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Woolworths Limited- submission to medium-scale solar discussion paper

Woolworths LogoManager
Medium-Scale Solar Working Group
Energy Sector Development Division
Department of Primary Industries
GPO Box 4440
Melbourne VIC 3001
Email: mediumscale.solar@dpi.vic.gov.au

Dear Sir/ Madam

Re: Medium-Scale Solar Discussion Paper

Woolworths welcomes the opportunity to provide comments in relation to the Department’s Medium-Scale Solar Discussion Paper

As a leading Australian retailer, Woolworths makes a significant contribution to the economy of Victoria. Woolworths has over 575 stores in Victoria including Woolworths supermarkets, BIG W department stores, Dick Smith Electronics outlets, Dan Murphy’s and BWS liquor outlets and Woolworths Petrol sites. Woolworths also operates a network of Distribution Centres and support offices across the State. Woolworths currently employs over 38,000 people in Victoria including nearly 1,000 trainees and apprentices.

Woolworths is also committed to being a leader in responsible and sustainable retailing. Woolworths has therefore committed to a number of key environmental sustainability targets including:

  • a 40% reduction in carbon emissions on projected growth levels by 2015 (bringing emissions back to 2006-2007 levels);
  • achieving a 200ML reduction in water use in our stores compared to 2007; and
  • generating zero food waste in the general waste stream by 2015.

In committing to these significant sustainability targets, Woolworths believes there is a considerable opportunity for businesses to drive positive environmental and sustainability outcomes. This applies particularly in relation to renewable energy generation, where the industrial and commercial sector is well placed to invest in such technology - particularly solar PV power generation - when supported by nationally consistent and commercially viable feed-in-tariff (FiT) regimes.

Woolworths’ Investment in Renewable Energy Generation

Woolworths is both committed and well-placed to play an active role in renewable energy generation (particularly solar PV power generation). As previously mentioned, Woolworths has made significant commitments to reduce its energy consumption into the future and the introduction of solar generation across the many sites it owns or leases is seen as a key way for the business to achieve this objective.

In terms of capacity to install such technology, Woolworths has a significant amount of roof space available for solar at both its stores and support facilities. In this regard, Woolworths estimates that across Australia it has over 3.2 million square meters of roof space that is potentially and practically available for solar PV power generation. Woolworths estimates that this roof space could be used to support facilities with a potential power output of over 320,000kW.Woolworths has already constructed distribution centres at Laverton (VIC) and Erskine Park (NSW) with reinforced roof structures and invertor rooms that can accommodate a solar PV array of 1 MW installed generation capacity. Woolworths has not yet been able to make further investment towards making these facilities operational due to limitations within current FiT regimes.

Woolworths has recently demonstrated its commitment to solar PV generation through the installation of solar PV generation at two Woolworths Petrol sites in the Australian Capital Territory. As part of this trial, Woolworths has installed a 30kW capacity solar PV system at each site which each has the capacity to generate up to 42,000kWh annually. The installation of solar PV systems at these sites has been made possible as a result of the ACT Government’s FiT regime that is applicable to large business, is payable on gross energy generated, is applicable to systems of up to 30kW and, at 20 years, is of sufficient program duration to provide an acceptable financial return. Woolworths notes that the ACT Government announced in September that it would be expanding the operation of its FiT scheme.

Woolworths Limited’s Responses to issues raised in Discussion Paper

Woolworths notes that the key focus of the Discussion Paper is the current low level of investment in solar PV generation across Victoria and the barriers to increasing that investment.

Woolworths believes that encouraging businesses to make investment in solar PV generation will be a crucial tool for effectively transitioning Australia to a low carbon economy and achieving an MRET of 20% by 2020. Achieving these goals will not be achieved by household renewable power generation alone, particularly where households do not have the ability to roll-out solar PV systems as efficiently as large businesses such as Woolworths can. For example, with the significant amount of roof-space available for solar PV systems (mentioned previously) and well-established procurement and development systems, Woolworths is well-positioned to quickly and cost-effectively install large number of solar PV systems once the appropriate investment environment is put in place.

