A Holistic Plan for Reducing Carbon Emissions through Solar PV Solutions for Manufacturing Companies

ECO:

Case

Contributor

Michael Yoe

Cut R Alya Buleen Valencia Chandra

Michael Yoe

Cut R Alya Buleen Valencia Chandra

Proposed by

Proposed by

BC-009 A Holistic Plan for AAH to

Inaugurate Company

XX’s Solar PV Transition

Advantages of using AAH Solar vs Other Solar Options

Company Analysis

Problem Analysis Strategy Conclusion 1

Situation and Case Objective

Objective

Company XX – a manufacturing company based in West Java

Company XX aims to achieve reduce carbon emission in 5 years

How can AAH tailor the best strategy to reduce energy carbon footprint by 15% for Company XX whilst profiting from financial benefits through solar PV solutions in the next 25 years?

subsidiary

Key Question

EPC EPC

O&M

O&M

_Dai^{ly maintena}

nce Installation

1 2

No Upfront Investment Less Hassle with

EPC and O&M

3

Reduced Electric Cost with Fixed

Rate

AAH Solar

Enables end-to-end solar

PV service for commercial

and industrial uses via

rental scheme

Growing technological advancement

in Solar PV

CO2 Emission and Geographical

Location

MEMR Regulation No. 49 of 2018 Solar is a Cost

Efficient Energy

Company Analysis

Problem Analysis

Strategy Conclusion 2

Industry Analysis: STEEP and Competitor, Market, and Product

INSIGHT: From the analysis, we acknowledge that AAH Solar lacks advantage among competitors. Steps on differentation need to be taken in order to win in the market.

Categories

Company Size

Target Customer

(Market)

Product- Speficic

#Employee Funding (via Crunchbase)

Target Market

Services

Pricing

USP

~99

11.5 M

~136 25 M

~22

2 M

~50 -

~99

- Industrial

On & Off Grid, Hybrid Installation

Commercial, Residential Loan, Rent-to- Own, Purchase

Residential Direct Buy, Customer

Loan, Rent

Commercial, Industrial Flexible contract

Residential, Industrial Rental Scheme

Medium Various Package

High Various Payment

Scheme

Low

Online Monitoring

& Risk Prevention

Low

Net Metering Support

Medium

No Upfront Investment, EPC & O&M Handling

Rising climate awareness and electric

demand

Social Technological Economic Environmenta

l Political

S S T T E E E E P P

Company Analysis

Problem Analysis

Strategy Conclusion 3

Company XX sits here

AAH is required to

differentiate and show its unique selling point to:

Massive Bottleneck

Win from Competitors in the Market

Support Company XX’s Emission Target

Move Company XX down through the Funnel

Hence,

Steps to convert company XX to create long term relationship with AAH

1

2

3

Root Cause Analysis

Root Cause Breakdown

–

MECE Tree Analysis

Problem Statement

How could AAH Solar address these pain points for Company XX to ensure their reduced carbon emission target is achieved along with gaining 105,3% RoI over the span of 25

years?

v

Company Analysis

Problem Analysis

Strategy Conclusion 4

Our team identified several pain points met by Company XX’s solar energy

transition; making Company XX less likely to transition into solar energy

Our team proposed a combination of solutions under the name of ECO Strategy, a Holistic Plan to inaugurate Company XX’s Solar Transition

Company Analysis Problem Analysis

Strategy

Conclusion 5

There is a need to craft a holistic strategy to address the problems mentioned

Effect Visualization

Clients need to feel they are making the right business decision

Proposed Solution

Why?

Expecte d Result

Display Real-Time Solar Benefits after

installing solar PV, (monitor performance,

cost savings, and reduced GHG

emissions)

What?

