Solar’s hidden boom: 15GW of PV by 2022?

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The Draft Energy White Paper sees virtually no role for solar in Australia’s energy grid in the next 20 years. But private forecasters say it could account for nearly one third of capacity. How did the government get so blind-sided, and will industry models be able to cope?

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It’s hard to have a conversation about energy for more than about 30 seconds without tripping over some sort of acronym. The one for what could be the most important document for the year is DEWP. It stands for the Draft Energy White Paper that was released last December, a prelude to the country’s energy blueprint for the next quarter century.

But no one, particularly those involved in renewable energy industries and with an interest in the design of new energy grids and low-carbon electricity, is too sure whether DEWP should serve as an acronym or a verb.

Those with most reason to be aggrieved by the DEWP come from the solar industry, which the DEWP document suggested doesn’t really exist. The solar industry was astonished by a range of predictions and assumptions based on modeling that seems hopelessly out of date, and threatens to make the energy industry hopelessly unprepared for what lies ahead.

DEWP does not think that solar will have much role to play in Australia’s energy future at all. This in contrast to the Chinese, Indian and US governments, who all think that utility-scale solar PV will be cheaper than fossil fuels before the end of this decade, and private analysts who think that India and China will be installing between 10GW and 20GW a year by that date, and the US between 5GW and 10GW. Even Greece plans 8-10GW of solar by the end of the decade, so it can export its energy and reduce its debts.

DEWP’s predictions for 2030 allow for just 2GW of solar PV and solar thermal in Australia, despite the fact that 1.4GW has already been installed (almost entirely on rooftops) and another 400MW in utility-scale solar should occur by 2015 through the Solar Flagships program alone. Then there is the ACT government auction, which will see at least 40MW, and possibly as much as 200MW, installed in the region in coming years. (This is not the only government forecast to get solar terribly wrong, as Queensland proved in their recent document.)

Private analysts in Australia believe that 3GW of solar PV a year (both rooftop and utility-scale) may be installed in this country by the end of the decade – and its total installed capacity could be more than 12GW by that time. But there is no mention of solar PV in the planning document of Australia’s energy policy makers.

Equally astonishing is the DEWP prediction that the installation of solar PV on household rooftops will grind to a halt after the renewable energy target ceases in 2030. This prediction is based on the assumption that renewable energy certificates are the only economic driver for the uptake of the technology. There seems to be little understanding about the economics of household energy consumption, about the inevitability of grid-based retail electricity price rises, the attraction that solar PV offers as a hedge, nor about the simplicity with which PV can reduce a household’s bill. In some parts of Australia, solar PV has already reached parity for residential and commercial users.

Mostly, this is because the forecasts on technology costs are hopelessly wrong. Nigel Morris, from Solar Business Services, notes in his submission to the DEWP that the document depicts “flat-plate PV” at an LCOE of $340-$750 per MWh in 2030. He notes that the average price of residential PV is currently in the range of $150-$175 per MWh and is forecast to be below $120MWh by 2020. He also notes that APVA modeling suggests that the current LCOE for large-scale PV is around $200/MWh and is likely to be below $120/MWh by 2020, which is consistent with current project costs particularly in the US and Germany.

It’s not as though this is a tightly held secret. A report commissioned by the Garnaut Review last year underlined the difference between modelling relied upon by Australia’s Department of Resources and Energy, and mainstream global forecasts from bodies such as the International Energy Agency. See graph below.

 

DEWP does not see this. Its forecasts for technology costs for 2020-2025 predict scenarios which have already been met, such as the $1/w panel price, which is already commonly available. “These (forecasts) have the potential to blindfold decision makers to the true potential of PV, and the upcoming market shifts that will result from its continued deployment,” says Warwick Johnston, the head of leading solar industry analysis firm SunWiz Consulting.

Indeed, modeling by SunWiz and SBS predict that between 5GW and 11GW of solar PV could be installed in Australia by the end of the decade, even on modest growth patterns. By 2022, there could be 15GW of capacity and it could be providing up to 30 per cent of capacity and up to 7 per cent of energy consumption. SBS’s Morris says the Internal Rate of Return (IRR) from residential and small commercial systems are predicted to exceed 15% for most of the coming decade, with IRRs exceeding 25% in all states by 2020 in a more optimistic scenario. “At the high end, the installation of 15GW over the next ten years is entirely plausible,” he says.

Other recent forecasts have put the rate of solar PV deployment in the same ballpark. Last year, Suntech, the world’s largest PV module manufacturer, said solar PV capacity in Australia could reach 10GW by 2020, when it would be growing at 2GW a year. Bloomberg New Energy Finance has predicted that 5GW of solar PV could be installed by 2020 – particularly as solar PV matches wind on costs and accounts for some of the capacity required by the Renewable Energy Target. Solar thermal could add another gigawatt or two. Advice to the Office of the Renewable Energy from three leading consultants forecasts that 1.1HW-1.4 GW of small-scale PV will be installed in the next three years alone.

Suntech said its forecast were based on rapidly declining costs, which meant solar PV had already reached parity for many residential users, will reach parity for commercial users around 2015, and parity for utility-scale developments towards the end of the decade. Martin Green, from the UNSW School of Photovoltaics, made a similar prediction late last year about utility-scale parity by the end of the decade.

As Johnston notes, such levels of deployment will threaten incumbent stakeholders – “those that can, will embrace PV, due to an inevitable demand from their customers, but business models will need to change radically.”

