ACT narrows field for Australia’s first big solar auction

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The ACT government has narrowed down the field for its groundbreaking solar auction. But it may choose to award more capacity than planned if it gets an overwhelming number of good offers.

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The ACT Government has narrowed down the field for the nation’s first large scale solar auction to 22 proposals from 10 different developers for the first 40MW to be allocated under its program – regarded as the most significant development for the large scale solar industry in Australia to date.

The proposals have been chosen from 49 submissions, and a preliminary list of 29 that were deemed in April to meet the requirements of “pre-qualification”. And while 22 proposals representing 148MW of capacity met the final qualification requirements, only 15 (with an unspecified capacity but believed to be around 100MW) have expressed a desire to bid into the first stage of up to 20MW. Those bids are due in June. The remaining 7 will be able to bid into the second stage, along with those that miss out in round 1.

Under the ACT government’s scheme, the price to be paid for electricity generated from the solar farms will be set by a competitive bidding process – a system that is proving popular in Europe, China, the Americas, and South Africa.

The auction is considered more effective at setting a competitive price than a fixed price tariff set by a government, or even a grants-based scheme, and the ACT solar auction – although small – is being viewed as a critical development in a sector that hopes to be a multi-billion dollar a year industry in Australian within the next five years.

So far, only one large scale solar project has begun construction in Australia – a 10MW facility in Western Australia that is being supported by a grant from the state government and equity from Verve Energy and General Electric.

But the grant funding process that has been used in programs such as Solar Flagships is seen as slow and cumbersome, and the ACT scheme is expected to elicit the current “market price” for large scale solar, and could set the template for more widespread deployment in Australia.

The results of a similar, but much larger auction in South Africa, were announced earlier this week, when 417MW of solar PV from nine projects were awarded at an average price of 19.9c/kWh – down 40 per cent in price from an earlier auction held just five months earlier.

“This project will take advantage of the large drop in the cost of solar module prices which has occurred over the last couple of years and I am confident Canberrans will receive a good outcome from this process at the most competitive price,” ACT Energy Minister Simon Corbell said in a statement. Globally, the cost of PV modules is estimated to have fallen 75 per cent in the last two years, the result of fierce price competition among module manufacturers, particularly in China.

Like the South African auction, Corbell said there had been strong interest from both local and international developers. But the ACT government has an interesting problem. Because the scheme is so small it may create the same frustrations that Solar Flagships did – a lot of bids, but only one or two winners.

Corbell told RenewEconomy on Thursday that there may be a provision to allocate more than 40MW. (The bill that was passed in December allows for a total of 210MW of large scale renewables to be auctioned over time).

The ACT Government has vowed that at least two proposals will be chosen to make up the 40MW, possibly in response to fears that the local energy monopoly, Actew AGL, could dominate the tender. AGL Energy managing director Michael Fraser confirmed today his company’s bid, believed to be a 20MW project near Williamsdale, is through to the round. Spanish developer FRV – which is involved in the Moree Solar Farm project in Solar Flagships, is also through, as is Elementus, a smaller Sydney-based solar developer. “We’ve been very pleased with the process so far,” managing director Ashleigh Antflick said. Spain’s Abengoa and US firm Recurrent Energy, an offshoot of Japanese electronics giant Sharp, are also thought to be through.

There is speculation of at least one other large proposal in the 20MW range, while most of the others appear to be in the 3MW-8MW range, judging by the numbers released by the government.

This means that the first 20MW stage may go to a single bidder, or be awarded to a bundle of smaller projects. The judgment will presumably be in the price, but a single winner in the first stage would mean that the 48 other proposals would have to cool their heals until next year.

“There is some ability to increase the total capacity on offer,” Corbell told RenewEconomy. “We might be able to accommodate that but there won’t be any substantive change to the total.”

Corbell didn’t say so, but the temptation to do that would be overwhelming, particularly if the bids are as low as some people are suggesting. ACT and Australia, would suddenly be on the global map for large scale solar, and the impetus of having numerous projects, from a range of local and international developers, could be profound. And if the predictions of wholesale price rises are correct, then the scheme would not actually cost the government (or its electricity consumers) once the bid prices and the wholesale prices intersect – sometime between 2015 and 2020.

“This is a game changer for the industry,” Corbell said. “We are going to make sure we have got a competitive outcome.”

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