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Published on April 7th, 2014 | by Giles Parkinson

15

Australia’s Plunging Cost Of Solar Energy (Stats)

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April 7th, 2014 by
 

Originally published on Renew Economy.

It’s a pretty consistent theme on RenewEconomy, but given the apparent ignorance in the mainstream media, it’s worth banging on about: solar energy is delivering cheap energy to Australia’s home and businesses.

Here a few graphs that bring some new insight into the falling cost of rooftop solar PV in Australia – both for households and for businesses.

They were prepared by Patrick Greene, the business development manager for solar developer Ingenero at the 2XEP conference in Sydney. Some will be surprised by their conclusions.

Greene fed his calculations into the NREL online calculator to come up with estimates for the levellised cost of energy for rooftop solar at commercial scale rooftops (100kW or more), and for smaller rooftop systems.

It gives three figures on LCOE (levellised cost of energy), based on various estimates of the “discount rate” – the value of money over time – with around 7 per cent being about the standard. At this rate, and not including large scale renewable energy certificates, the LCOE of rooftop solar is 14.1c/kWh.

The second number shows what it means for smaller systems, which get another form of certificate, known as STCs, as an upfront payment. According to Greene’s calculations, the value of solar is now below 10c/kWh. To get the subsidy free price would require adding about 30 per cent back into the cost.

“People are told that solar is too expensive,” Greene says. “But we have seen a staggering reduction of the cost of solar in the last couple of years, so I hope that these graphs frame what the actual cost of solar is.”

ingenero lcoe

For what this means for people installing solar on their rooftops, the next two graphs are instructive.

The first shows the payback on a smaller system, one that qualified for STCs, for a business in Adelaide currently paying 33c/kWh for grid based power. The payback is less than four years.

ingenero rooftop 1

The next graph is for a larger system for a bigger user that gets a cheaper rate from the local utility – 15c/kWh. The installation still saves money, but it is a much longer payback, possibly too long for many businesses.

ingenero rooftop 2

All of this is causing some fierce push-back from the utility industry. Greene and other speakers cited numerous ways that distributors are seeking to slow down the uptake of solar – one is by drawing out the application process (taking 65 business days for each amendment or query), requiring systems to be installed to stop exports back into the grid, or simply refusing the installation.

That, of course, leads to users thinking that they might be better off without the grid. How far is that away?

Ingenero’s Greene used this graph below to show that it was not as far off as some people think. It is from the Vector Energy offering in New Zealand, where the local distributor is offering solar plus storage packages on leasing arrangements with their customers. (Vector is doing this to avoid having to build new poles and wires).

The key figure comes in this table. Look at the bottom line, it is for the system with 5kW of solar and 12kWh of battery storage. That’s enough to look after all the needs for the average Australian house. The cost: $3,000 upfront and $115 a month.

It is likely subsidised to some extent by Vector under their trial, but it shows that solar and storage is not far from being a viable solution. And that, may just turn the industry on the head – instead of utilities dictating tariffs to consumers, it might be the consumers (with a viable alternative) that can dictate terms to the utilities. Imgine that.

ingenero vector 1

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About the Author

is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia's energy grid with great interest.



  • Ronald Brakels

    A little background: Many businesses in Australia are going to want a 9% or higher return. That means in the first graphic they are going to be closer to the 10% discount rate than the 7% discount rate. However, many businesses do pay over 17 cents a kilowatt-hour for electricity during the day, so solar is still going to be an attractive option for them. Feed in tariffs tend to be pretty minimal here so rooftop solar is going to be the most attractive to businesses that have a steady load through the day rather than just nine to five, so it would better suit a supermarket than a sporting goods shop. But as the price of solar continues to fall (and if grid electricity prices continue to increase) pretty much all businesses that own roof space will find it worthwhile to install.

  • ven sonata

    We are an off grid large community for the last10 years in Canada (51degree latitude)

    we generate 90% by solar panel and 75 kwhr battery bank. The panel system is a mere 3.4 kwhr set up. We generate, store and use 5000 kwhr per year. We average 15 people in residence. Batteries last 15 years at $140 per kilowatt storage. so 75 x140 = $10,500. solar panels at $2.50 per watt installed = $8500. total $19,000.

    Make it $20,000 BAtteries 15years x 5000 kilowatts= 75,000. divide by 10,500 dollars 14 cents/ kilowatt. panels 5000 x 30 years= 150,000kwhr divide by 8500 = 5.5 cents kwhr!!! Add together 20 cents Kwhr. So if your grid price is that or above it makes economic sense. The only way to go cheaper is battery decline by 3 fold to $50 kwhr. That is very unlikely but that would give you 10 cent electricity off grid.

    • Bob_Wallace

      What’s your backup for that other 10%?

      • vensonata

        our back up is diesel generator 12 kw. This year though we are going for the holy grail…100% solar year round by tripling solar to 10kwhr array.

  • Will E

    thank you Bob. for the link.
    work it out tomorrow.
    I make a lot of money with solar and heat pump.
    it is cheap, works perfectly and energy bill zero.
    in the Netherlands Solar is 1 to 1
    so Australia must be bloody cheap with 1 to 4

  • Banned by Bob

    The economics of Creative Destruction at work; beautiful.