It seems incumbent on the federal government to get this right. In almost all their scenarios, out to 2030 and 2050, the International Energy Agency, the European Energy Commission and the US Department of Energy predict significant roles for solar energy.

The Australian government, advised by out-of-date modeling and a refusal to countenance anything other than the current hub-and-spoke energy model, seems to be the only one that doesn’t see this. Perhaps there is a case for an update DEWP, so then the industry as a whole can be encouraged to respond to the challenges that clearly lie ahead.

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5 Comments
  1. Matthew Wright 8 years ago

    And DRET – Martin Ferguson’s department will force these super inflated numbers on AEMO so as to make the 100% renewable modelling for 2030 and 2050 achieve a result that looks really expensive.

  2. Ngaire McGaw 8 years ago

    To echo and augment this article refer to this recent media release from the Climate and Health Alliance:

    Energy policy in need of intensive care: health groups

    Media release 20 March 2012

    Australia’s energy policy is in need of intensive care, a national coalition of health care groups, the Climate and Health Alliance (CAHA), said today.

    “Australia’s current energy policy poses serious risks to human health,” CAHA spokesperson Fiona Armstrong said.

    CAHA’s submission to the Australian Government’s draft Energy White Paper raises concerns that the broader implications for energy policy, such as the adverse health effects of fossil fuels, were being ignored. There is an urgent need to transform Australia’s energy systems to clean renewable sources to protect energy security and prevent national security risks, the alliance said.

    “The draft Energy White Paper does not consider the perverse consequences of energy policy that lead to harm to human health and damage the Earth’s biosphere, and put Australia’s economic and national security at risk,” Ms Armstrong said.

    “Many countries around the world are developing national plans for their transition to zero emissions energy supply systems,” Ms Armstrong said. “In the face of rapid warming from ever increasing emissions, it is an important risk management strategy to prepare to reduce national emissions as fast as possible.”

    A continued emphasis on coal and other fossil fuels in the Energy White Paper suggests the government is ignoring the clear evidence of harm to human health and the environment from mining, transportation and combustion of coal, oil and gas, Ms Armstrong said.

    “This energy policy should be looking at mechanisms to rapidly transition towards an energy system based on clean safe renewable energy technologies,” Ms Armstrong said.

    “Instead it privileges fossil fuels, despite the well documented harm to human health and the Earth’s biosphere. This national energy policy is in need of intensive care.”

    CAHA Members: Australian Association of Social Workers (AASW); Australian College of Rural and Remote Medicine (ACRRM); Australian Council of Social Service (ACOSS); Australian Hospitals and Healthcare Association (AHHA); Australian Health Promotion Association (AHPA); Australian Institute of Health Innovation (AIHI); Australian Research Alliance of Children and Youth (ARACY); Australian Women’s Health Network (AWHN); Australian Nursing Federation (ANF); Australian Psychological Society (APS); Australian Rural Health Education Network (ARHEN); CRANAplus; Doctors for the Environment Australia (DEA); Doctors Reform Society; Friends of CAHA; Health Consumers’ Network (Qld); Health Issues Centre (HIC); Public Health Association of Australia (PHAA); Royal College of Nursing Australia (RCNA); Royal Australasian College of Physicians (RACP); North Yarra Community Health (NYCH); Services for Australian Rural and Remote Allied Health (SARRAH); Women’s Health in the North; World Vision.

    CAHA’s Submission to the Draft Energy White Paper can be found at: http://caha.org.au/wp-content/uploads/2012/03/Submission-in-response-to-Draft-Energy-White-Paper-March-2012.pdf

  3. Dean 8 years ago

    When will the government wake up to the fact that Martin Ferguson has gotten the EWP horribly wrong and undermines their credibility ? They should have moved him sideways in the last reshuffle and let someone who isn’t in the pocket of the current generator/coal/gas industry take the helm.

  4. Ken Winter 8 years ago

    Part of the reason for this is the behaviour of the consultants who model such thing for the Commonwealth. I make notes about only one of these groups, but I expect they’re relativelly similar.

    The uptake of PV is severely and purposely constrained for a number of reason resulting from their flawed logic.

    A rediculously low cost annual cost reduction function. How you can stand by your projections when you say costs will reduce by 3%/year when the historical rate of the previous few years is closer to 10%/year I will never understand.

    Even if the cost function was right, the installation numbers per year are limited to an arbitrary value based on an economists view on how quickly installation teams could be applied to this market, this estimate restricts installations substantially below what is realistically achievable.

    These two restriction achieve the goal of not depressing the wholesale electricity price and enabling the continued build of new plant (in the models at leas).

    While I would stop short of implying intentional misleading conduct I do feel the reasons are a woeful understanding of economies of scale in manufacturing, not fully understanding the diseconomies of scale in the transmission and distribution systems, and the key source of information in which the models are based is the incumbent utilities.

  5. Winston Smith 8 years ago

    When it comes to the accuracy of the predictions of economists, I think astrology has a similar if not better accuracy rate…

    The woeful bias and uncritical acceptance of obviously erroneous assumptions in the DEWP is breathtaking drive to maintain a status quo.

    Is the DEWP acronym meant to be pronounced as dupe (djuːp) or derp (du:p / der:p). Either one may in fact be applicable…

    (derp -an exclaimation made after a moment of incredible stupidity or massive failure.)

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