Australia: "[Utility scale] solar can genuinely compete without subsidies within three to four years."


pv magazine: When Australia’s Clean Energy Council and federal opposition presented a compromise position to the federal government regarding the Renewable Energy Target (RET) I couldn’t help feeling optimistic about the outlook for PV power plants in Australia. Since then I’ve become less optimistic. What do you think?

Jack Curtis: It is certainly gathering steam and there is a broader spectrum of stakeholder support. It does seem that things won’t be resolved overnight and I think it will be driven by incremental momentum. So obviously the Clean Energy Council put forward a position that is fairly broadly supported. Then a number of industry groups came on board. Now Labor has supported it.

I think it is at a point where there are not any more interested parties that have been involved in this process that aren’t supportive of the compromise position, except for the government.

So I think it is at a point now where it would be a crying shame for a proposal that is supported by pretty much everyone else on both sides of the fence, to not gain acceptance from the government over 1,500 GWh.

I don’t have any great insight at this point as to where the government is at, other than the fact that they have rejected it on the basis at least that industry couldn’t build the amount of capacity required – which I personally don’t believe is accurate. And so I guess it remains to be seen what happens yet.

What do you make of the claim that the government's most recent claim that the renewable industry won’t be able to build out the capacity required is based on? It seems to me that that particular argument came out of left field.

I guess there have been a number of arguments that first drove the need for a review of the RET, then why the RET target should be reduced. The review was focused on a power price impact, which is always a sensible place to start. Then their [the government’s] own review concluded that the RET would actually reduce power prices.

Then it became an oversubscription of supply argument, as grid electricity consumption was decreasing. But one of the main drivers behind the RET was to drive a new generation mix, so nothing about that has changed just because that electricity demand is reducing rather than trending up. The more recent one is that there is not enough capacity to be built and that it can’t be built in time, which I don’t think is accurate.

There are a significant backlog of projects that can be built with a firm concrete market signal. There really are a lot of other projects that could certainly be built within the timeframe that we have between now and 2020.

So I am not sure what is driving the government policy on that, but I think that it is probably one of the less credible reasons behind why an agreement can’t be met, especially when we seem to be arguing over 1,500 GWh.

If there is a solution found, what chance is there for large scale solar?

There has been a lot of commentary that a target of 33,500 GWh wouldn’t allow for a lot of large scale solar and I think that is a fairly accurate representation of what most people who are active on the solar side think. The efforts to try and find a way to bridge that in other respects have been helpful.

The one thing that you generally do get uniform agreement with, is that regardless of what the RET number is, it would be better if it were a more diversified generation mix, so not all wind for future deployment. That has been something that has had a wide range of support beyond a couple of wind companies.

The challenge has been getting a structure in place that enables some projects to be deployed straight way, which would be wind, but reserve enough support in the program, or an ancillary mechanism within the program that would allow for solar the opportunity to compete in the outer years.

It is not looking for large scale solar have some extraordinary free ride, but it would be more giving large scale solar the potential to compete with wind and drive a more diverse generation mix, which most people want. We need to find a way to incentivize the market to look to large scale solar through to the outer years or find a way to bridge the first two or three years.

95% of the stakeholder mix, including government, don’t want wind to dominate the RET and would be very happy to see solar play a bigger role.

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Well if it does come down to cost then, at what can large scale solar roughly be built at?

Right now depending on the usual parameters you can see solar at around AUD$120/MWh (US$93.8/MWh) to AUD$140MWh ($109.4/MWh). To compete with wind it needs to be at least AUD$100/MWh ($78.1/MWh) – there needs to be some qualitative factors that help close the gap to where you would see a pure wind PPA price right now around AUD$85/MWh ($66.4/MWh). From a pure delivered cost of electricity point of view I think solar needs to be around the AUD$100/MWh mark to be in the game.

The point being is that if the gap was twice as much then it would be somewhat of a moot argument to be having, but given solar has demonstrated extremely aggressive cost reduction trajectory over the past five years and still has a lot of ground to cover and especially in Australia where there is a lot of potential for local cost reduction, I think there is a very sensible argument around ‘solar can genuinely compete without subsidies within three to four years’ given the RET was always intended to achieve a more diverse generation mix and there is a wide group of stakeholders that agree with that.

It would be best that any resolution on the RET would also accommodate a way for solar to maintain that optionality.

What do you make of the argument that large-scale PV has other advantages to wind that make it more attractive?

I think that solar needs to get to AUD$100/MWh while wind is AUD$85/MWh and the delta between there will be covered by those qualitative factors and so I think for something like the load generation profile confluence with peak demand that would generally attract a premium of between AUD$5 to $10/MWh. I think something more binary restrictions around community pushback, permitting issues, environmental impact I think that’s definitely going to help close the gap.

It is a function of two things: Firstly, if the economic equation was close enough, what would procuring entities prefer to buy and the answer is definitely solar. Secondly, the question is then how much of that qualitative benefit can you attribute a quantitative metric to? And I think that is what brings it back on a pure cost point of the view, there will be an interest in solar without taking into account the pure economics.

If a compromise on the RET isn’t reached?

It leaves us in a pretty dire state. It is really going to curtail any new development of any technology, which isn’t a great outcome.

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