Collaboration with Power Up

Partners

Offering Custom-Fit

Solutions

AAH could deliver net positive results on finance, environment,

and simplified business processes for

Company XX

Establishing a relationship between

AAH, Company XX, and a non-profit

organization

Differentiated market and certain stipulations require flexible solutions

AAH has little impact on public opinion and media relations to convey for

Company XX

Company XX is offered a wide range of options to choose

from to fit production needs

1.) Positive publicity and building a better image for Company XX’s green initiative.

2.) Building relationships and community.

Tailoring the best solution for Company XX whilst

maximizing AAH's revenue through

upselling or additional income

stream(s).

C O

E

Effect Visualization is explained further to simplify and monitor solar PV performance

Company Analysis Problem Analysis

Strategy

Conclusion 6

A great and unique selling point AAH can offer to company XX is to directly offer project monitoring (dashboard), showing reduced emission, saved cost, and performance in one platform.

The interface allows users to receive real-time data on the performance of the solar PV system: energy production, system availability, and any alerts or issues that may arise.

1

1

2

3 4 5

Real-time Monitoring

Data

Visualizatio n

The interface provides users with the ability to view and analyze data on the performance of the solar PV system, using tools such as graphs, charts, and tables.

Alerts &

Notification

The interface provides users with alerts and notifications on key events or issues related to the solar PV system, such as maintenance needs, system outages, or other problems.

1

System Control

The interface allows users to remotely control certain aspects of the solar PV system, such as turning it on or off, adjusting output levels, or accessing diagnostic information.

1

Customer Support

When solar PV output contains an increase in outliers, or any malfunctions happen, AAH is notified directly to help the customers in ameliorating any issues that occur.

SA MP LE IMA GE

The Collaboration with Power Up Partners solution would provide benefits for all parties involved in the business

Company Analysis Problem Analysis

Strategy

Conclusion 7

Overall, establishing a relationship with AAH and a non-profit organization could be a valuable strategy for Company XX to support its renewable energy goals and enhance its publicity, exposure, reputation and credibility

The potential benefits for all parties are shown from the Value Creation Diagram and Partnership Scheme of AAH Power Up Partner Collaboration. All in all, the benefits Company XX would gain in this scenario include:

Positive Publicity

By partnering with non-profits, Company XX can gain access to a network of local partners who can help to spread word about company's efforts to implement RE project.

Networking and Partnerships

The collaboration gives Company XX the chance to network with other RE- related businesses and organizations, resulting in future partnerships and collaborations to help accomplish company’s objectives faster

Credibility and Reputation

Company XX may improve its public image and build trust with its stakeholders by demonstrating its commitment to sustainability and renewable energy

Cost Savings

The non-profit organization may be able to provide support or resources that could help to reduce the costs and risks associated with implementing rooftop solar PV.

C

O

E

The AAH team will work closely with Company XX to understand their unique energy needs and budget constraints and will utilize their extensive industry knowledge and resources to develop customized solutions such as:

To tailor the offering to specific needs and goals of the client, Offering Custom-Fit Solution strategy should be implemented by AAH

Company Analysis Problem Analysis

Strategy

Conclusion 8

Upselling Approach

o Complimentary

Meteorological Data Acquisition System Used to monitor and predict weather patterns and conditions o Energy Insurance

To resolve inconsistencies in energy production, AAH would cover the energy bill via the utility company o Upgrading Battery Capacity Larger battery capacity would protect clients from power outages

1 Lease to Own

Program

2

o Financing option that allows a company to use an asset without having to purchase it outright

o The customer pays an additional monthly fee to use and eventually own the panel system

o Help cutting costs via solar energy whilst slowly establishing and acquiring knowledge about solar PV operations

3

o Assuming the factory is within the net metering area, commercial use is supported with the new MEMR Regulation No. 26 of 2021 o Cost-saving created as

excess energy is sold to the grid for a fixed amount of credit

o Under Reg 26, for every 1 kWh exported by a, the consumer is entitled to a credit of 1 kWh

Net

Metering

*These primary suggestions are in a broader context as there will be a wide range of options to tailor every customer needs.

