It’s not exactly helpful to the renewable energy cause when government initiatives like the Solar Flagships program run into trouble.
Big solar projects should work in a country with abundant sunshine, but when they can’t find someone to buy the electricity they would produce, known as power purchase agreements, then they can’t get funding to make them viable.
While the government thinks about what to do next to get big solar projects going, perhaps they should look around for some alternatives.
In fact, the $1.5 billion Solar Flagships program would get a far better return if the funding were spent on rooftop solar.
This example shows how it could be done.
Just say the $1.5 billion were given to public hospitals in Australia to fund solar energy for them.
There are around 750 public hospitals in Australia – so the funding would mean $2 million each.
For that, at current market prices, each hospital could install solar on its rooftop which would have a generating capacity of around 700kW and yield approximately 980,000kWh of energy a year, depending on location.
On a conservative estimate, one could assume that average electricity cost per hospital would be about 15 cents a kWh and so the new solar systems, which generate electricity for free once installed, would save around $147,000 a year for each hospital.
For the total 750 hospitals, they would be generating 735GWh of energy and saving over $110 million a year in energy costs.
At times of hospitals struggling to meet ends, you’d like to think the hospitals would be quite grateful to be given a route to cost saving rather than the next band-aid solution.
Also, at the risk of stating the obvious, the underlying reason for installing solar is that is a healthier alternative to carbon fired power.
The energy-saving program on hospital rooftops, in replacing traditional power, would lead to over 700,000 tonnes of greenhouse gas emission reductions, on the basis of 1kg saved per 1kWh of renewable electricity generated.
These calculations aren’t rocket science but just a reflection of what is happening in energy markets today, where the cost of solar is coming down while traditional coal-fired power is going up.
Over the past few years, the cost of solar panels has been plummeting as their key ingredient, silicon, has fallen in price from $450/kg in 2008 to just above $25/kg today.
The contrast in traditional electricity cost is becoming just as startling.
Average energy bills in NSW now show a cost of between 20 and 30 cents a kilowatt hour, reaching 43 cents at peak, while solar energy costs between 5 and 7 cents a kilowatt hour to produce over its lifetime.
Pricing of electricity in NSW is governed by the Independent Pricing and Regulatory Tribunal which approved a 17.6 per cent lift in prices for 2011 and is tipped to allow a 20 per cent increase for 2012, meaning the differential with solar is set to widen further.
The gap between cost of solar and traditional power is getting greater in retail markets but it is tight in the wholesale markets where the Solar Flagships projects would operate.
These large-scale solar projects would be selling electricity at around 6 cents a kWh into the national electricity market, which is why they have been struggling with their funding equations.
If you install solar on a rooftop and offset consumption, as opposed to selling into the wholesale market, you are likely to get a much better return, in the area of four times greater.
The reason all this is important sometimes gets lost.
Australia still actually has targets for the reduction of greenhouse gases, which is for them to be 80 per cent below 2000 levels by 2050. Two independent researchers have reached strong conclusions about this in recent times.
Last November in his Quarterly Essay, Andrew Charlton pointed out that Australia would need to increase clean energy facilities tenfold by 2020 if it is to meet its target of reducing carbon emissions by 5 per cent for that timeline.
Just recently, the Grattan Institute released its paper about Australia’s energy future and concluded that government has no choice but to foster the adoption of renewable energy if the country is to meet renewable energy targets.
The Institute believes the private sector on its own cannot overcome some of the barriers to deploying low-carbon technologies, such as transmission connection hurdles, subsidies to incumbent technologies and high finance costs for new technologies.
How government should help will be the subject of a future Grattan Institute paper, but in the meantime, there does appear to be a more economical solution to the Solar Flagships dilemma now facing the government.
Jeff Bye is an engineer and general manager of CBD Solar