Soft-cost learning curve key to ARENA’s large-scale program

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Australia’s PV power plant sector looks likely to achieve major cost reductions under the first round of the Australian Renewable Energy Agency’s (ARENA) large-scale solar program. With international developers such at Europe’s juwi, Neoen and FRV and Chinese giants Canadian Solar and Suntech have all made it through the first competitive round of the program, announced today.

Large Australian utilities Origin Energy and Infigen Energy have also been successful in the first round, along with independent domestic project developers Genex, Windlab, APA and Ganawarra Solar.

All shortlisted projects would deliver an LCOE below AU$0.135/kWh (US$0.0937/kWh), and ARENA CEO Frischknecht has indicated that below AU$0.10/kWh (US$0.069/kWh) could be feasible.

“That is where we would like to get to, but you can’t get to that point without any volume in the market,” Frischknecht told pv magazine. “Experience will drive the cost down.”

ARENA is specifically looking towards PV power plant experience in Australia delivering reductions in the area of soft costs.

“Something like 60% of the cost of a large-scale solar farm is local cost so it is not just the cost of the modules and the inverters, which are imported into Australia, it is the cost of construction, the cost of finance, the supply chain costs,” said Frischknecht. “There are fairly high contingency margins and it is going to take developers longer to do this job than if they have not done it ten times. Of course, there are many unique factors in Australia around network connection, working with the local labor force, local planning rules and those sorts of issues.”

Frischknecht explained that the shortlisted projects were assessed by factors including cost, the ability reach financial close quickly, the ability to execute and community engagement. Innovative factors such the integration of storage was not included, although such projects can apply to ARENA for funding under its existing activities outside this first large-scale solar scheme.

However, that is not to say that the shortlisted projects are unremarkable. RenewEconomy observes that for some of the projects solar will be combined with wind and other renewable technology. Goldwind Australia has proposed siting a 20 MW solar farm alongside its existing wind array, Infigen also plans to do the same with a 39 MW array at its Capital wind farm, and Windlab has proposed 19.2 MW of solar to add to its existing wind capacity at its Kennedy installation.

“Genex (50 MW), meanwhile, is looking to combine solar PV and pumped hydro, while Ratch (42 MW) is considering solar PV with a range of other technologies at Collinsville, where a coal-fired power station has been closed down,” notes RenewEconomy.

The shortlisted projects can apply for debt finance under the Clean Energy Finance Corporation’s (CEFC) complimentary PV power plant program. ARENA notes that projects that may not have a PPA or offtake agreement particularly stand to benefit from the CEFC’s finance offering.

“There is a very strong appetite amongst financial investors to provide debt for projects that have some sort of revenue certainty either through an offtake agreement or a CfD with a statement government or something like that,” said Frischknecht. “Absent an offtake agreement or an equivalent it becomes very difficult to sign a debt finance agreement [outside of the CEFC].”

“One of the purposes of this round is to mature that market, and I would be surprised that in two years from now if there wasn’t a vigorous market even for projects that didn’t have revenue certainty and were selling into the spot market,” said Frischknecht.