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Solar costs tipped to halve and beat wind in 5 years

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One of the world’s biggest solar manufacturers and project developers, the US-based First Solar, has predicted that utility-scale solar costs in Australia will halve over the next five years, becoming cheaper than wind energy by 2020.

First Solar says this should mean that large-scale solar takes up an increasing amount of the capacity required to be built under the current 41,000GWh target.

However, First Solar’s prediction about costs are predicated on the renewable energy target not being removed or diluted in the interim, as is feared under the Abbott government.

First Solar argues that the RET is needed to encourage new projects and bring down costs. More than half the cost of a large-scale solar project, it says, comes from the cost of local of local suppliers and contractors. Without new projects, these costs cannot be reduced.

first solar PPA predictions

The graph above illustrates First Solar’s argument. The more solar farms that are built, the more costs can come down, and the less government support is needed. This will allow such projects, eventually, to be built without subsidy. In Chile, where electricity prices are even higher, and the sunshine is even stronger, this is already the case.

But First Solar says that rapid reduction in costs would not occur without a “market bridge” to bring technologies to commercialisation and maturity, particularly if the Clean Energy Finance Corporation and the Australian Renewable Energy Agency are also removed.

First Solar notes that little large-scale solar has been deployed so far in Australia. Indeed, as we noted last week, Australia now ranks 30th in the world in large-scale solar deployment, just behind energy giants such as the Dominican Republic, Mozambique and Puerto Rico.

First Solar’s cost profile – which confirms that of other independent analysts such as Bloomberg New Energy Finance – is interesting in the context of the current RET review, which appears to be driven as much by distaste of wind farms among Conservative politicians – such as Joe Hockey and Angus Taylor – as it is about economics.

First Solar says large-scale solar is useful to the energy mix because it produces energy when it is needed most, during daylight hours, and this has a strong correlation with peak demand and complements the profile of wind generation.

It also has strong community support. Solar farms can be located in areas with no competing land uses, are not as visible, and have no moving parts, use no water and produce no emissions.

And because of the excellent solar resource, and the modular, scalable nature of solar PV projects, they can be built where they are needed most within our electricity network.

First Solar built the country’s first utility-scale solar farm, the 10MW project at Greenough River in Western Australia, and is also building the 102MW Nyngan Solar farm and the 53MW Broken Hill solar farm for AGL, as well as a 3.25MW project for the University of Queensland at Gatton.

Australia’s next solar project, the 20MW Royalla farm built in Canberra under the ACT’s solar auction program, is soon to be commissioned by Spanish group FRV.

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  • stuart

    Does anyone know why the LCOE prices for utility solar projects in Australia are more than twice those in the States?

    My understanding is the PPA prices for a number of recent projects in the States hover around the $50/MWh mark though this does include a 30% ITC. The unsubsidized LCOE for these projects would be approximately $70/MWh.

    http://www.greentechmedia.com/articles/read/first-solar-macho-update
    http://www.greentechmedia.com/articles/read/Cheapest-Solar-Ever-Austin-Energy-Buys-PV-From-SunEdison-at-5-Cents-Per-Ki

    The hardware is the same and at least in the rooftop PV arena Australia has much lower installation and “soft” costs. Australian rooftop PV systems cost about half the cost of the identical US system, but in the utility solar space the situation appears to be reversed. I would be interested to know the reason for this disparity.

    • http://www.reneweconomy.com Giles

      Cost of finance. It is mainstream in the US – but no bank has lent money to a solar project yet in Australia.