar production over daily timeframes the best case financially is usually to size the solar system to provide a bulk portion of the site’s power supply with onsite generation, rather than sizing the array to try and provide the entire usage. Availability of a suitable area for installation of the solar panels is also determining factor in the size of the solar array for any given site. Most sites will have at least some roof area which is suitable for installation of solar panels, and this is likely to be the most cost-effective option in most cases. Although dedicated structures which double as shade for onsite parking are also available.

Equipment Selection

Proper equipment selection is key to ensuring that there is adequate warranty coverage over service life on which the business case is based. Many practice managers may also have some concern over the variability of the power produced by the system. However, rooftop solar will not affect the reliability of the site’s power supply as any power requirements in addition to the solar produced are simply drawn from the grid. Whilst production may be difficult to predict over any given day or week, over monthly and yearly time frames, solar resource availability is ultimately stable and well understood. The best case financially is to size a system so that the entire output is used, rather than attempting to size a system that covers the highest expected usage.

Public Perception and Brand Value

With increasing competition between private health care providers, a commitment to reducing carbon emissions is also likely to be a point of difference for a significant portion of patients given the choice between similar alternatives, and growing awareness of the impacts of climate change.

For public health care providers, the public interest imperative to maximise onsite solar energy use is even more pressing. Several recent polls on the subject including from the ABC, Roy Morgan and the Lowy institute report that over three quarters of the Australian public want action taken to combat climate change. When operational cost reductions are factored in, the case for installation of onsite solar for a health system increasingly burdened by an ageing population and the impacts of the COVID-19 pandemic becomes compelling.

Conclusion

In the context of increasing public awareness of runaway climate change, there is a growing public expectation, and moral imperative to reduce carbon emissions wherever possible. Onsite solar arrays allow health care providers to reduce their carbon emissions and operating costs simultaneously, as well as securing power price certainty. The key to maximising the financial return of any system lies in proper design, appropriate equipment selection, and proper system sizing. A reputable solar installation company should be able to provide a proposal that satisfies these criteria prior to contract award. This presents health care providers with an opportunity to reduce operational costs and emissions, while meeting growing community expectations around climate action.

[1] to the end of 2019

[2] financed over 7 years at 4% interest