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Super cheap solar – and why that’s good for Australia’s mining sector

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Solar Farm, supplied by BayWa.

Solar Farm, supplied by BayWa.

Australia’s most pre-eminent solar researcher, Dr Martin Green, says the cost of solar PV technology will fall substantially in coming years, and while bad for the country’s thermal coal industry it will spell good news for other Australian mineral and materials exports.

Green, the director of the Australian Centre for Advanced Photovoltaics at UNSW, spoke at an Australian Renewable Energy Agency function in Canberra last week, and we caught up with him on Monday.

“Solar PV is the cheapest form of new power, and soon it will be even cheaper,” he says.

Solar PV, Green expects, will fall in price in some areas in the world to around $US20/MWh this year, but by the mid-2020s costs of just $US10/MWh will be obtained, and prices in the $US20/MWh range will be routine across the world.

But the underlying message of Green’s presentation in Canberra, and his later remarks to RenewEconomy, was that this would be good for the mining industry, rather than bad, as it is often portrayed by the mining lobby.

“It’s great for Australian resources,” he says. A global surge in solar capacity would lift demand for key Australian exports such as coking coal, iron ore, bauxite, alumina and copper, while the battery storage industry will be good news for miners of lithium, nickel and cobalt and other materials.

It’s ironic, because the biggest opponent of renewable energy in Australia has been the mining lobby, and its proxies in the Murdoch media. But Green says the export boost from other materials will offset the reduction in revenues from thermal coal exports by a factor of more than five.

One terawatt of solar PV – that is 1,000GW, or one million megawatts – would, by his estimates, be installed by the early 2020s, and possibly become the annual installation rate.

“Over the last 18 months, solar fields … have become the cheapest way of generating electricity – and they are quickly becoming cheaper,” Green says. “And Australians have played a major role in this and in future cost reductions.

“The really important development is not that solar is now two-and-a-half times cheaper than coal, but that solar is now becoming cheaper than coal fuel costs – with solar costs still decreasing. This is important because in future, solar systems can be financed solely from fuel savings.”

Martin_Green_Image_National_Australia_Day_CouncilGreen says the solar industry has already moved from its “pre-production phase” and its “industry development” phase, and is now in its “mass production” phase, but its “learning rate” is still rising – to 40 per cent. Forecast price drops are being met earlier than expected.

“Australia has played, and continues to play, a major role in this transformation, beginning in the lab,” he says.

UNSW held records for silicon cell efficiency for 30 of the last 33 years, and is now leading with the PERC technology, which currently has a 20-25 per cent market share in the world. It is now aiming for a further 50 per cent boost in efficiency by stacking a second cell onto silicon, sustaining ongoing cost reductions.

“We are approaching 1 TW installed solar PV and, at present growth rates, installing 1 TW/year by the mid-2020s is feasible,” Green says. If this is achieved by the mid-2020s, then CO2 emissions can reduce close to the 2°C trajectory rate.

By Green’s estimates, installing 1 TW/year PV will reduce thermal coal demand by about 600 Mt/year, or 10 per cent of the present market. While great for the rest of the world, Australia is a major thermal coal exporter and its coal exports, worth $15 billion in 2015-2016, will suffer.

“Economics is an inexact science, so I aim for consistency not exactitude by estimating this loss by what I call a ‘Share the Gain/Share the Pain’ approach. If the world market drops by 10 per cent, I assume Australian exports drop the same 10 per cent, or $1.5 billion. Bad news!

“But maybe not! According to IRENA, 1TW of PV requires 56 million tonnes (56 Mt) of steel for mounting structures and the like, or about 60Mt of coking coal, 6 per cent of the present market.

“Australia is the largest exporter of coking coal, with increased demand increasing earnings by $1.2 billion, estimated as before. This nearly offsets thermal coal losses.

“But we also need iron ore to make the steel, about 110 Mt more, 3.3 per cent of the world market – another $1.6 billion for our exports – we are now well ahead.

“But that’s not all! IRENA estimate another 19 Mt aluminium is needed for module frames and supports, or about 38 Mt of alumina. Australia is again the biggest exporter – another $3.3 billion gain.

“Also another 5 Mt of copper where Australia is 4th biggest ore exporter – another $2.1 billion.

“Any loss in thermal coal sales due to strong solar PV uptake will be offset likely 5 times over by increased demand for more valuable resources – coking coal, iron ore, alumina and copper.” This does not include demand for other resources where demand will increase – silver, lithium, cobalt, nickel, for example.

“This also neglects Australia’s No. 1 position in solar resources. With future very low-cost solar electricity, lower than almost anywhere in the world, Australia could add value to its resources by increasing the amount of local processing,” he says.

