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Australia waits for a $64 billion wind and solar boom

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Investment bank Citi says there is a $64 billion market opportunity for solar and wind energy installations in Australia, which it says rates as the most attractive market for solar in the world based on costs.

A report by Citi into the global investment opportunity for renewables says $5.6 trillion of wind and solar energy could be invested around the world without added costs for extra infrastructure or back-up – which it describes as its “sensible investment” scenario, or its near term opportunity.

Its estimate for Australia suggests that up to 12GW of solar (an investment of $26 billion) could be absorbed into the Australian grid without added costs, and up to 16GW of wind ($38 billion).

Australia currently has about 2.6GW of solar and just under 3GW of wind capacity. Citi’s estimate is based on a 20 per cent “sensible wind penetration” – which is a global average. It notes that some economies will comfortably absorb 30 per cent with little added cost.

This graph below highlights how Citi sees the “sensible” investment opportunity around the world. “Certain countries such as Japan, Australia, Latin America and the US are better positioned to participate in this investment wave while in other countries such as Italy and Germany the renewables boom should be largely over,” it says.

Screen Shot 2013-09-25 at 9.18.08 PM

Solar in Australia rates highly because it can compete “behind the meter”, or with residential prices, and because of ability of utility scale solar to displace expensive gas peakers during the day-time. Wind is less attractive in Australia compared to other countries because it has to compete with relatively low-cost wholesale prices, and does not necessarily produce at peak time.

Citi notes that in Australia, households are facing the choice between (a) buying electricity from the socket at a rate of $30ct/kWh or (b) producing solar electricity at a cost of $18.5ct/kWh. “By installing solar panels a household would save $11.5ct for every kWh consumed from solar,” it says.

This graph below shows how Australia compares with other countries in terms of investment opportunities.

Citi solar wind opportunity

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