C

O

E

Company Analysis Problem Analysis

Strategy

Conclusion 9

OKR (Objectives and Key Results) of the ECO Strategy is necessary to define the success when implementing the strategy

E

C O

With the created OKR above, AAH would deliver an excellent service and help Company XX to achieve its CO2 emissions reduction target through Solar PV solutions without compromising on negative financial or HSE effects.

OKRs can be an effective tool for setting and achieving goals, promoting alignment and focus within teams, and fostering a culture of continuous improvement. Thus, hereby stated the Objective and Key Results of the strategy.

Effect Visualization

(Interface)

Collaboration With AAH Power

Up Partners

Offering Custom-Fit

Solutions

Reduce system outages & malfunctions by 20%

Achieve 100% adoptability rating in the first year

20 positive publicity for Company XX across media 3 Non-Profit partners within the first year

Increase Initial Revenue by 10% through Upselling

Create USP and urgency for Company XX to drive sales

From the environmental and financial analysis, we can conclude that

Company XX should use solar panels which saves up to 150 kg of CO

₂

e per hour

Company Analysis Problem Analysis

Strategy

Conclusion 10

AAH Solar

PV Wind Coal Natural Gas

Cost (per kWh)

Rp932 (90% fixed tariff)

Rp1.231 Rp667,68 Rp1.843,05

CO2 emission per kWh (tCO2e)

0 0 0.32115 kg 0.18362 kg

Potential environ- mental hazard

Water trade-offs (coolant system)

Damage to aerial wildlife, space required

Air pollution, human

toxicity, premature death, respiratory illness

High methane emission, contamination to nearby communities

It is strongly recommended that the Company XX uses 889 panels generating 346.7465753 kWh that saves the company for 150 kilograms of CO2 emissions per hour that is equal to 166 pounds of coal burned per hour.

ENVIRONMENTAL ANALYSIS

Capital Expenditures IDR 10.526.496.493 Yearly Operational Expenditures IDR

314.000.000

Daily Price for 25 Yr for AAH IDR 1.153.589

Current Daily Tariff IDR 2.298.580

AAH's Fixed Percentage on Regular

Energy Tariff 90%

Price per 1 kWh of Electricity IDR 932

Total Revenue over 25 Years IDR 29.877.090.500

Total Profit IDR

19.350.594.007

PayBack Period (Years) 8,81

Gross Profit Margin (GPM) 73,7%

Yearly Inflation Rate (10 year

historical average Indonesia) 4,3%

Return on Investment (RoI) 105,3%

[Summary] Financial Analysis*

*View Appendix A2 for a detailed financial calculation

Company Analysis Problem Analysis

Strategy

Conclusion 11

Basic

Components Function #Unit Required Solar array &

mounting system

Convert sun light to electrical energy

882 panels &

fixed mounting unit (2179 m

²

space required)

Wiring

Connect

components into systems

-

Battery

Supply power for

solar panels 2773.82 kWh

Charge controller

Ensure power

supply on a consistent amount

578 units

Inverter

Converts DC

power to AC power

10 units Solar PV Components

Major components to be installed

Other than the required main components, our strategy also features the complimentary components, such as the MDAS System for local weather detection and step up transformators to enable net metering options.

Infrastructure and Technological Analysis

Reputational risk from nonprofit Technological risk on obsolete panels Operational risk on malfunction User Acceptance risk on adaptation Cyber vulnerability to cyber attack Financial risk from bankruptcy/losses Stakeholder risk from equity owner

1 .2 . 3 .4 .5 .6 .7 .

