How is it that the Energy Minister in London, who possibly spends much of his time dressed in Wellington Boots and a sou’wester, should articulate a solar vision for the UK vastly more ambitious than anything expressed by a government minister in Australia?
Australia has the best solar resources, the most land, and has been a breeding ground for some of the most advanced technologies. We like to think we are a leader in the solar industry, and while we have enjoyed some of the biggest deployments of rooftop solar in the world in the last two years, in terms of utility scale installations, the country is barely out of the gate.
Just how far behind – in practice and in vision – was reinforced last week when UK Energy and Climate Change Minister Greg Barker repeated his government’s “aspiration” that the UK solar market could reach 22,000MW by 2020. There are plans to begin construction of the first large scale solar plants in Scotland, of all places, early next year.
Australia’s ambition? Well, according to the draft energy white paper released 11 months ago – the master document for Australia’s energy planners – and the closest thing Australia’s federal energy ministry comes to having a vision – it expects around 3,000MW.
So badly mistaken was that scenario that the number is likely to be overtaken as soon as the end of next year, and there has been much said – both about the actually deployment, the costs, and the future cost curve – to suggest that Energy Minister Martin Ferguson has the opportunity to address that missing link when the final draft is released this Thursday.
The issue around big solar will be critical. Solar is arriving on people’s rooftops in ever increasing numbers, its costs are falling, and it emerges as a potential election issue in marginal seats. It is also capturing the imagination in situations like Port Augusta, where the local mayor is leading a popular push to build a solar thermal plant.
Last month, Australia opened its first utility scale solar farm – a modest 10MW solar PV facility near Geraldton. While ground-breaking for Australia, it does not rank even in the top 200 of utility scale solar systems in the world.
So apart from the UK, who else does Australia trail behind in big solar?
There are the major economies, such as the US, which has built nearly 3,000MW of large scale solar and has committed projects for another 28,000MW, and China, which last week reinforced its ambition to have 21,000MW of solar installed by 2015, a roughly even mix of distributed and utility scale plants. Why does China install so much solar and Australia doesn’t? Well, it needs all the energy it can get, as do other nations. Australia has too much energy, and more renewables will simply accelerate the decline of coal and gas.
India, another energy hungry nation, has its own plan to install 20,000MW by 2022, and has already built several large scale plants, and more are under construction. Germany, Spain and Italy all have large amounts of rooftop solar, as well as many commercial and industrial and utility scale systems. Germany has more than 35,000MW of solar, and Spain is a leader in solar thermal and solar storage plants. Japan has also just introduced the world’s most generous feed in tariffs, and plans for solar plants in the 10MW to 100MW range are announced almost daily.
The other countries ahead of Australia – in big solar – may surprise. These include Ukraine, Bulgaria, Romania, Czech Repbulic, France, Greece, Portugal, Peru and Thailand. Serbia has just announced plans to build a 1,000MW solar park by 2016, South Africa has signed off on the financing of 600MW of solar projects and is about to invite bids for another round, while Chile has some 3,000MW of large scale solar in the pipeline – mostly built for mining clients without subsidies,such is the cost of energy in that country.
Then of course, there is Saudi Arabia, which plans to spend $100 billion to invest in 40,000MW of large scale solar, so it can free up more oil for export and other uses. A senior Saudi minister last month suggested the country may aim to be 100% emissions free in its power systems within a few decades. Dubai has just ordered a 13MW solar plant, the first in a $3 billion program, and large scale plants are being built across the middle east and north Africa, which is being linked with the Desertec project in Europe to import solar power.
Nope, Australia is not leading in Big Solar. It has some catching up to do.
SunPower’s plans for Australia
SunPower gave some interesting insight into the solar leasing business, which it dominates in the US and which is starting to enter the Australian market. SunPower said it accounts for 40 per cent of solar leases in California – the biggest market in the US, and solar leases account for two thirds of the residential market. Amazingly, the average sized system on household rooftops is 7.9kW – that compares to 2.2kW in Australia.
CEO Tom Werner described the leasing market this way: “Leasing is really an LCOE (levellised cost of energy), or cents per kilowatt hour-based decision. Put another way, the consumer is not leasing a solar system, but buying energy over a period of time for a set price.” He believes that some of the first entrants in the solar leasing market will start securitizing their residential assets in coming quarters – a sure sign of the maturity in the industry, and the interest of the financial sector.
CFO Charles Boynton made a brief reference to the Australian market, which it sees as the most promising in Asia after Japan. “We think upside potential in Australia is rather significant,” he said. Si\unPower recently bought a major share in Australian renewable energy retailer Diamond Energy, Boynton said the size of the transaction was not significant, but the strategy was – and the purchase would enable the company to sell energy directly to customers – sort of a local variation of the US leasing model.
SunPower is also building the 250MW California Valley Solar Ranch project, and in September connected the first 22MW to the grid. So far, 150MW has been built. It is currently financing two other projects in California totaling 600MW. And to give an idea of the extent of the distributed and commercial sector in the US, tt also recently connected a 4MW system to a school district in California.
First Solar’s bullish on costs
First Solar, by contrast, is focused almost entirely on the utility scale market. To give some idea of scale of its business, it $9 billion in project sales over the next few years, including the 550MW Topaz and Desert Sun projects in California.
CEO Jim Hughes says the industry remains challenged, but feels there are signs of stabilisation, despite (or maybe because of) the recent rash of bankruptcies. Hughes re-iterated that First Solar’s principal road map is to lower its levellised cost of energy to between $100 and $140/MWh. And he said recent developments suggested it could accelerate its timeline and deliver below those targets. CFO Mark Widmar said the manufacturing cost per watt – including warranty, freight and end of life costs, was likely to fall below 60c by the end of next year. This table shows the recent trajectory.
“This is very encouraging in an extremely competitive industry where the lowest cost providers with the most comprehensive and customized solutions will ultimately be the winners,” Hughes told analysts in a conference call. In the US, he anticipated a robust debate on incentives for renewables, such as the investment tax credit, as well as subsidies for fossil fuels. “(We) have an extreme degree of confidence in the overall competitiveness of solar as a part of the generation mix irrespective of where that debate falls out,” he said.
Hughes said Australia remains one of the most attractive growth markets, along with Chile, Australia and north and South Africa. It is also about to start a 13MW project in Dubai, part of a $3 billion solar investment in that Gulf state. In India, the company would adopt a similar strategy of building one plant where it can gain an understanding of labour costs, supply chain relationships and operating conditions – as it had done in Australia with its “small” 10MW project near Geraldton – before moving on to larger projects. “Our focus is on a grid-connected utility scale markets and in particular, a big focus on projects that are attracting debt finance and low cost of capital.”