Origin Energy to reboot solar strategy, including storage, EVs

Origin Energy says it is looking to “revitalise” its solar strategy, and will look at products that include installing modules on rooftops for no cost, as well as options for the emerging battery storage and electric vehicle market.

The announcement from Origin appears to be a bit of a turnaround in the utility’s thinking – given that it was once the biggest solar installer in the market – for choosing to focus on its export gas terminals in Queensland.

But Origin managing director Grant King says it is clear that rooftop solar PV will soon “stand on its own feet” – and may already do so in parts of Australia. He says it is important for Origin to act on this and other distributed generation, before other competitors steal market share.

Indeed, as Origin Energy starts to bring its massive LNG investment on-line, and starts to reap revenues from that investment, it has cited renewable energy as one of its four main strategic priorities in coming years.

This includes large-scale renewables such as solar, geothermal and hydro, but only in overseas markets. In Chile, King says, geothermal and solar are now competing without subsidies; in New Zealand, its Contact Energy subsidiary is now 80 per cent renewables and it can now switch off its gas-fired generation completely at times; while geothermal also looks promising in Indonesia.

However, the company looks to have put its big hydro plans for PNG on ice, with the company booking a $51 million write-down on work on its 2,600MW Purari run of river hydro project, due to the “political” uncertainty.

Origin’s focus on renewables appears to accord with its view of the policy environment, which is that the renewable energy target should be reduced to a “real” 20 per cent, which would mean no new large-scale wind or solar projects in Australia for several years.

It also wants solar subsidies removed, and network tariffs re-aligned to “reflect the real cost” of solar. It has previously complained that solar is a “free-rider” on the network because of the way subsidies are structured.

But King admitted that the move toward distributed generation appears inevitable, and follows a similar announcement from AGL Energy this week, and murmurs to the same effect from EnergyAustralia, even if none of them agree with the pace of such change outlined in the latest analysis from UBS, which we report on here  and here.

UBS says it is “time for a solar, storage and EV revolution”, and predicts that this combination of solar, storage and EVs will be competitive, without subsidies, by 2020, and predicts the “extinction” of centralised fossil fuel generators.

Origin Energy’s latest results reveal exactly the impact that changing consumer patterns, the growth of solar PV, and energy efficiency is having on its energy business.

Electricity demand is down 10 per cent, and profits from that part of the business are down 12 per cent of $183 million. Origin even ascribed a value to each disruptive force, noting that solar PV and energy efficiency  had cut volumes by $52 million, and the extremely warm weather by $27 million.

Gross profits per customer was down 11% to $461/customer primarily due to reduced consumption per customer as a result of the warm winter weather, solar PV penetration, energy efficiency and other factors including intense market competition.

It says that cuts in energy demand from solar, energy efficiency will not go away, hence its renewed focus on distributed generation.

“Inevitably, all remaining subsidies will be withdrawn because solar PV will stand on its own feet some time in the future,” King said in response to a question from RenewEonomy at a media briefing today.

“It is only a question about the transition to a world where PV is competitive in its own right.

“As we can see overseas and in Australia, a whole series of different opportunities and products will emerge.”

These includes power purchase agreements, where companies like Origin Energy put up the money for the installation of rooftop solar, and then set a price for using that output.

“We are trialling a  number of different propositions to customers,” King said. “In some markets both here and overseas (solar PV) is competitive now. Really it is just a function of how solar is embedded it is in networks.”