“To recap on my 3 points, electricity from large solar PV is already cheaper than from any other source and it’s going to get a lot cheaper – maybe 2-3 times cheaper than at present.

“Australia has played a major role in getting to this stage through its research leadership – this role should be encouraged and even accelerated … because it benefits the Australian resources industry enormously and may give Australia the world’s cheapest electricity further down the track.”

You can see a video edit of Green’s presentation here.

  

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  • Matt

    How about metallurgical silicon, the raw material for PV panels using high purity mono or poly crystalline silicon, Australia produces this as well, mostly for export. I know the process is a heavy CO2 producer, but we still make the stuff.

  • Peter F

    and of course Lithium for the batteries to backup the solar

  • john

    Giles old mate please correct the spelling mistake as cooking coal is “coking coal”

  • Eb

    Hopefully we’ll see steel electrolysis demonstrated soon, reducing the need for coking coal. The Pilbara may be a good site.
    https://www.scientificamerican.com/article/cleaner-cheaper-way-to-make-steel-uses-electricity/

    • Mike Shackleton

      Electric arc furnaces with a renewable source of carbon for the alloying process is also an option. But given Aluminium is a better metal, with cheap renewable electricity we may see a transition to higher aluminium usage in traditional steel consuming sectors like cars.

      • Rod

        I think the substitution of Aluminium for steel may be under way in the auto sector.
        Aluminium has gone through the roof of late.
        http://www.kitcometals.com/charts/aluminum_historical_large.html#1year

        • Mike Westerman

          Yes – switch to EV will increase demand for aluminium, copper, cobalt, lithium and graphite, decrease steel. There’s a great graphic I saw comparing content in ICE and EV – can’t remember where.

    • Brunel

      Titanium electrolysis might be great.

      But we should also fine people for throwing aluminium cans in the rubbish bin.

      • nakedChimp

        or in the landscape..

      • Alastair Leith

        Just put 5c or 10c on them nationally and you’ll never see one abandoned for more than a day ever again. Same for plastic containers.

        Incentivise recycling if people are too disinterested to do it (though they can do it well in many European countries for decades).

        • Brunel

          I mean people throwing them in the rubbish bin. I bet some cafes throw glass bottles in the garbage bin. Despicable! Glass is easily recycled. They should be fined for throwing glass bottles in the rubbish bin.

          • Mike Westerman

            Glass is expensive to recycle compared to new glass, but there needs to be an incentive to minimise all waste, whether recycled or merely collected, crushed and dumped. Certainly it is appalling metals are not recycled, or that plastic is casually discarded into the environment at large.

    • Brian Tehan

      Hydrogen reduction of iron oxides is a proven technology and the direction that the Europeans are heading in. Obviously, it requires a lot of renewable energy to produce the hydrogen but Australia has the renewable energy potential if not a government with the foresight to help it along.

  • Roger Franklin

    Well that sort of buggers up the story that Scott Morrison and his “Lump of Coal” was trying to tell in Parliament a few months ago where Coal is going to save the world! Someone want to tell Scott and Co that the world has changed before you give away $1b of public money to start a new coal mine

    • Alastair Leith

      That was just a stunt to sure up another donation from Gina et al. They know coal is over as an energy source as well as we do.

    • Ren Stimpy

      Morrison’s as slippery as an eel (actually all of them are). As the renewable energy transition ramps up he will no doubt front the press with — “The lump of coal in parliament that day was coking coal – I was trying to help the renewable energy transition.”

  • Radbug

    Electrochemistry supplants Pyrometallurgy. Smelt at the mine-site, using electrochemistry and local solar electricity.

  • Robert Westinghouse

    Dr Green could not have said it better. Solar is good for Australia – yes, all Australia. So Turnbill and his ignorant self-interest politicians need to listen and take note. Or we will vote for those who want to help normal Australian, rather than the greedy NLP right wing a-holes.

  • Jeremy C

    Don’t forget if you are a mid career mining exec in Australia you are staring at career oblivion, not just with the future but rendering all that hard work, sacrifice, etc, that you have put in since your early twenties absolutely pointless. And if you are a typical Australian business executive i.e risk averse, follow the herd so as to ensure your status, unimaginative except when it comes to choosing accessories for the beamer, willing to “go-hard” and stare down your opponents then you are faced with finding out that your whole life has amounted to nothing what are you gonna do? You will fight every inch of the way won’t you.

  • onesecond

    Thank you Mr. Green for highlighting those facts, now we can watch the mining lobbyists turn on each other. Only the pro renewable front will win this one. Excellent.

