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Stunning new low for solar PV as even IEA hails “age of solar”

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The cost of solar PV has hit a stunning new low – with a bid for a 300MW solar project in Saudi Arabia pitched at just $US1.79c/kWh – or $US17.9/MWh ($A22.7/MWh) – with no subsidies.

The stunning offer – coming in the oil kingdom’s first major tender for solar power – represents a significant fall of 75 per cent in costs below those considered “not credible” less than two years ago.

And it comes from two major players in the energy industry. The consortium behind the offer is made up of EdF, the mostly French government owned nuclear giant that is currently building the world’s most expensive nuclear plant in the UK, and the Abu Dhabi-based Masdar.

Renewable capacity additions in 2015 and 2016 by country/region and technology. Source: Renewables 2017, IEA.

Renewable capacity additions in 2015 and 2016 by country/region and technology. Source: Renewables 2017, IEA.

News of the bid came as the technology conservative International Energy Agency declared that we are entering  “a new era of solar”, and predicted that renewable energy by 2022 would top 1000GW around the world – built in a fraction of the time it took to construct the same amount of coal power.

Yet it also came as a new report from Australia’s Climate Council lamented the political roadblocks that sees Australia’s government ignore the advice of the CSIRO, the Finkel Review and the Australian Energy Market Operator that could pave the way for a much high renewable energy share.

The Saudi bid, however, is the big news. The tender is the start of a $US50 billion program to substitute clean energy – mostly solar – for fossil fuels in its domestic energy supply. Mostly it burns oil, but it has figured out it is far cheaper to use solar and other renewables and then sell the oil overseas.

The bidding result was announced in a web-cast ceremony held in the Saudi capital of Riyadh. Six of the seven lowest bidders offered prices below $US30/MWh. It compares with the previous low of $US25.40 for a solar plant in Dubai.

In early 2016, a sub-$60/MWh solar offer – also in Dubai – was deemed “unachievable” by disbelieving energy experts and competitors, yet prices have continued to plunge ever since.

There is some skepticism about the bid, in the same way that a recent contract signed by SolarReserve for a 150MW solar tower plant in Port Augusta signalled a price of $75/MWh, when in fact the actual “cost” would be higher.

“There is great pressure in the Middle East to come up with an impressive headline number, and these are becoming increasingly divorced from the reality of payments,” said Jenny Chase, chief solar analyst for BNEF in Zurich.

Saudi Arabia’s price may also reflect a “base rate” paid at periods of peak demand or a price that applies only for part of the project’s life, Chase said.
“I don’t think this is possible as an all-in price of electricity from a 2019 PV project, particularly given the rising cost of debt in Saudi Arabia,” Chase said. But similar skepticism was expressed in early 2016 when the first sub- $US60/MWh bid was made.

Still, solar is being seen as the major new force in global energy markets, even by those who had previously dismissed it as a sideshow, and not part of the main game..

The IEA on Thursday  predicted a “new era in solar PV”, based on its latest update that increases its usually conservative forecasts for the deployment of solar PV by 12 per cent – even though some people still think it is undershooting on its forecasts.

The IEA – created in the 1970s to protect access to oil and gas markets – has often been criticised for underestimating the uptake of both wind and solar, and for grossly over-estimating the contribution of coal and gas. And this report is no exception.

But the IEA still recognises that solar PV capacity grew 50 per cent in 2016, and by 2022 the combination of wind and solar will contribute half as much capacity as coal, built in just a fraction of the time.

“What we are witnessing is the birth of a new era in solar PV,” said IEA executive director Fatih Birol, noting that China was underpinning the huge growth and plunging cost in solar.

“Along with new policies that spur competition in several other countries, this Chinese dynamic has led to record-low announced prices of solar PV and onshore wind, which are now comparable or even lower than new-built fossil fuel alternatives,” Birol noted.

“This is radically changing the narrative in other emerging economies, which are now looking at renewables as attractive options to sustain their development.”

But in Australia, these facts are ignored, as are reports by key institutions that suggest that high levels of renewables are both achievable and affordable.

Screen Shot 2017-10-05 at 12.25.01 PM

Figures released by the Clean Energy Council on Thursday suggest Australia is undergoing a renewable energy investment boom – after three years of drought – because of the renewable energy target is finally starting to bit.

