The outlook for PV power plants Down Under

On a blustery winter’s day, shortly after midday, a little over 23 kms (14.3 miles) from the Australian capital city of Canberra, Spanish and Australian dignitaries gathered to open Australia’s largest PV power plant. The 20 MW Royalla Solar Farm may not be vast in terms of scale, but it did become the largest operating PV power plant in the country when the switch was flicked.
The project hadn’t been without its critics. In particular, a local group had protested the park since the project was announced in 2012. Forming a group called “Solar Monstrosity,” locals had agitated against the utility scale development, saying that it would affect “rural vistas” and potentially lead to decreases in the value of local properties. The group never gained major traction, and the project’s development went ahead, supported by an ambitious Territory government renewable energy initiative. Under this program, the Royalla plant was granted the 20-year FIT, and a consortium of domestic and overseas investors funded Royalla. Spain’s Fotowatio Renewable Ventures (FRV) realized the project.

Ambitious goals

Attending the opening of the farm was FRV’s CEO Rafael Benjumea, along with Spain’s Ambassador to Australia Enrique Viguera and Foreign Minister José Manuel Garcia-Margallo. Leaving to one side the rare sight of Spanish government officials supporting solar, Australian Capital Territory (ACT) officials also attended the event and spoke of the project’s role in the Territory’s ambitious renewable target.
“The 83,000 panels that make up the Royalla solar farm are a tangible example of the ACT Government’s strategy to meet our 90% renewable energy target by 2020 and fulfills our commitment to the overwhelming majority of Canberrans who support renewable energy technology and the government’s initiatives,” said Simon Corbell, ACT’s Environment Minister. “This target will do the heavy lifting in achieving the emission cuts needed to reach the territory’s legislated greenhouse gas reduction targets that require a 40% cut on 1990 level emissions by 2020.” Within days of Royalla’s opening, another PV power plant project got off the ground in the Territory. The 13 MW Mugga Lane Solar Park received planning approval on September 5, with the Australian subsidiary of Chinese utility-scale PV developer Zhenfa, which is also active in Australia as a wholesaler and commercial installer, selected to develop the project. The Mugga Lane project is additional to another project in the ACT, the 7 MW OneSun Capital project, developed by Elementus – an Australian solar park developer that had previously realized two projects in Spain.

ACT policy

The ACT aims for 650 MW of renewable energy by 2020 to achieve its 90% target, and it has been awarding projects under a reverse auction mechanism. The ACT government claims that the target will add AUD$4/week on to households’ electricity bills over the next six years, with this amount beginning to fall after 2020.
The effect the policy is having on PV power plant development in the ACT is clear, and Environment Minister Corbell claims that the Territory is becoming a center of renewable energy research, through the Australian Capital University, and for the renewables sector in the country. However, in Canberra itself (the seat of Australia’s Federal Parliament), politics is playing a decidedly different role.

RET regrets

Since its election a little over one year ago, the Conservative Federal Coalition Government in Australia has been winding back mechanisms under which renewables have been developed in Australia. The most recent action has been the review of Australia’s national Renewable Energy Target (RET) (see p. 40). The effect of the review and the rhetoric coming from the government against renewables and the pressure they are supposedly having on power bills, has been to halt PV power plant development in Australia altogether.
While not exhaustive, Australia’s PV power plant projects (> 1 MW) table above makes for exciting reading for utility scale developers and suppliers. However, many of the planned projects will likely never be realized.
Given the propensity of proposed projects to fade away, rather than their cancellation being announced, there are many proposals that are in all likelihood already dead.
The uncertainty regarding the RET alone has stalled investment, as power generators and major offtakers have little incentive in signing PPAs with the development companies looking to install the PV power plant projects. A further impediment is that Australia’s world-leading carbon price mechanism has been abolished by the Federal Government.

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First Solar’s VP Asia-Pacific region Jack Curtis says he’s doubtful any of the planned projects will go ahead in the current environment. “I think it’s worth distinguishing between those and the others on the list that are either constructed, under construction, or have a clear path to commencing construction,” says Curtis. Looking towards a scenario where the government reduces the RET of 41,000 GWh or renewable capacity to be added by 2020, Curtis reports that First Solar would reassess its business and investment in Australia.
“The consequences of a reduction to the 41,000 GWh target or a period of prolonged policy uncertainty would negatively impact the industry and thousands of jobs,” says Curtis. “First Solar would be forced to reassess the market opportunity that remains and the level of resources and commitment that such an opportunity would warrant.” In years past First Solar has been known to dramatically reassess opportunities, with the vacant Frankfurt (Oder) manufacturing facilities in Germany’s east a recent example. But First Solar is not alone in its pessimistic outlook.
When asked in an interview with leading Australian renewables website RenewEconomy whether FRV will continue to invest in Australia if the RET review recommendations are implemented, the company’s CEO Rafael Benjumea was unequivocal.
“While it is comforting that the Review Panel has indicated committed projects will be protected, our investment in the development portfolio will be worthless,” said Benjumea. “We are surprised at the extreme views that have emerged within Australia in areas such as renewable energy and we hope that a sensible outcome will be found from the current review of the [RET] that will encourage continued deployment of renewable energy.” Other developers are also frustrated by recent developments.

