Revolving Fund for Financing of Sustainability Projects
By Bruce Barbour - February 2020
I recently came across a website that was promoting the
use of a "revolving fund" for the financing of
sustainability projects - primarily the installation of
photovoltaic (PV) systems and on occasions other
sustainability improvements which have a positive
financial return - for the not-for-profit sector.
Before I give you the link to the site I will explain how
the system works.
A financing organisation finds a suitable not-for-profit
organisation which owns (or has really long term lease or
usage agreement on) a building they use for the provisions
of not-for-profit services. The financing organisation
works with the not-for-profit to determine the size of the
PV system they need and an estimate of cost and an
estimate of likely savings and repayments. The prime
requirement is that the estimated savings are greater than
the estimated repayments from the not-for-profit - more on
this later. The financing organisation calls then for
donations from the public to finance the solar PV system.
When the required amount of money is raised the
not-for-profit gets quotes for the system. The preferred
quote has to be approved by the financing organisation to
ensure that the system is of suitable quality - a system
that should last 25 years. Once that is achieved the
financing organisation agrees to lend the money to the
not-for-profit. An order is raised and the system
installed and paid for using the lent money. The
not-for-profit repays the capital cost to the financing
organisation using the savings they make on their
electricity bill to make the payment. No interest is
charged by the financing organisation.
Now this is where the true power of the arrangement comes
into effect - the "revolving fund". The repayments are
used to partially or fully (depending on the size of the
fund) finance the next solar PV project for another
not-for-profit - with additional donations also being
called for. And the process is repeated.
The revolving fund is constantly being topped up by new
donations. This means a greater number of projects can be
funded quicker - rather than having to wait until the
first project has paid back its loan. The reuse of the
donated funds means that the funds are not just being used
to install one PV project but will be used for multiple
projects over time, multiplying the number of Watts of PV
installed as a result of that donation - this is what
makes it attractive to the people donating to the fund.
Each dollar they donate is going to lead to the
installation of many more Watts of PV panels than if they
had used that dollar to, say install more PV on their own
roof. It also helps that donations to the fund are tax
Eventually as the fund becomes large enough it could
continue to operate even if no new donations were
received. However if new donations continue to be received
it means that more projects can be funded.
As an example if the fund size was $600,000 it could be
funding, say, 20 x $30,000 projects (though in practice
the size of the projects would vary depending on the
requirements of the not-for-profit) - each starting at a
different time. If the projects repay their loans over a
five year period this means that the revolving fund would
receive back $120,000 dollars each year. (An average of 4
projects may complete payments on their loan each year.)
This $120,000 can then be used to fund a further 4 x
$30,000 projects - increasing the number of projects to
24. It would be similar for the following year -
increasing the number of projects to 28 - and so on. Thus
the revolving fund.
This arrangement has become possible due to the fall in
prices of PV systems in recent years.
I will provide a simple calculation to show how it works
for a single project. The assumptions made are quite
conservative - a greater financial return could be
anticipated. I prefer to under promise and over deliver.
Indicative Figures Only
needs to be determined from consumption patterns.
peak solar hours per day - Melbourne VIC
kW of panel
||This is to allow for imperfect
alignment and installation.
Energy Generation per day
day per kW of panel
Generated Per Year
Proportion consumed on site.
||This needs to be determined from
of Grid Electricity -
||For large users the
structure of electricity pricing is different to
this. I have not determined at what level the
pricing structure switches. You will know from
your electricity bill if the price structure is
different to this. Consult your supplier.
In Tariff - typical Victorian
Electricity not purchased
||PV generated electricity consumed on
In Tariff Received
||Can depend on site.
of Years to Pay back
||Assuming all savings are used to
(1) According to SolarQuotes - under 30 kW the PV systems
are usually treated as similar to domestic installations
and can be installed by many suppliers who install
domestic sized systems. Over 30 kW there are more hurdles
that the owner / installer must overcome and additional
expertise required. Refer to the SolarQuotes guidelines
for commercial installations.
