Solar PV to replace coal as “incumbent” technology

Australia is embarking on a radical transformation of its electricity system that will see solar PV transition from being “disruptive” technology to the “incumbent” technology, displacing coal and sparking a radical change in the way that electricity is provided.

This is the assessment from Clean Energy Council CEO David Green (pictured), who in a presentation last week said generation will move from its traditional place at the point of supply to at or near the point of use; the primary role of the grid will be converted to that of a back-up “battery”; and consumers will play a key role in a more competitive market.

Green told a Davos Connection conference on infrastructure last week that the core logic behind having large scale generation plants close to their fuel source (coal or hydro) was being challenged by shifts in the basic cost parameters of many sources of energy allow generation (mostly solar) to be built closer to where it is used.

It was clear, he said, that solar PV has been taken up more rapidly in lower-income suburbs than higher income – because of the attraction for lower-income households to get a lower, fixed rate of electricity.

Now, new financing models – such as leasing and community ownership, as well as models for renters – was likely to spark a third wave of investment in solar PV.

“Further innovation in the business models will potentially unleash still more waves of investment until solar PV has fully transitioned from disruptive technology to the new incumbent technology,” Green says. (You can read the whole presentation here)

“In a similar way we are witnessing the battery energy storage market emerge. Like the solar PV market, it is initially focused on early adopters, but spreading quickly as the economic case for investment becomes favourable.”

Green says it is not yet clear whether the spread of low-cost energy storage will result in households disconnecting from the distribution grid entirely – seen as the most radical vision for a decentralized energy sector, and one that CSIRO entertained in its Future Grids analysis, and which has been raised by utilities in the US and elsewhere as either a great opportunity, or a horrendous threat.

“For the moment it would seem more likely that households will stay on the grid,” Green says. “But that the role of grid-supplied power will be inverted, from the primary source of power (supplemented by embedded generation like solar PV) to a safety net supplier of last resort, with embedded generation being the primary source of power.”

“Even this more moderate vision would require a fundamental rethink in the financial model for distribution network services businesses.”

Those comments fit in with the scenarios painted by the CSIRO, which suggested that customers were more likely to remain on the grid if the utilities adapted their business models. But it also made clear that a third or more customers could simply leave the grid if the utilities failed to act.

Green said it was clear that the pace of innovation in distributed generation technology, the demand by consumers for greater involvement in, and control of, the ownership and usage of electricity, and the international drive to address climate change are all promoting real and fundamental change.

“A ‘new normal’ has not yet been established but all the indications are that the emerging model will lower the cost of new infrastructure, improve competition and greatly improve the degree to which existing infrastructure is used efficiently.”

He noted that while many incumbents saw distributed generation as a niche, it was moving at such a speed that it was simply a matter of innovation and to what extent the “new entrants of today”are allowed to become the incumbents of tomorrow.

Green says that Australia has managed to shift around 13 per cent of its electricity generation to more decentralised renewable sources so far, with much of this also coming in the form of what he calls “modular” wind farms (they can be built with just a few turbines or more than a hundred).

But because this and solar are disruptive, it will be fiercely contested by those who benefit from the traditional system – the network operators and the fossil fuel producers.

“They will have an obvious tendency to resist change,” he says. “Others will embrace it. It is potentially an exciting and dynamic time for the energy sector to drive innovation and reach for the future.”

RenewEconomy’s Take: Green is right, and this speech is welcome. It is about time that the clean energy industry articulates such a vision for the future in a co-ordinated and vigorous manner. There is much at stake.

As in the US, there is a mixture between those who see opportunity, and those who see only threat. Right now, it appears, it is the latter dominating policy settings. The utilities are resisting change, and so are the government owners.

The carbon price is being wound back, the renewable energy target is under threat, and energy efficiency schemes are also being wound back. In the meantime, tariffs and regulations appear ready to be deployed to slow down the uptake of the solar and solar storage and other technologies. It should be a quite battle.