Auxiliary effects

Aside from the impact on the solar industry if the utility scale sector in Australia grids to a halt, other Australian industries are set to be affected. First Solar reports that it has been producing 56.3% of it materials (excluding modules) for its three major PV power plants currently under construction: Nyngan, Broken Hill, and Weipa. The domestic materials spending totals $66 million (US$60 million) additional to the $72 million (US$65 million) on local contractors.
First Solar is also particularly proud of the mounting system supply partnership it has forged with local metalworkers IXL. The story is a good one in that IXL was one of the Australian manufacturers adversely affected by the decline in the country’s car manufacturing industry.
“IXL has previously provided First Solar with a cost-effective, Australian-manufactured framing capability for the 10 MW Greenough River Solar Farm (GRSF) in Western Australia in 2012,” says Curtis. “Today, First Solar is sourcing materials within Australia on an economically viable and competitive basis.” The 10 MW GRSF came with a hefty price tag at $50 million (US$45 million) and is jointly owned by GE Financial Services and state-owned utility Verve Energy – which has subsequently been remerged with its retail arm and is now called Synergy.
The vast distances involved at times in Australia play a role in project cost and the modules for the GRSF were shipped from Malaysia, before arriving in Geelong on the east coast of Australia and then trucked across the country. But First Solar’s Curtis believes that sourcing local components and developing local expertise will further drive down the LCOE of PV power plants Down Under.
“It is important to remember that prior to 2012 there was an absence of a utility scale solar industry in Australia,” says Curtis. “So in a relatively short period, project experience has given the opportunity for local suppliers and contractors to build a capability and begin to reduce the cost of delivery through scale and improvement.” Mark Rayner was the project manager on the GRSF for Synergy and he told pv magazine that the high price tag was partly as a result of additional grid infrastructure that had to be put in place. Rayner had hoped that the project could
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be doubled or even quadrupled in size, and there is certainly no lack of space in the vast open plains of Western Australia’s Midwest region.
Perhaps tellingly, Rayner is no longer with Synergy, and there are no signs that the GRSF will be expanded. There are certainly power-hungry industries nearby including a reverse osmosis desalination plant. But given uncertainty over the RET, the impetus to develop renewable electricity sources have evaporated under the harsh Australian sun.

Existing assets

This is particularly true of existing power generators. The combination of Australia’s now defunct carbon price and the RET was seeing low-OPEX renewables flood into the country’s two electricity grids and thus seeing wholesale electricity prices decrease. With falling electricity demand – due to a combination of a slowing economy in the wake of the GFC, declining demand for primary resources from China, energy efficiency measures and ever-growing residential and commercial rooftop PV – the economics of Australia’s aging fleet of coal-fired power plants were in terminal decline.
The retirement of polluting assets is precisely the design objective of decarbonizing policies. But perhaps it is exactly why these policies appear likely to be the victims of their own success.
In the Warburton RET Review handed down to the Federal Government in August, the review panel recommended that the RET be either closed to new entrants or significantly reduced to, “protect the broader community from the cost of subsidizing unnecessary additional generation capacity if electricity demand continues to fall.” At the same time, the review noted that the RET as it currently stands will not lead to an increase in electricity prices. What a reduction of the RET will do will allow mothballed coal power plants to come back into use “if wholesale prices recover or at least protect the revenues of existing generators. ”

Consumers lose

The final irony is that in the location of Australia’s first PV power plant the GRSF, Western Australia, consumers stand only to lose as a result of these and other policies supporting coal generators. Electricity prices remain relatively high in the state at AUD$0.23/kWh ($0.20/kWh), largely due to an overinvestment in grid infrastructure and unnecessary peaking gas-fired generating capacity, when electricity prices were expected to rise. Only large consumers, 50 – 100 MWh per annum, have the option of turning to alternative electricity providers to the state-owned “gentailer” Synergy.
On top of this, the state government (so taxpayers) are subsidizing electricity provision in the state to the tune of $600 million (US$541 million) per year. A situation compounded by the conservative state government’s decision to fund the refurbishment of a 1960s-era 240 MW coal power plant, Muja AB. The price for the revamp, after technical problems, came in at AUD$336 million ($305 million) and will result in the plant’s life being extended by 15 years. These figures are from a KPMG report to the government on the refurbishment project leaked to pv magazine .
In an interview with ABC Radio earlier this year, the Western Australian energy minister Mike Nahan said that he would be willing to divest the government of all its electricity assets if there was a buyer for the unprofitable generating assets and unviable system.
By contrast, the Australian Capital Territory is locking in electricity prices through to 2020 by investing in renewables and regardless of fluctuations in gas, coal or oil prices. After 2020 prices are set to fall.
PV power plants and wind installations are flourishing under the ACT policy and have stalled in WA and elsewhere in the country. As to whether utility scale PV is competitive in Australia, First Solar’s Curtis says that it’s a no-brainer in offgrid and remote locations, and that against new-build capacity, it’s a matter of against what PV power plants are competing.
“Competitiveness to us is less about competing with established coal plants that have been operating for decades, and more about competing with alternate providers in areas where there is an energy demand,” says Curtis.
“From a fuel perspective, we think we compare favorably given Australia’s excellent solar resource, the positive correlation between daylight hours and energy demand, and the obvious benefits that come with a fuel that is delivered for free.”