In terms of the principal focus of the Discussion Paper, Woolworths notes that the overriding barrier to investment for corporations continues to be the very significant upfront capital investment required for businesses to install solar PV systems and the lack of an appropriate return on that investment. This is a particular issue faced by businesses such as Woolworths who must act in the interest of shareholders and must undertake rigorous financial analyses on how to most effectively allocate the limited capital that is available to them – both in total and specifically in relation to the sustainability objectives committed to by that business.

It is for this reason that, to date, Woolworths has largely focussed its sustainability investment on driving energy efficiency and rolling out new facility design guidelines rather than in investing in renewable energy generation (see Figure below). For example, in 2010 Woolworths commenced 46 new energy savings initiatives in our stores and distribution centres involving a long-term investment of $13 million. Woolworths has now also built 51 green stores with the 21 stores opened in 2010 achieving a reduction in carbon emissions per square metre of 25.8% compares to business-as-usual stores. This investment pattern reflects the fact that the installation of solar PV systems or other renewable energy generation facilities continues to be commercially unviable.

Woolworths Chart

Figure 1 – Woolworths’ Identified Energy Saving Opportunities1

Woolworths believes that the most effective way to overcome the current lack of investment in medium-scale (and small-scale) solar PV systems by business is to implement an appropriately structured FiT regime. This position is supported by international and domestic experience which shows that, in the absence of an appropriate FiT regime, business will not make significant investment in renewable energy generation. Conversely, where appropriate incentives are put in place business will make such investment – for example, the introduction of FiT regimes in Germany and California has driven significantly higher investment in solar PV generation by businesses despite, in the case of Germany, lower sunlight availability and correspondingly lower solar generation opportunity. As mentioned previously, the introduction of the ACT Government’s FiT scheme has facilitated Woolworths’ first investment in solar PV systems.

The key requirement for an appropriately structured FiT regime is that it provides business with certainty around its duration and the rate payable. It is also imperative that the FiT rate apply to total (gross) generation and not net export to the grid. In terms of duration, it must enable a sufficient return on capital and Woolworths considers that a length of at least 20 years is appropriate (and in line with other jurisdictions in Australia). In terms of rate, Woolworths believes that, pending the introduction of a price on carbon, the levels at which the ACT Government has set the FiT are largely appropriate – as you would be aware the Gross FiT in the ACT is currently set at 50.5 cents for 2009/10 and 45.7 cents for 2010/11 (locked for a minimum of 2 years).

1 Extracted from Woolworths Sustainability Strategy 2007-2015. The strategy is available on the Woolworths Limited website – www.woolworthslimited.com.au

Finally, Woolworths notes that the Discussion Paper suggests that businesses that install solar PV generation are likely to receive a range of benefits – including protection from electricity price increases as well developing “green credentials” in the eyes of customers and the general public. The issue is also raised that introduction of a FiT regime should not result in significant electricity price increases for customers where these price increases largely benefit certain groups who participate in that FiT regime. Woolworths acknowledges that these potential issues need to be addressed in the policy formulation process. Woolworths does, however, note that any potential savings in electricity costs and potential marketing benefits achieved from installation of solar PV systems are still relatively limited. As such, they do not address the fundamental lack of investment incentives and high up-front capital costs involved in installing this technology. Consequently, Woolworths would be concerned if these issues were cited as reasons for not proceeding with a FiT regime which would otherwise enable businesses to play a significant role in addressing climate change.

Next Steps

Woolworths looks forward to working further with the Department as it works to develop its report to the Minister for Energy and Resources. If you have any questions regarding the matters raised in the letter or would like to discuss Woolworths’ sustainability program in more detail please contact me.

Yours sincerely
Charlie Beasley
Public Policy Manager
Woolworths Limited