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

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 The solar industry was astonished by a range of predictions and assumptions based on modeling that seems hopelessly out of date, and threatens to make the energy industry hopelessly unprepared for what lies ahead.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.