(2) The higher the amount of the PV generated consumed on
site the better as it displaces the use of grid
electricity. Consequently the organisations that will get
the most benefit from a PV system are organisations that
operate during the day, seven days per week, 365 days per
day. More on this later. The 0.2 proportion used in this
table is quite low for buildings being used during the
day. If it was higher, say 0.4 the benefit of the PV
system, the savings to the organisations, to the
organisation would be higher (in this case payback in 3.6
years, 27% return). An example of an organisation that
may have high proportional use would be an aged care
facility. They operate 365 days per year, day and
night. The actual proportion would have to be determined
by studying the centre's electricity consumption pattern.
For domestic houses the self consumption may be less than
0.2 if the house is not used during the day and
electricity appliances have not been switched to operate
during the day.
(3) The $1000 per kW is an estimate of cost for larger
projects. If the cost is actually $1200 per kW payback
will be 5.4 years, 19% return (with 0.2 self consumption).
The cost per kW for small good quality domestic PV systems
will probably be higher than for a larger "commercial"
good quality system. The price estimates are after the
Small Scale Technology Certificates (STC) rebate has been
(4) In practice the financing organisation would not
require all savings to be put toward loan repayments.
Payment would be set at up to 90% of the estimated savings
- meaning that the not-for-profits starts getting some
benefit straight away. And they get the the full benefit
after the loan has been repaid in say 5 or 6 years (or
whatever agreed loan length is).
* * *
From the simple example in the table above the PV system
makes a cost saving of $6679 per annum on an investment of
$30,000. That is a 22% return, payback in under five years.
The main barrier for the not-for-profit taking up this
opportunity and installing a PV system is the upfront
capital cost. While they could borrow the money this is also
a barrier. This is where the interest free loans and the
revolving funds come in. It removes the barrier of having to
find the capital cost.
THE SAVINGS MADE ON THE NOT-FOR-PROFIT ORGANISATION'S
ELECTRICITY ACCOUNT COMPLETELY FUNDS THE REPAYMENT OF THE
INTEREST FREE LOAN GIVEN TO THEM TO PURCHASE THE SYSTEM.
After the loan is paid off the organisation is better off to
the tune of $1000s of dollars per year for the life of the
PV system - 25 years for the panels (with possibly the
inverter needing maintenance or replacement in 10 to 15
The figures used in the spreadsheet are pretty conservative.
You can play around with these figure in the Excel
spreadsheet which you can download here.
Two useful document are from the Solar Quotes site:
The organisation which is currently doing this - all with
the use of donated funds is CORENA - the Citizen's
Own Renewable Energy Network Australia Inc.
I have made a donation to their revolving fund. I may make
further contributions in the future. Initially I hesitated
because the project that they were funding (in February
2020) was for a 100 kW PV system on a Steiner
School in Tasmania. I have nothing against Steiner
Schools but they are not a cause that I would normally
consider donating to. But then I realised that I was not
donating to the school but to the "revolving fund" and to
increasing PV in general. The donation was going to lower
carbon dioxide emissions regardless of the building it was
located on or the organisation that used that building.
Through the revolving fund the donation would continue to be
used for other projects later. I was also concerned that
Tasmanian electricity is already pretty green due to all
their hydro power but then I realised that Tasmania is part
of the East coast electricity grid and will be more
interconnected in the future when the second Bass Strait
link is constructed. So even PV electricity generated in
Tasmania may make it to the mainland displacing some of
Victoria's dirty coal electricity or to keep the Tasmanian
Hydro system topped up for longer.
Basically the idea of the revolving fund and interest free
loans to fund new PV systems is great. Well done to CORENA
for getting this off the ground. At the moment their funds
are approx. $250K, all from donations (for their "Quick Win"
projects). Due to the revolving fund the cost of the PV
systems installed is over $500K. CORENA finance systems all
around Australia. In the grand scheme of things this is
pretty small. It would be great if Government took this idea
and turbo charged it for the installation of PV on many more
For example, the VIctorian state government could fund their
own revolving fund. It would have to be seed funded with
taxpayer money or a loan. I don't know what size it should
be. It could be $500k perhaps growing to a couple of
$million over a couple of year - it would depend on demand.