Company Analysis Problem Analysis

Strategy

Conclusion 12

A c ti o n P la n

Time (month)

3 4 5 6 7 8 9 1

0 1

1 1

2

Site Survey

2

1 1

3

1 4

1 5

Planning Phase

Contracting Phase

Procurement & Installment

Final Survey

Collaboratio n

Custom Offer Interface Interface Interface Overall Overall

Challenges

(Implementation Reliant)

Strategy Affected

Comprehensive communication and PR team Research latest tech & frequent system update Invest in reliable system with good performance Provide training to user and operator & intuitive UX

Strong authentication and encryption protocol Proper project budget & safety deposit Educating stakeholders through communication

Mitigation Steps

(How to Avert the Risks) PV usage

Negotiation

Feasibility: Risk and Timeline

Company Analysis Problem Analysis Strategy

Conclusion

13

ECO strategy is recommended to achieve their CO2 reductions through solar PV without compromising on negative financial or HSE effect

Offering Custom Fit Solutions Collaboration with Power Up Partners (Non-

profit)

C

Effect Visualization

E

O

Display Real-Time Solar Benefits after Company XX install solar PV, including cost savings, monitor PV performance, and reduced GHG emissions to deliver simplified results for Company XX.

Establishing a relationship between AAH, Company XX, and a non-Profit organization to build positive publicity for Company XX image as well as relationships to community

Company XX is offered wide range of options to choose from to fit production needs to find their best solution and maximize AAH’s revenue through upselling or additional income stream(s).

Reduce system outages &

malfunctions by 20%

20 positive publicity for Company XX across media

Increase initial revenue by 10%

through upselling

3 non-profit partners within 1

^st

year

Create USP and urgency for Company XX to drive purchase

Achieve 100% adaptability rating in the 1

^st

year

By implementing ECO strategy, AAH will deliver excellent service by reducing 150 kg CO

₂

e per hour with 90% lesser energy cost. AAH would benefit from IDR 8.158.728.846

total profit

Conclusion:

Thank You Michael Yoe

Cut R Alya Buleen Valencia Chandra

Michael Yoe

Cut R Alya Buleen Valencia Chandra

BC-009

∙ The calculation assumes that all devices work optimally for the given time with inflation rate of 4,3%

∙ The manufacturing factory is working seven days a week working 8 hours a day.

∙ No governmental subsidy for solar panel operation & overhead cost, including federal tax credits, however in this assumption, the MEMR Regulation No.

∙ 26 of 2021 on Rooftop Solar Power Plants Connected to the Electricity Grid for Public Interest License Holders (“Reg 26“) that became effective on 20 August 2021 applies.

∙ Company XX is providing enough flat roof space to install the solar array (2179m2).

Company Analysis Problem Analysis

Strategy

Conclusion

 

Appendix A1: Mathematical Model for Rooftop PV System - Technical Analysis

i = index of each type of load such as fan, lights, TV etc

E _day = energy per day

U _i = number of hours device type i is used per day

U _i = 8 hours (normal workday in Indonesia)

Pi = power rating of ith device type ni = number of devices of ith type

P _pv = total PV generation capacity required

Sd = average number of hours the sun shines at the site

d = de-rating factor, which takes into account the effects of efficiency and changes in the solar generation during the day

N _P = number of Solar Panels Required Po = power output capacity of each panel

nd = number of days of back-up power required

Vbat = voltage rating Ih = ampere-hour rating

DOD = depth of discharge of the battery system

N_bat = Number of Batteries Needed

DF = diversity factor,ratio of maximum demand to total load connected.

P_inv = Inverter Output Rating

S _y = Electricity consumed for factory

Ty = Electricity exported to grid in year y (kWh)

Py = Retail price of electricity in year y (IDR/kWh)

PTy = Electricity export price to the grid n = lifetime (years)

IR = Cost for Replacement (IDR) m = Lifetime of Inverter (IDR) OM = Operations and Maintenance r = discount rate

Assumptions Used

Mathematical Model Used

(Rosyad, 2020)*

Where

,

*Rosyad, Andri Y, Wahyudi, Candra AD. 2020. Profitability Assessment of PV Rooftop Implementation for Prosumer Under Net Metering Scheme in Indonesia

