Hazelwood owner insists solar costs will not fall | RenewEconomy

Hazelwood owner insists solar costs will not fall

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Owner of Hazelwood brown coal generator, GDF Suez, argues solar costs unlikely to fall further because panel manufacturers continue to lose money.

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The owner of Australia’s Hazelwood brown coal generator, one of the country’s biggest emitters, has claimed that the cost of solar PV is unlikely to fall in future years.

In an extraordinary submission to the RET Review panel on its modelling assumptions, GDF Suez suggests that solar PV is unlikely to reduce costs because many panel manufacturers continue to lose money. And it takes issue with the costs estimates included in the Bureau of Resource and Energy Economics’ most recent technology cost assessment.
“Caution is required when using the stated learning curves, particularly in relation to PV technology,” the company says in its submission.
“PV manufacturers struggle to remain profitable (including China) and the current situation is unlikely to be sustainable. Sensitivity around the BREE learning curve for PVs should also be tested at much reduced, or perhaps static, learning curve.”

This below, is the graph that worries GDF Suez. It shows solar PV costs falling by more than half over the coming decades. Most solar analysts, however, would suggest that this is a very conservative estimate, noting that some solar systems are being built in the US at little more than $60/MWh, which after adding back in a tax benefit, would place the cost of the technology in 2014 within 5-10 per cent of BREE’s estimates for 2050.

bree solar

As we have noted, solar module manufacturers are still recording manufacturing cost reductions of around 20 per cent per year. This has allowed them to record positive margins – in the teens – and will allow them to reduce prices in the future.

The cost of modules is also just one part of the equation. The so-called soft costs are the main target of the US Department of Energy’s Sunshot program. These costs – for associated materials such as inverters, mounting, finance, installation and maintenance – will likely come down in coming years to the point where solar PV is cheaper to install at utility level than coal-fired power stations. It already is for consumers, but the big coal producers don’t want you to know that.

GDF Suez’ submssion is also notable for urging the RET review panel to assume the most negative forecasts for future demand. This would help in getting a revised “real” 20 per cent target that would result in as few large scale projects being built as possible.

GDF says it wants only forecasts used by the Australian Energy Market Operator to be considered, and even these adjusted for a more “bearish” view. “Other sources have a proven upward bias,” it notes.

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10 Comments
  1. Robert Johnston 6 years ago

    GDF Suez / International Power is hardly a global centre of excellence in picking winners. Hazelwood investment = example.

    • adam 6 years ago

      They have a market cap of 50 billion so I think they do alright.
      http://markets.ft.com/research/Markets/Tearsheets/Summary?s=GSZ:PAR

      Just because you don’t like it, doesn’t mean it doesn’t make money.

      • Robert Johnston 6 years ago

        GDF Suez has a large market cap and revenue, but not a corresponding profit. Their share price has halved in the last 15 years and they have hovered between small profit and loss for the last few years. Dec 2013 was a significant loss….. I’m pretty sure they are not making money. Certainly over the longer term their shareholders haven’t been.
        I don’t dislike coal adam, I have developed/built a coal power station or two in my career along with gas and renewables. Its self interest pretending to be expert opinion and analysis I don’t like.
        Take a look at their Hazelwood acquisition price and current book value and you will see why I quoted it as an example of an investment that was not a winner.

        • adam 6 years ago

          Fair points. I suppose I shot from the hip at what was apparent shooting from the hip…

          On self interested rent seeking, I totally agree. Unfortunately unless there is a clear stance taken by government against this behaviour it’ll be a function across our economy in any concentrated market. And we’ve seen this from such markets, but there is definitely a feel that it gets more traction with policy makers these days. This is obviously unfortunate.

          Re: GDF Suez’s RET submission, I don’t necessarily support this view but I haven’t seen sophisticated breakdowns of cost curve supply projections really beyond Mckinsey Darkest Before Dawn which is not very transparent around their research.

          If these are available I would be happily directed to them, but if sunshot is focusing on “soft costs” this implies that modules cost curves are hitting their basement. But there are other economic forces here that I haven’t seen commented on:
          * Is China dumping cheap modules to dominate global markets, downward pressure reinforced by their gov’s currency manipulation? They are modernising including their labour rights/markets which will lead to upward production costs,
          * Commodity supply markets for silicon -what are these doing?
          * What happened to suntech and why?

          Maybe there are good solid answers to these and other questions so I look forward to responses /links.

  2. MrMauricio 6 years ago

    GDF Suez has a lot to answer for in terms of the Morwell/Hazlewood fire in which it failed to comply with rehabilitation and fire protection covenants and exposed through its negligence thousands of people to health damage. A salutory message on the local community effects of burning fossil fuels on health and then broader damaging climatic stability . GDF Suez has zero credibility!

    • michael 6 years ago

      they also do a hell of a lot of renewables, so let’s not throw the baby with the bath water (>1,000MW in north america for starters). bit like the love affair with china and their supposed renewable credentials while pumping a very large amount of carbon into the atmosphere and continuing to install very substantial numbers of caol fired power stations. any rational investor will frame the argument to suit their particular circumstance, not worth getting hot under the collar about

  3. ALchemyst 6 years ago

    I like the way they construct their arguments!

  4. RobS 6 years ago

    Institutional delusion is a stunning thing to behold.

  5. patb2009 6 years ago

    in the 80’s almost every company making computer memory lost money for a decade.
    Costs fell, production grew, but it was impossible to make money, it was a mutual game of misery.

    Most airlines lose money.

  6. Chris Fraser 6 years ago

    GDF Suez was perhaps making submissions to the faulty RET Review, so perhaps a deprecating submission of the falling cost of PV afforded them assurance of a sympathetic ear ? Even so, this blog reports often of anti-RET protagonists on the verge of delusion, desperately thinkin’ wishin’, hopin’ and prayin’ for some hope of return to the old business model. Michael says they do renewable investment, presumably not because it’s trending, or produces a feel-good or public relations benefit. Their PV projects probably WERE cheaper and more efficient. So what does PV really signify for them – a loss of market control ? Did they really underestimate PV impact ?

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