Australian big solar PPAs heading to $75/MWh, says ARENA

The cost of developing large-scale solar farms in Australia will fall to as low as $70-75/MWh for projects starting construction in 2018, the chief financial officer of the Australian Renewable Energy Agency says.

Speaking at the Large-Scale Solar Conference hosted by RenewEconomy and Informa in Sydney on Monday, Ian Kay said that projects were currently reaching financial close in the Australian market – without ARENA support – in the low to mid $80s/MWh.

“We’re seeing major projects able to go ahead, in the low to mid $80s/MWh, without ARENA support,” Kay said, pointing to examples including the Gannawarra Solar Farm, Clare Solar, Ross River, and Taliem Bend.

This is already a remarkable achievement, considering the current wholesale market standard sits at around $100/MWh.

But in a year’s time, Kay says large-scale solar projects are “likely to be priced down in the mid-70s (dollars per megawatt-hour)”, which was “just absolutely sensational,” he added.

“When it comes to vanilla large-scale solar (PV), I’m very pleased to say that ARENA’s work is done,” Kay told the conference.

“(Power purchase agreements) are still in the $80s (/MWh), but are coming down quickly,” Kay said, noting that this was in part, due to growing confidence that the federal government mandated RET would hold, as it currently stands will hold.

State government schemes supporting large-scale solar, particularly those led by the ACT, Victoria and South Australia, had also helped to build momentum, he said.

Kay said that alongside falling technology costs, industry-wide, ARENA’s large-scale solar funding programs had been a key driver of Australia’s industry, which had grown from one relatively small solar farm in 2012, to 18 big solar farms around the country to date, and many more in the pipeline.

He said that for the money the Agency had spent, it had thought it might get six large-scale solar projects up and running.

Rather, he added, “we have had nine reach … financial close of late, with another we hope will soon follow.”

Adding to the falling cost of project was also the increase in local components, he said: “that gives us the ability to drive costs here in Australia.”

All of these factors, “and even governments”, he said, Kay added, had played key roles in getting Australia’s large-scale solar indusrty “from a standing start to commercial within 5 years.”