Greg Bourne, the chairman of the Australian Renewable Energy Agency, on Monday outlined the newly formed agency’s investment strategy for the $2.2 billion at its disposal, and the first of its funding decisions: namely, to reject a proposal by the Solar Dawn consortium to build a massive solar thermal power station in Queensland, and to whittle down the number of potential solar PV projects left over from the Solar Flagships consortium to two from three.
RenewEconomy caught up with Bourne to ask him about these decisions, and how he envisages ARENA will allocate the funds at its disposal, which will be critical for the development of emerging and enabling technologies. This is a lightly edited transcript.
RenewEconomy: You’ve rejected the funding application from Solar Dawn, can you give the reasons for that?
Greg Bourne: We worked very, very closely with the proponents to see if we were able to get things up and running and make the project fly. Even though we had a couple of good shots at making it go, it’s just not going to. Now, it doesn’t mean that solar thermal per se is out of our eyesight at all, it just means that one particular project has gone. Obviously, with the Queensland government cutting their funding as well, they would have gone through some decision-making process, in the end it meant that we both agreed that this was the right time to call it a day.
RE: What was the problem with the project, was it too big?
GB: I think it was a combination of size – it was a two phased assessment, the amount of money going in, and then the benefit. Also, many of the solar thermal projects these days around the world have storage brought in to advance the value. There wasn’t in this project. This allows us and the project proponent to do a rethink of what would be the most size, most logical locations, what sort of rating for storage. A complete rethink – as ARENA that is exactly what we will do. It does not mean we are not thinking about solar thermal, we will do quite a big dive into solar thermal technologies over the next six months.
RE: There might be a lesson learned from South Africa, which began construction on two solar thermal projects with storage this very week?
GB: Yes, there are a number around the world which have their pros and cons. One thing we do know, each one of these projects has like a cookie-cutter approach, so from our point of view we’d like to see where you get maximum learning spot going forward. It may be solar thermal electricity, solar thermal heat, solar thermal storage or a number of things coming together.
RE: You have two remaining solar PV projects on your books from the flagships program, what’s the potential attraction of those? I presume they are smaller in scale. When do you expect to make an announcement?
GB: We’re still in discussions with those – very good discussions, and we’re up to the final points and ideally we’ll be able to announce those relatively soon.
RE: Back to Port Augusta, Alinta said recently they had been to see ARENA for some discussions. Can you confirm that?
GB: A number of people have come to us< particularly with regard to solar thermal heat. One thing we do want is innovative ideas – they need to say they want to do A,B, or C, these are the costs, these are the benefits, and pointing out why this particular idea might be replicable elsewhere. “Replicability” is quite an interest to us, either by the same party or another party elsewhere.
RE: You are saying there are no technology paths in your strategy, it is about themes and outcomes. What do you mean by that?
GB: Very definitely, we are moving away from the envisaged pie chart by supplied technology. We are not even thinking that way at all. We are more thinking about what are the outcomes we can cause in accelerating uptake of renewables. Now, that can be linked to commercialisation, linked into scale, place as well. Hitherto, some of the biggest barriers have been “we can’t get it into this part of the grid, we can’t link it there because it will cause destabilization of the grid”. So, we see this in terms of, how to get renewable energy into a small mini or micro grid, that is at sufficient level that it causes you how to answer the questions about intermittency and grid management, and storage. If one can then increase that percentage even more, those learnings are ideally transferable to the next size up. It’s not a matter of starting small, but starting where you can push the boundaries and get maximum amount of learning.
RE: Australia has plenty of places where fuel costs are high, and technologies can be deployed to rebut the arguments about why they can’t be deployed in broader arena.
GB: Very much so. The key thing is, particularly in remote and isolated areas, essentially what you are doing is diesel displacement, or diesel augmentation. Diesel is very, very expensive, so it takes it much closer to commercialisation. If you can prove the technology and the control systems for forecasting and intermittency, you have a lot more confidence in trying it nearer to a large grid and beginning to sweep away the barriers of ‘oh, we can’t do this, everything will fail.” That’s why we will do that. If you take the north-west of Australia, the Northern Territory, and northern Queensland, there is a huge opportunity out there. But also fringe of grid areas will also become interesting.
RE: You’ve mentioned a lot about hybrid solutions. That might not appeal to technology purists, why are you so keen on this?
GB: It’s more the reality of it. Even if one looks eventually at the coal sets, they are typically multiple trains of sets and generators. When you look at the 202s and 203s, the transition of those plants will be in the retirement of one train and the replacement of it with a renewables type train. That way, you can use transmission links, distribution links … the reality is transition will take place through a hybrid route. We are not looking at hybrids per se, but the recognition that hybrids will be part of that route, be it gas and wind, or gas and solar.
RE: What about REDP (renewable energy development program) projects. Are you looking at repatriation of those funds. Are their set deadlines?
GB: Each of the six projects under the REDP have their terms and conditions, their milestones, which they have to meet at they go forward. The stance we are taking now is very much an investment stance, and we will be talking with all proponents, not just the REDP projects, as to where they are – is it logical to extend, is there an industrial or financial need to do so. But we will be very clear with all proponents that if it is necessary to call it a day on something, we will do so.
RE: What about geothermal? There was a question about geothermal drilling, and their costs, which has been a big block to the progress of the technology. What’s your thinking on that?
GB: With my background, having drilled many, many wells, albeit with oil and gas (he was a former country head for BP Australia), I know some of the issues with drilling wells, how complicated they are, and how expensive they are. On the oil side of things, if you can get a flow rate of 10,000 barrels a day times $100/barrel, you have a $1 million a day to pay for operating cost, capital cost and also the risk you have to take in the first place. In geothermal case, you still got to drill a very complicated well, but now your remuneration path is through electricity sold, or maybe heat sold, and that is not nearly as remunerative as oil. What that says to me is that you really have to understand the risks you have in front of you, and work hard on de-risking – via geophysical or remote sensing technologies< and research into rock types – prior to putting wells down.
RE: So you are asking for more research and less drilling.
GB: We will certainly be moving in that direction. Again, in the oil industry you need to have almost drilled the hole in your mind and at your desk and lowered the probabilities towards commercial success before you ever put anything into the ground. Now, having said that, wells that are in the ground can give you a lot of information, and making sure you maximize that information becomes very, very important.
RE: You must have a lot of applicants at your door at the moment. How will this funding be deployed. You have a budget of how much can be spent each year, but presumably that doesn’t mean how many projects can be approved, because each project has a timeline.
GB: We’ve got two things that are going straightway – the emerging renewables programs. Expressions of interest come in and we evaluate them and make decisions. With renewable energy venture capital fund is going ahead, it’s first project was to approve not so long ago, and we have to manage the legacy projects that have come across to us. In effect, what we will see is less money going out the door until such time as the beginnings of the first strategic initiatives begins to call for expressions of interest, so in terms of cash going out of the door, you will see a dip for quite a bit of this financial year, then a pick-up in the next financial year. We are not going to measure ourselves by the rate in which we can get dollars going out of the door. It’s very much about the quality of the projects that will dictate the cash flow.