The CEC says 41 renewable energy projects have now been committed in 2017, creating an unprecedented wave of investment worth over $8 billion, and creating approximately 4680 new direct jobs and massive economic benefits for local businesses across the country.

“These 41 projects will deliver over 4330MW of new capacity, which is crucial to increasing supply in the energy market, replacing old coal-fired generation that continues to close and ensuring downward pressure on power prices,” CEC boss Kane Thornton said.

Half of these projects, by capacity, are solar, with its costs falling to match wind in some areas and challenge it in others.

“It is incredible to see the shift in conversation and action around and in the industry,” Thornton said, noting also the strong uptake of rooftop solar, with another $2 billion invested by homes and business in another 1000MW in 2017.

Thornton praised the individual state-based renewable energy targets, but warned that the momentum may be lost with a long-term national policy, such as a Clean Energy target.

A Climate Council analysis said the only hurdle towards a grid with a high penetration of renewables was politics, as the independent advice from the CSIRO, AMO and the Finkel Review made it clear there was no technology obstacles.

“There’s no disputing it – fossil fuel technology is obsolete, expensive and unreliable. In fact, Within 10 years, over two thirds of our coal plants will be over 50 years old. It’s time to look to the future with an energy system fit for the 21st Century,” the Climate Council’s senior  energy expert Andrew Stock said.

 He said Stock the only thing holding Australia’s energy grid back is the ongoing climate and energy policy deadlock: it was clear that renewables were the cheapest form of new generation, and other technologies could deliver the dispatchable power needed.

“You wouldn’t try and salvage a broken down, 50-year-old clunker of a car – so why is our government attempting to do the same with old coal-fired power stations?

“So much energy is wasted debating issues of yesteryear while the rest of the world has moved on. It’s time for the Federal Government to stop playing politics and start moving on our renewables future, not the solutions of the past.”
Back in Saudi Arabia, officials plan to make a final decision on who will build the solar plant at Sakaka in the country’s north in January. It will be the first plant in a program to build 9,500MW of solar and win by 2030.

According to PVMagazine, the second lowest bid was proposed by Saudi power group ACWA, which offered a LCOE $US22.36/MWh, while a $US26.6/MWh offer from Japanese conglomerate Marubeni also beat the previous world low.

Other bidders to offer contracts below $US30/MWh included French energy group Engie, the owner of the now closed Hazelwood generator in Victoria, Japanese engineering company JGC Corporation, Japan-based industrial conglomerate Mitsui, and French oil group and SunPower’s largest shareholder Total.  

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  • Andy Saunders

    …and such figures aren’t applicable to Australian conditions, given the vastly different labour costs and possibly land prices and civil works prices.

    • Carl Raymond S

      The trend is applicable. Take a drive west till the first emu. Land to the horizon. As for labour, this vid is a sign of things to come.
      https://youtu.be/ebLam_3_Vko

    • Bristolboy

      Agree there are things which mean this price can’t be replicated in most of the rest of the world. However constantly falling prices can be replicated.

      • Andrew Roydhouse

        That’s what they said about computer prices, TV prices, memory prices, CD prices, DVD prices etc etc.

        Mass production and technology advances do drive prices lower and lower, google Moore’s Law for example. State of the art chip from 2005 now sells for 1/10,000 its 2005 price. Chips in common watches are made on the machines that made the state of the art chips in 2003.

        Cost of chips in one VERY well known sports watch company cost between 10 and 31 cents (Australian).

  • Tom

    Good old Tassie. Zero new RE, zero jobs, despite our hydro being the perfect way to store (by substitution) variable generation.

    • Carl Raymond S

      Tassie west coast is perfect for wind.

    • Peter Campbell

      Tassie could be using its existing hydro to store wind generation and then nearly always exporting to Victoria on demand from its hydro.

      • Tom

        Absolutely.

  • john

    The simple fact is this.

    Because the energy cost to power Solar is presently ZERO this gives it a huge; or using the words understood by the unwashed UGHE advantage.
    So basically it is the energy production over the expected life time of the plant divided by Capital Cost.

    As against the energy production over the expected life time of the plant and the cost of its energy source divided by the Capital cost.

    Yes i know add in the R & M for both for a fossil fuel plant into the energy cost, this will be larger against cleaning panels.

