ARENA boss: large scale solar to match cost of new coal by 2020

The chief executive of the Australian Renewable Energy Agency, Ivor Frischknecht, says he expects large scale solar to be cost competitive with new coal-fired power stations by the end of the decade.

Frischknecht said there was no doubt that coal was currently the cheapest form of generation in the wholesale markets, but that was because many of the plants were old and fully depreciated. And big emitters.

What counted most, as these generators left the market, was the cost of new generation. Wind energy, he quoted market analysts (such as Bloomberg New Energy Finance, see graph below) was already cheaper than coal, and solar would likely be so by 2022. But he thought it would come quicker than that, by 2020.

“I think they have got it wrong on solar,” Frischknecht told an energy forum at the Brisbane Global Café, an event leading up to the G20 meeting this weekend. “They are too conservative. They underestimate the amount of price decline (that will happen in coming years).

“(Parity with coal) is going to happen by 2020. Technology Innovation is going to be bringing down the cost quickly.”

Frischknecht cited the recent results of the solar auction in Brazil, where project developers such as Spain’s FRV, which is building the Moree solar plant in NSW, and built the Royalla plant in the ACT, bid a price of just $US87/MWh for a solar plant. Similar results have been achieved in India and the US.

Prices had not yet fallen anywhere near this level in Australia because the supply chains do not yet exist, contractors could not predict construction costs, and mainstream financing was not yet available.

Frischknecht noted that rooftop solar would be popular, for homes and businesses, as well as large scale solar because it eliminated fuel price risk.

In remote, off-grid areas, where solar competes with diesel, it was already a far cheaper option. Northern Territory and Queensland spend around $200 million a year subsidizing electricity in these remote communities.

Indeed, solar was an altogether more pleasant option. He played this audio to show the (constant) sound of diesel for those off-grid.

“People want cleaner, quieter, healthier sources of energy. “

These will be some disruption, though, and the incumbents will fight back.

“There will be losers. That includes much of the existing generation industry. As is often the case, the losers are a small number of highly impacted, powerful interests, whereas those who stand to benefit are small, relatively weak renewable energy players and the large number of people who will benefit from cleaner, quieter and healthier energy.

“That makes change hard. The transition will inevitably be opposed.”