Australian solar farm capital intensity halves, due to smarter, cheaper plants

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The stark and rapid improvement in the economics of big solar in Australia is due to global declines in component costs, but also importantly declining construction costs and the deployment of yield-boosting technology like tracking.

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The capital intensity per watt of the utility scale solar plants in the current development pipeline in Australia is about half that of those that are already operational.

The stark and rapid improvement in the economics of big solar in the country is due to global declines in component costs, but also importantly declining EPC (construction) costs and the deployment of yield-boosting technology like tracking.

With the pipeline of utility scale PV projects growing seemingly on a daily basis, Sustainable Energy Research Analytics (SERA) believes that solar’s increasing competitiveness is due to a large part to a more competitive and efficiency EPC landscape.

“A couple of years ago in Australia, there was only one solar EPC contractor, and now we are looking at close to 15,” says SERA Managing Director Gero Farruggio. “So it is the increasing competition but also the increasing knowledge and experience gains which are allowing them to deliver a lower cost here in Australia.”

Farruggio notes that as more companies more into the solar EPC business and hire grow their solar teams and expertise, economies of scale are the result.

A reasonably flat construction market, particularly in the wake of the receding mining boom, has additionally resulted in an EPC landscape in which companies are hungry for new project business.

One further consequence of the sector’s experience gains beyond lowering cost is that the next wave of PV power plants in Australia will deliver improved yields.

“It is falling cost but it is also better output and better installations as well,” says Farruggio.

Aus LS solar new costs

SERA’s project database reveals that of the 202MW of utility scale that it expects to be completed in 2017, around 87% of that will deploy tracking technology.

Alongside tracking, more efficient park design and installation techniques, and higher efficiency modules are all driving costs down. Next generation technologies such as intelligent weather monitoring and forecasting also have the ability to improve future project economics, SERA notes.

SERA believes that given solar’s rapidly increasing competitiveness, a pipeline of some 4GW of utility scale PV is conceivable over the next five years, with 2018 marking the inflection point, when over 800MW likely to be installed.

“Australia has benefitted from a number of grants over the last couple of years that has allowed some projects to get off the ground,” says Farruggio.

“The intention of those grants was to stimulate the industry and to build the momentum and to reduce costs and it has achieved that. What has surprised people is the rate of change of these cost reductions. We always expected that the solar cost would be coming down but it is the rate of change [that has been surprising].”

As impressive solar’s increasing competitiveness has been, big PV’s capital intensity in Australia, as calculated by SERA, remains around double that of leading projects in the Dubai and Chile.

SERA deploys the B1 breakeven metric, the merchant power or PPA price required to cover all costs and deliver a positive net-present value, for its calculations. The B1 metric takes into account government grants and financing, and any subsidies that can often apply to such headline-capturing projects.

Nonetheless, the outlook for large scale PV is, in SERA’s opinion, bright.

“It is a step forward, and that in itself is going to be an incredible catalyst for the industry.”

 

 

 

 

 

 

 

 

 

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10 Comments
  1. George Darroch 2 years ago

    These are encouraging figures. What would it take to get Australian projects below the $1/W level?

  2. MaxG 2 years ago

    What I will promise though:
    Despite the lower cost of generation, consumer prices will continue to rise!

    • Ian 2 years ago

      Love your cynicism, Max. Here’s mine: The cost reductions do not reflect technology improvements or solar tracking or cheaper manufactured components, these cost reductions reflect less price gouging and greater competition for the government money t!t.

      • MaxG 2 years ago

        🙂 It is rather fact than cynicism… The corporation have been gauging the government and therefore the people for a few decades now. It is what I call neoliberalism and the subsequent vulture capitalism that effectively denies the public a better life, while corporations pillage the environment and people, and take home the profits.
        A recent example: Sarina Russo is said to have made almost 2b$ in profit; imagine the total cost to the public purse (in comarison to direct employment) for the (only casual) workforce… the top percent is not just a saying… when you then have politicians who deny and discredit science in the interest of corporations and their profits… you can say for sure we are being screwed.

        To stay on topic: my understanding is, to reduce power prices (a lip service and an election furfy); the availability of cheaper generation however, will only benefit the supply chain and not the customer. I do not think it is a good proposition to imply lower price increases as a result of cheaper generation (technology) thus being a good thing. My prognosis stands: check in a few years retrospectively how the price of electricity has increased at the same rate as before.

      • juxx0r 2 years ago

        You might even notice that the projects not hanging off the government money t!t are at around $1/W. Otherwise known as where they should be. If the government stopped handing out money and instead went guarantor, they’d all be around $1/W.

    • Mike Shurtleff 2 years ago

      You’re wrong Max. Once battery storage drops enough in cost [it’s really already there], if grid costs continue up,… full grid system economic failure and resulting restructuring. “You cannot fool all of the people, all of the time.”

      • MaxG 2 years ago

        … but most people most of the time 🙂 why we have neoliberalism sprouting in all western societies…
        I am not obsessed with being right. Let time tell us what is going to happen. If I look back the last 20 years, electricity prices have gone up, and if the past is an indicator, this will continue … as I said: time will tell. 🙂

        • Mike Shurtleff 2 years ago

          Fair enough. Neither am I.
          My prediction: Things are going to change in Australia. Your government will be getting renewable energy religion. 😉
          The technology and economics are there now.

  3. A1 2 years ago

    As impressive solar’s increasing competitiveness has been, big PV’s capital intensity in Australia, as calculated by SERA, remains around double that of leading projects in the Dubai and Chile.

    Close to $2 USD per w:
    https://www.pv-magazine.com/2016/04/11/enel-begins-production-at-79-mw-chile-solar-plant_100024088/

    Bit older, but still $2 USD:
    https://www.pv-magazine.com/2015/08/24/chile-pv-projects-totaling-503-mw-announced_100020716/

    I have not ever seen Dubai CAPEX, but look at US, which is mature.
    http://newscenter.lbl.gov/2016/08/24/median-installed-price-solar-united-states-fell-5-12-2015/

    Please comment.

  4. AussieSlade 5 months ago

    Look into something like Power Ledger, peer to peer trading of electricity is the only way we will get a good deal.

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