It could start out targeting aged care facilities - for the
reasons stated earlier - but move onto other community
service areas later.
Say they had a $500k fund to be lent interest free to a
number of aged care facilities with repayments made over an
average period of 5 years - using the CORENA type model. If
the Government had to borrow the money at say 5% then the
government's interest payments on this would be approx.
$75,000 over 5 years (assuming a shrinking fund size as the
loans are repaid). For that $75,000 cost (plus admin costs
which I can't estimate) the government is encouraging the
installation of $500k of PV systems - say 500kW of panels -
6.6 times the number of panels that the government would
have been able to buy if it had invested directly. It will
get back the $500k over time, though it may elect to keep on
funding more projects as per the revolving fund model.
| As an
Governments at all levels should be
undertaking large scale installation of PV
systems on their own buildings, such as
schools and offices. For local government, PV
system installation on indoor recreation
centres and libraries - centres that operate
seven days per week - would benefit greatly
due to their seven days per week operations
and therefore their greater proportion of self
use. The economics for larger systems are
starkly in favour. And there are of course
environmental benefits. And private companies
should also be looking closely at the
installing PV systems and investing.
Compare that to their current subsidy for PV - the
domestic solar rebate. This scheme initially (2018)
started out offering a 50% rebate, up to $2,225 dollars,
for a 4 kW PV system (though I understand that the rebate
is now less than this - not that their web site says this
- at February 2020). If someone buys a really cheap system
for $4,450 the Government is getting a doubling of the
amount of PV installed per dollar invested (although that
may be illusory if a cheap system fails in under 5 years).
This is way less than the over six times return of the
revolving fund with no interest loans.
Initially I thought the interest free loans should just be
offered to organisations in the not-for-profit sector (and
possibly local government if they work in the same area),
but on reflection it should also be offered to the
for-profit sector who are providing similar servicing as
the not-for-profit organisations. E.g. all aged care
facilities should be eligible rather than just the
not-for-profit organisations. (The scheme could include
other services later - e.g. kindergarten/day care, etc.)
Otherwise the for-profit organisations would be crying
foul. And anyway it does not matter where the additional
kWh of PV electricity is coming from - it will all benefit
the environment - which is the ultimate aim. An aged care
facility in the for-profit sector is already getting huge
amounts of money from government to provide aged care
services anyway - so why should this be different. It will
cut the costs of service provision in the long term so the
not-for-profit can provide better service for their
clients - and so can the for-profit organisation if they
choose to use it that way.
Under the scheme it is vital that good quality systems are
installed. Otherwise the situation could arise that the
system fails in under five years total cancelling out the
benefits of the system. The PV systems (or at least the
panels installed) should last a minimum of 20 years,
preferably 25 or more.
There are a couple of ways of achieving this:
Another alternative would be require all purchases/quotes to
be arranged through an organisation such as SolarQuotes (as
I understand that they pre-qualify the installers to ensure
that sub-standard systems are not quoted and installed. For
openess of process the government could call for expressions
of interest / tenders for this aspect and make sure the
organisation knows about it.
- have a government organised bulk buying scheme for the
panels and inverters, ensuring only good quality systems
are supported - and that these are supplied at
potentially a discounted bulk rate; or
- Have a pre-qualified list of suppliers to provide
panels and inverters under the scheme; and
- Have a pre-qualified list of installers who install
the panels / inverters purchased under the bulk
purchasing scheme or from the prequalified suppliers;
- Have a pre-qualifed list of installers who also source
approved good quality hardware.
Admin could also be outsourced if desired. (CORENA have
experience in the area though as a volunteer
organisation they might not want the job.)
CORENA has promoted this type of scheme for local Councils
to fund domestic solar installations for the residents -
refer to the CORENA Power
Point Presentation. I am surprised they haven't
promoted a similar State government scheme, such as I am
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