ARENA plans new large-scale solar funding to narrow huge cost gap with US

The Australian Renewable Energy Agency is planning another round of funding for large-scale solar plants, in a bid to bridge the gap between the cost of large-scale solar plants in Australia and the US and elsewhere in the world.

ARENA chairman Greg Bourne flagged the new round at the NSW Solar Breakfast event in Sydney on Monday, suggesting it would be included in the next general funding strategy it will release soon.

The initiative is likely to be welcomed by the Abbott government, which is keen to push large-scale solar as hard as it can, to ensure it displaces out-of-favour wind generation in the renewable energy target.

The Abbot government, whose senior ministers have described wind turbines as ugly, inefficient and possibly harmful, is asking the Clean Energy Finance Corp to also direct finance to large-scale solar projects.

Bourne noted that the current cost of large-scale solar PV projects in Australia is probably around $A140-$A170 a megawatt-hour.

ARENA’s Greg Bourne

This compares to just $US40/MWh in the US, equivalent to just over $US50/MWh after a tax credit, and tariffs of under $US60/MWh in the Gulf Region and Middle East.

Bourne says the difference comes down to the cost of finance, and to the “nuts and bolts” and the solar supply chain in Australia.

He said Australian banks were “very timid” when it came to large-scale solar, mostly because so little had been built in the country.

To date, only one 10MW has been built in Western Australia, a 20MW plant in the ACT, and a 102MW plant (largely funded by ARENA) at Nyngan. Two other ARENA funded projects, Broken Hill (53MW) and Moree (56MW) are also under construction.

“People say the market should drive everything … but the market here does not supply the capital when it is actually needed. Markets overseas do, but not here. They (the banks) are very, very timid.”

Bourne said the current estimate of large-scale solar PV in Australia was between $A140 and $A170/MWh, but ARENA was aiming for a short-term target of getting to $A110 and $A130/MWh by 2017.

Longer term, by 2020, it was aiming for “wind parity” of $A80-$A100/MWh, and then to try and match the US prices. “We may not get there because of the size of Australian market …. but we need to be able to accelerate our way down there.”

Apart from helping to lower the cost of finance – by getting more projects built – ARENA will target the supply chain. Bourne says 60 per cent of the cost of a project is local.

“It’s the boring stuff,” Bourne said, such as the concrete foundations, the steel bolts, the racking, and the other balance of systems costs.

“We have so much at the distributed level, of PV. In terms of utility-scale, we do lag. Part of it is to do with political history, part of it is to do with financial involvement.

“There is a substantial opportunity to reduce local supply chain and financing costs,” he said.