Published on May 3rd, 2012 | by James Martin II53
The State of Commercial Solar Power in Australia
May 3rd, 2012 by James Martin II
Commercial-scale and utility-scale solar power are viewed as the next frontier for the solar industry in Australia. The incentives that drove the wild boom in residential solar power — state-run feed-in tariffs coupled with federal up-front discounts in the form of renewable energy certificate — have mostly died down, and at present, the home solar market has reached a fragile sort of equilibrium. As has been widely noted, the cost of solar PV has plummeted in the past several years. This is a game-changing fact for solar power and for the future of electricity generation.
There are a number of large-scale projects in the pipeline, including the Solar Flagships projects — the proposed but beleaguered Moree Solar Farm and the Solar Dawn consortium’s CSP plant in Chinchilla, Queensland. Both of these are now on shaky ground, due to the withdrawal of a key partner and failure to secure a PPA in the case of the former, as well as a change of government from Labour to Liberal in Queensland that promises to see a withdrawal of funding in the case of the latter.
But there are a number of other large-scale projects and incentives going forward. For example, there are high hopes for the ACT’s large-scale feed-in tariff — which received a whopping 49 submissions in its opening round — to show the rest of the nation how it’s done. The winners are expected to be selected within the year. Meanwhile, Western Australia’s 10MW Greenough River Solar Farm carries on, and a renewable energy think-tank has even recently pitched a well-argued proposal for replacing 2 ageing coal-fired power plants in Port Augusta, South Australia with concentrating solar power.
In addition to these high-profile projects, there are also numerous other medium (~100kW) to large-scale project in the works or already operational throughout the country, including the Nullagine and Marble Bar solar plants in remote Western Australia, and the University of Queensland solar array — currently Australia’s largest rooftop array. Solar PV and solar thermal combined, however, still made up less than 2.5% of Australia’s electricity generation in 2011, according to the Clean Energy Council’s Clean Energy Australia 2011 (pdf) report. 90.36% of all generation came from fossil fuels — mostly coal.
If we wanted to use a metaphor, one could liken Australia’s utility-scale solar power industry to chicks in an incubator who are just beginning to break out of their eggs. To take this awkward metaphor further, more eggs could potentially be on the way, but only if the first few reach a stage of development advanced enough to move out of the incubator to make room for them, and to give their rearers some confidence in their own ability to bring birds into the world. If this happens, Australia could start to see its large-scale solar industry reach its full potential, and, well, take flight to become a large chunk of the country’s generation portfolio.
Australian Politicians Refuse to Acknowledge the Potential of Commercial Solar Power (and Solar PV in General)
This sort of success will be predicated on a number of factors, and many feel that what is really needed right now is a number of projects that demonstrate the technical and financial viability of these projects for Australia. Coal-fired generation technology is well-understood and widely deployed here, and is therefore associated with a low level of risk; from an investor’s point of view, it is a known quantity and therefore seen as bankable technology (at least for now).
This is not yet the case for utility-scale or commercial solar power in Australia, especially after all the turbulence surrounding incentive schemes for the industry. To make matters worse, many Australian politicians still have their heads in the sand with regard to renewable energy, despite ample evidence that renewable technologies can deliver. Shining example and case-in-point is Germany, whose renewable capacity is not only reliably producing a good chunk of the country’s overall generation, but is even starting to show signs of its growing ability to drive down electricity prices, thanks to the merit order effect. It goes without saying that expansive, sunny Australia’s solar power potential easily dwarfs that of smaller, colder Germany. So what’s going on?
Once some larger products are on the ground and proving themselves, more will likely be quick to follow suit, especially with the price of solar technology dropping steadily. As Australian solar industry analyst and veteran Nigel Morris of Solar Business Services wrote recently about solar PV: “Those on the inside of the PV industry can smell economic parity; we can see it and taste it in many parts of the world, including Australia’s retail market and we know how fast it is going to accelerate. It won’t come without bumps and wobbles and it isn’t a silver bullet. But it is grossly underestimated and with their own confirmation bias I suspect the deniers are failing to open up to what’s really going on around them.”
Morris says that the 3 ‘golden rules’ required for large-scale solar project developers to get projects on the ground are: 1) knowing the market, 2) getting engineering and business advice, and 3) understanding finance. Making specific reference to Solar Choice’s Operational Lease package for financing big projects, he notes that this last point is integral for ‘staying in the game’.
Do what they may, however, commercial solar power project developers, at least for the time being (or until 2020), will need some kind of government support to reach the price-points that will make their projects economically worthwhile. Germany and Spain, as the world’s loss-leaders for solar, have already done much of the heavy lifting in helping to drive the price of solar technologies down to their current historically low levels. The rest of the world can now stand on their shoulders.
Having commented and advised extensively on the state of the utility/commercial solar industry here, Morris recently wrote an eloquently worded open letter to some high-profile government leaders on the topic (copied in below).
Dear respected leaders,
I would like to bring your urgent attention to the report by McKinsey & Company titled “Solar Power, Darkest before Dawn”. McKinsey are one of the most respected consultancies in the world and are noted for their conservatism. The findings in this report highlight the astounding growth of PV and the crucial role it will play in the world’s energy mix in the near term. They echo the upgraded forecast for solar PV issued recently by the IEA, arguably an even more conservative organisation and those of many others including my own company SolarBusinessServices.
It highlights the fact that solar PV is economic NOW in selected markets and is tantalisingly close to being economic without subsidies in many more.
Quoting the headline statement – “Those who believe the potential of the solar industry has dimmed may be surprised. Companies that take the right steps now can position themselves for a bright future in the coming years”.
If only our elected leaders could take this advice and provide meaningful support.
With minor exceptions, Australian Government policy for solar PV, at all levels, remains meek, dis-jointed and inconsistent.
We see State leaders continuing to use solar PV as a completely unjustified scape goat for rising electricity prices.
We see an enormous focus on protecting the viability of coal-fired generation and the potential of CCS from Federal leaders.
We see lacklustre and un-coordinated policy foresight from opposition, that belies the magnitude of the industry.
And we have an Energy White Paper, the business plan for our energy future that is so wrong with respect to solar PV it virtually ignores it.
I do not deny that we need an energy mix, nor is solar PV a silver bullet. However, I remain perplexed and astonished at the lack of will, fortitude and vision when it comes to the most obvious resource that Australia has.
What is it going to take for our leaders to wake up and embrace this unique opportunity ?
I hope that this report might help convince you that solar PV, even by the most conservative estimates, has a staggering and completely underestimated potential in Australia and I look forward to seeing co-ordinated policy that supports rather than hampers solar PV .
The Australian solar industry has its fingers crossed that leaders will heed Morris’ words.
Top image: One of Port Augusta, South Australia’s two coal-fired power plants. These plants provide 30% of South Australia’s power. Image via Alinta Energy.
Drive an electric car? Complete one of our short surveys for our next electric car report.
Keep up to date with all the hottest cleantech news by subscribing to our (free) cleantech newsletter, or keep an eye on sector-specific news by getting our (also free) solar energy newsletter, electric vehicle newsletter, or wind energy newsletter.