    • Michael Murray

      I assume you mean solar PV ? In which case shouldn’t you factor in storage costs if you want to compare it to the other 24 hour available electricity sources.

  • Cato

    Check your figures Giles.

  • Here in Australia the IPA will be on to this greenie thing soon. Maybe they will say the Great Barrier Reef is something worth protecting. The Murdoch press will start having realistic headlines. Then the IPA and Murdoch will claim that mining has negative impacts on the environment. Before that they will say that protecting people from second hand cigarette smoke is a good thing and that motorcyclists should be required to wear helmets. Then they will claim that…

  • Jake Frederics2

    First of all: “Please don’t ban me Giles”……

    In our study at a very competitive capital cost of $950k per 1MW generating capacity our numbers ended up as follows using following assumptions:
    – 25y life span for all components (generous)
    – I can’t remember the exact capital cost rate but it was less than 4% per year
    – No maintenance/opps costs.

    Capital cost for the solar array only was ~$5000 per month which gave us a 1MWh production capital cost of $47/MWh. I had an issue with the average daily generation of 3.5W per W installed capacity which I thought was about 20% too low.

    Can someone please point out where we made a mistake to end up with this high cost? (all numbers for zero subsidy scenario)

    • Mike Westerman

      Jake I would think the 3.5W/W figure drove your costs up: depending on where your project was, you could have been up to 35% low on revenue.

    • nakedChimp

      Just as a datapoint for you, I expect 3.5W/Wpeak up here in FNQ with clouds and all that crap for stand alone systems I design for scientific research.

      If you’re somewhere drier and maybe even get single axis tracking, you’re numbers should be nearly twice of that.

    • neroden

      Bluntly, 30 year solar panel lifespans are now being used as the basis for *leases* in the US (and have been for several years). 40 years is considered to be the real lifespan of the panels, so they’re still being conservative.

      The wiring lasts essentially forever. The inverters are the only part which wears out (and they do have a fairly short lifespan, as little as 10 years). You should do your lifespan expectations correctly.

      • Jake Frederics2

        You’ll have to be super optimistic to hand a paid-for business case to your client with 40y life expectancy. (let us not even talk about performance after 40 years). I would really like to see how that meeting will go down.

        25 years was used as number for panels with expected performance 89‰ of new at end of use. Due to tax/finance considerations (which I don’t know much about) the benefits modelling beyond 30y diminishes exponentially.

        On the generation part we were under because somebody forced us to include a high provision due to the extremely dusty environment. Had to play with cards dealt.

        • Ren Stimpy

          “somebody forced us to include a high provision due to the extremely dusty environment”

          So your “study” domain is one very tiny but dusty portion of the market. No wonder you are so biased.

    • Ren Stimpy

      It sounds like an undergraduate “study” for a semester project (i.e. full of inexperience and hollow assumptions). Please provided a web link to your “study” so that we can judge the worth of it.

    • chrgordon27

      Is that supposed to be 3.5Wh/W?
      What location?

  • ozfred

    one site as an Australian example of generation trend with two year history – southern WA 4kw panels fixed 15-20deg angle almost true north
    winter average 9kwH = 2.25 factor
    summer average 22kwH = 5.5 factor
    spring/fall in between.
    consistent with hours of sunlight/heavier cloud in winter

    Factor of 3.5 would be seriously pessimistic.

  • Thankfully the “Golden Age of Gas” was short lived. Much shorter than I expected to be honest. https://uploads.disquscdn.com/images/575493aecb556418ddb982e2917592648e746aa264059935631258d2292ee4ce.png

  • Kevin Johnson-Bade

    I agree that it is inconceivable that a so called reputable publication could publish such utter dribble. We are witnessing the futile kicks and twitches of a dying industry. Fortunately many otherwise intelligent people are being manipulated by the propaganda that include technical data that they don’t understand. This is not dissimilar to the massive fight put up by the cigarette industry. We still have cigarettes, one can only hope that the sheer economic reality will usher in the transition, despite our having a government that is irresponsibly supporting the fossil fuel industry rather than introducing legislation that will serve to facilitate and accelerate the transition, not to mention developing a new industry for the country. https://youtu.be/BYimTOuj3GY

  • My_Oath

    Deleted my comment – wrong post!