  • Will E

    calculate.
    Australia gets 4 kWh for 1 kWh installed Solar.
    google solar panels China and find a Solar Panel price of 1 US dollar 1 kWh.
    so 10,000 kWh solar panels cost 10,000 USD
    10,000 USD over a period of 25 year that is an investment of 400 USD a year.
    10,000 kWh Solar panels generates in Australia 40,000 kWh every year.
    so you get 40,000 kWh electricity for 400 USD in one year.
    price of Solar Energy is 400 USD divided by 40,000 kWh is
    1 US dollarcent 1 kWh.
    is this correct????

    I think this is the way to calculate.
    or did I make an error????
    I really like to have an answer on this.
    if its true?
    Solar electricity for 1 cent 1 kWh

    • S.Nkm

      I don’t think you understand the difference between power and energy.

    • RamboSTiTCH

      One day we may be able to find a 200W solar panel selling for $200.

      A 1 kilowatt (KW) solar electric system includes approximately (5) 200 watt photovoltaic modules. This may one day equal $1,000. (Not to mention mounting hardware, inverters, wiring, licenses/permits, and labor)

      (5) x 200 watts = 1,000 watts or 1 kilowatt (KW)
      This 1 kilowatt system would make 1 kilowatt-hour of electricity for every hour it is in the sun.
      In
      Minnesota, for example, there is an average of 4.6 good sun hours every day (more in
      the summer when the days are longer, less in the winter when the days
      are shorter).
      1 kW solar electric system x 4.6 sun hours/day = 4.6 kilowatt hours/day of electricity.

      • Bob_Wallace

        A 200 watt panel selling for $200? You thinking prices will rise? ;o)
        Here’s a good guide to panel prices. You can purchase single panels for less than 80 cents/watt.
        http://www.ecobusinesslinks.com/surveys/free-solar-panel-price-survey/
        Right now rooftop solar in the UK, Australia and Germany is being installed for $2/watt.

        Utility scale solar (solar farms) is being installed in Italy for $1.20/watt and in China for $1/watt. The US seems to be dropping under $2/watt, we were a few pennies higher a few months ago.

        $1/watt installed. Almost certain that will happen for large scale installations. Rooftop should drop well below $2/watt.

        • RamboSTiTCH

          I’m going shoppin’!

    • Bob_Wallace

      Solar panel price is about $0.70/watt. Likely cheaper if buying in large quantities.

      Australia average solar hours in AU are what? 6 hours would be a CF of 25%. It’s probably a bit lower than that, perhaps 22%.

      1,000 kW of panels would generate 10,000 * 0.22 (CF) = 2,200 kWh per day. 803,000 kWh per year. 32,120,000 kWh over 40 years.

      1,000 kWh of panels at $0.70/watt would cost $700,000. $0.022 per watt.

      That’s only panel price. And there would be some output drop per year (~0.5%). Might be better to assume about 90% of the output.

      (Someone should check my math. First cup of coffee has not yet been installed.)

      You’re trying to figure out the cost of solar electricity? If so, the best thing to do is to calculate the LCOE (levelized cost of electricity).

      Here’s a pretty handy calculator.

      http://www.eia.gov/electricity/annual/

      If you need some help using it just post back.

      • Ronald Brakels

        The average installed price for solar is now under $2 Australian. That’s about $1.80 US at current exchange rates or about $2.45 US without our Renewable Energy Target subsidy.

        While in most of Australia optimally aligned solar panels will have a capacity factor of about 25% or more, we delibrately live in the less sunny areas of Australia on account of how we die less that way. Capacity factors for optimally aligned panels in various capitals are:

        Darwin: 24% (population 130,000)
        Brisbane: 21.5%
        Sydney: 19.7%
        Canberra 20.4%
        Melbourne: 18.4% (Water will actually fall from the sky in this city)
        Adelaide: 20.5%
        Perth: 21.6%
        Hobart: 17.4% (population 216,000. Slightly higher if you count heads instead of bodies.)

        Drop off in panel performance is not really a problem. They overperform when new in Australia and slowly decline to spec.

        One will need to account for the fact that roofs are rarely optimally aligned. If one is going for maximum electricity production expect to lose at least 10% of what an optimally inclined panel would generate. However, many people intentionally face panels to the west and sometimes east to maximise self consumption. As a result Australia’s rooftop solar operates at a little under 80% of capacity at noon on a cloudless day, but energy generation is more spread through the day than it would be if all panels were optimally aligned.

    • cravenhaven

      Will E.

      You have a few of the numbers incorrect, so correcting the KWH and KW, and changing the calculation to $1/watt which is approximately the current solar panel prices, I calculate the following:

      Australia gets 4 kWh for 1 kW installed Solar.
      google solar panels China and find a Solar Panel price of 1 US dollar 1 Watt.
      so 10,000 kW solar panels cost 10,000,000 USD
      10,000,000 USD over a period of 25 year that is an investment of 400,000 USD a year.
      10,000 kW Solar panels generates in Australia 10,000*4*300 = 12,000MWH every year (assuming average of 300 sunny days/yr ?).
      so you get 12,000MWH electricity for 400,000 USD in one year.
      price of Solar Energy is 400,000 USD divided by 12,000 MWh is
      3 US dollarcent 1 KWh.

      I think the average generation on a fine day in Southern Australia is around 4KWH for a 1.5KW system, so your figures might be a bit high, but it depends on where in Australia the system is built.

  • Raymond Del Colle

    “The cost of clean energy has dropped dramatically in recent years — even faster than experts expected.” http://clmtr.lt/c/FrO0Bbr0cMJ

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