Interview: Origin’s Grant King on big solar, small solar, plunging fossil fuels

Origin Energy delivered its interim results on Thursday and CEO Grant King held a briefing for analysts, a media conference with journalists, and talked to RenewEconomy in a direct phone interview.

King talked of the plunging cost of big solar, the growth in rooftop solar, the emergence of battery storage, and some key ongoing industry issues such as meeting the renewable energy target, the call for payments to assist coal generator exits, and global climate goals.

We wrote up the main story here, but here are some more quotes about detailed subject matter:

Will the RET be met?

Some analysts suggest that unless 4,400MW of large-scale renewable energy projects are committed to this year, the renewable energy target will not be met by 2020, and some consumers will find themselves paying a “penalty price” of $92.50/MWh. The price of large-scale renewable energy certificates has already risen to more than $80/MWh.

King says this is a function of the market, but argued that Origin had enough renewable energy certificates to meet its own obligations. “We have a substantial bank of RECs.”

And he also said Origin is ready to push the button on some large-scale solar projects, and wind also. “We expect a lot of renewables to come into the market by 2018.”

Why hadn’t this investment happened before? The RET issue, he said, was only settled a year ago, and Origin had expected the price of renewables to fall. Just because renewable energy is more economic doesn’t make it any quicker to build, he said.

On big solar

There have been some optimistic forecasts about the price of large-scale solar in Australia, with some suggesting that it would fall below $100/MWh sooner than people thought. Bloomberg New Energy Finance, for instance, suggested large-scale solar would dominate the renewable energy target, while other conservative analysts, such as ACIL Allen, have predicted no large-scale solar.

Origin Energy now says large-scale solar costs have fallen to around $80/MWh, making it cheaper than both gas and, on Origin estimates, wind energy. Origin is ready to push the go button on a 150MW solar project in Queensland’s Darling Downs, near a gas-fired generator it owns. “That’s what the market is telling us,” King said of the solar cost estimates. “Solar competes with other forms of generation.”

He said Darling Downs will be the largest solar farm in Australia if it goes ahead (although it will face some competition). “We are not mucking around here,” he said.

And on little solar

Origin was once the biggest installer of rooftop solar in the country, but let that crown slip. It is now seeking to regain the mantle, and in the first half says it lifted its sales by 42 per cent, to nearly 10MW. That puts it roughly on a par with AGL Energy. It claims 55 per cent of business sales and says its “solar-as-a-service” offering is making a “meaningful contribution”.

Entry of telco’s into energy business

On the impending entry of Telstra into rooftop solar and storage market, and predictions that this would herald the beginning of the end of the traditional utility, King said Telstra would add their name to a “long list of people” looking to enter the market.

“The fact of the matter is that there is no constraint on the ability of Origin Energy to evolve its business to meet competition from wherever it comes. We have built ourselves to compete effectively.”

On the emergence of battery storage

Origin this year became the second Australian company to install a Tesltra Powerwall and says it has inquiries from 2,000 customers about battery storage, demand which it is looking to meet quickly.

King, however, was more cautions. He said – at the risk of “sounding contrarian” – that batteries had a role and Origin was playing its part in understanding the new Tesla Powerwall.

But he noticed that consumer magazine Choice had produced an article that suggested long pay back times for battery storage. “Who will take it up? … For many people it is not an economic option,” King said.

(Others suggest that payback times might not matter for many, and battery storage costs will quickly fall to make it a mass market attraction).

On payments for coal plant closures

King continues to argue against payments for coal closures, pushed by environmental groups, analysts, and some coal generators themselves. He says Origin Energy operates the country’s biggest coal plant – Eraring in NSW – purchased just a few years ago.

“We made our decisions to invest, knowing what the future looks like. Anyone who invested in coal-fired power in the last 10 years knew what the future looks like.” He said there were already significant subsidies in the market (a lot to renewables) and did not see why consumers should pay more.

On the Paris climate summit outcome

“Cop21 in Paris was better than Copenhagen. There is a greater global resolve – and we will need more gas and more renewables to achieve it, and less coal.

“To achieve the 2°C target is exceptionally difficult, to achieve 1.5 is even harder.”

On US shale sector:

“Investment in US shale is a lost cause,” King said. “That sector is almost uninvestable, given the amount of debt it is carrying.”

The US shale oil and gas sector, now blamed for a surge in US methane emissions, a potent greenhouse gas, is under stress from the falling oil price, with BHP Billiton writing off billions of dollars in investments and other following.