Company Analysis Problem Analysis

Strategy

Conclusion

Appendix A2: Cost-Benefit Analysis Calculation Table

The Gross Profit Margin is 73,7%, therefore this scheme is

profitable for AAH with 8,81 years Payback period

37.31%

34.23%

1.93%

10.36%

8.29%

3.12% ^4.76%

Solar Panels + Racking System Cost of Battery Cost of Inverter Cost of Charge Controller Total Cost EPC Company

Yearly O&M Main- tenance Cost Contingency Fund

Capital Expanditures Usage – by

Category

Appendix B1: McKinsey' 7S framework is used to assess and align the key elements of  the company Strategy

Develop a clear and concise strategy for achieving net zero emissions within the next five years. This should include a plan for implementing rooftop solar PV, as well as any other initiatives that may be necessary to reach this goal.

Skills

Invest in training and development programs to ensure that employees have the skills and knowledge necessary to support the implementation of the

rooftop solar PV installation and other renewable energy initiatives.

Structure

Consider modifying the organizational structure to better support the implementation of the net zero emissions strategy that could include creating

new teams dedicated to RE initiatives or reorganizing existing teams

Shared Values

Communicate the importance of achieving net zero emissions to all employees and align the organization's values and culture with this goal,

including programs to help employees understand their role in achieving goal

Style

Adopt collaborative and inclusive approach to the implementation of the net zero emissions strategy includes working closely with partners in Indonesia

and Japan, as well as engaging with other stakeholders

Systems

Develop systems and processes for managing the implementation of the rooftop solar PV installation, including the selection and supervision of EPC and

O&M contractors to ensure the efficient execution of the project

Staff

Develop a clear and concise strategy for achieving net zero emissions within the next five years. This should include a plan for implementing rooftop solar PV, as well as any other initiatives that may be necessary to reach this goal.

Appendix B2:    STEEP framework is being used to help evaluate external macro-environmental factors

Social

S

T

Tech

E

Economic

Environ

E

mental

Political

P

• Increasing awareness and concern about climate change and the need for renewable energy sources. In 2020, Renewables counts for 6,7% of all known energy shares in Indonesia. This grows closer to the average Asia renewable share which is 9,9% 

• Growing demand for electricity, both in rural and urban areas, growing 2,4% compared to the previous year. From 560,8 in 2020 to 572,5 gigajoules per capita in 2021

With ever increasing competitiveness of solar and wind power, integrating large amounts of variable power into the grid is becoming more and more relevant. For policy makers, the important question is whether and when integration of variable renewable energy is likely to become an obstacle to achieve energy diversification ambitions and climate targets This situation increases the likelihood for increased net metering coverage (sell solar power back to the grid, reducing the overhead cost for a battery system)

Solar-generated electricity is a more cost- efficient source of energy, and the cost of solar is continuously dropping. The levelized cost of energy generated by large scale solar plants is around $0.068/kWh, compared to $0.378 ten years ago in 2010. 

• Growing CO2 emissions, both in rural and urban areas, for 1,8% compared to the previous year from 29,6 in 2020 to 30,0 million tonnes of carbon dioxide per capita in 2021. By shifting to solar PV electricity, companies can contribute towards zero emissions. 

•  With only 2 seasons and Indonesia's strategic geographical location in the equator, solar energy thrives in Indonesia due to the extensive sunlight. 

The Ministry of Finance wishes to assess existing support schemes for RE development in Indonesia and develop a framework that will accelerate development in line with government targets. Indonesia has set ambitious targets for expanding electricity generation from RE sources. In order to encourage Indonesia’s solar PV industry, MEMR is applied to allow net metering to be more profitable for private companies and residentials.

STEEP analysis helps businesses

evaluate the impact of factors like

changes in consumer behavior, advances in

technology, economic trends, environmental

regulations, and political instability.