    • My_Oath

      As a miner, I’d just like to point out that the ‘Mining Lobby’ everyone talks about is the Minerals Council of Australia. That body has 3 members. It represents 3 mining companies and is not the voice of the other 3,500 companies in the mineral resources sector.

      While that non-representative body blathers about coal, the other companies are either using/developing minesite solar, analysis of minesite solar, developing new tech to reduce CO2 generation.

      While the MCA/LNP cuddle their little black rocks in parliament, the rest of the industry is quietly just getting on with it.

      • Mike Westerman

        And includes some leaders who are looking at converting their mines at end of life to pumped storage! Nothing in common with the black rock cuddlers!

  • Brunel

    Goodness gracious me! Bauxite and iron ore should not be exported but turned into metal in AUS and the metal exported.

  • James West

    I realize that this is back of the envelope stuff, but comparing an ongoing yearly export income (thermal coal) with one-off exports totalled over all years (the metals and coking coal) seems a bit disingenuous.

    Also, you don’t seem to have included the one-off metals and coking coal requirements for the coal plant required if one were to build that instead of the PV.

    • Mike Westerman

      James there are 2billion ICE cars in the world to replace, and you will note that the annual projection for PV to replace coal over the next 40+ years is 1TW/a – the uptick in copper, aluminium, cobalt, lithium and graphite reflect a long term view of increased demand. Significant pumped hydro and wind will take more steel than a similar coal fired power station. On the other side of the ledger, is declining coal prices and demand. I know what I would back.

      • James West

        That’s nice. Unfortunately the article here was referring to one specific potential development / change in the energy system. It oestensibly sought to make a monetary comparison between two different, specific outcomes. I’ve just pointed out that it is in fact comparing oranges with apples, changing system boundaries and time scales willy-nilly, and so does nothing to advance our understanding on the specific topic it tried to address.

        • Mike Westerman

          You may have read a different article – the one by Green talks about annual demand for coking coal, steel, copper etc due to the annual installation of 1TW of PV so directly comparable with the annual but declining income from coal. One only needs to be aware of what is happening in the copper mining sector for example to realise the momentum building there, a sector where Australia stands to benefit. As China ramps up efforts to clean up its air, I would expect to see further declines in coal exports from Australia and even a recovery in the aluminium price.

          • James West

            Thank you for that reply. You have helped make my point about just how disingenuous the original article’s framing is. The coking coal and metals quoted are the total requirement of the 1 TW capacity (which presumably has a life time of 20-40 years), not an ongoing operational input. The article has misled you. This is understandable because it also conflates the metals requirements for 1TW capacity with a hypothetical installation rate, which it also pegs as 1 TW p.a.

            Giving the author the benefit of the doubt here, we’ll accept a 1TW p.a. installation rate. In that case, the article neglects to mention that EACH additional 1 TW of installed capacity will reduce demand for coal by $1.5 billion over its life time of 20 – 40 years. Thus by year 20, while we are receiving the extra $5-$10 billion p.a. in additional metals income, we will be forgoing $30 billion p.a. in thermal coal sales. Not a great trade -off in financial terms (please, let’s restrict this analysis to the system discussed in the article, as that is what I was addressing).

          • Mike Westerman

            You seem to be assuming that some how Australia’s coal exports are quarantined from world pricing. The shift in demand for coal will happen regardless of what Australia does, so the value of its coal exports are going to fall sharply in any case. What the article rightly contends is that this will be more than compensated by the increased and increasing exports of other commodities.

          • James West

            Nice topic change.

            Do you concede that my analysis of the ways in which the article itself is misleading is right, and if not, how not?

          • Mike Westerman

            The topic change is only in your mind – it’s really very simple: the value of Australia’s coal exports will drop but be replaced by the value of metals exports as demand grows and is maintained for PV and wind. The transport sector has hardly even begun its transformation, so the demand for electricity will start to grow at above CPI rates. The demand for copper and aluminium will drive up prices as well as quantities, even while prices and volumes for coal drop. The article makes the point well, countering the nonsense that Australia will sink like a stone if we’re not continuing our coal exports.

          • James West

            So no response on the specifics then? I rest my case.

            Note that the analysis in the article itself is uses constant prices.

            Bye.

          • Mike Westerman

            You rest your case out of lazy analysis, not lack of evidence. One day you will awake to find fossil fuel assets worthless stranded assets. Meanwhile, my dollars are following the metals.

  • JamesWimberley

    Martin Green is a great solar researcher, but he’s not a trained economist, and it shows. Suppose there isn’t any solar. The world’s energy system still needs $1.7 trillion a year of investment to keep ticking over. Oil platforms, pipelines, refineries, LNG plants and ships, gas and coal power stations, hydro dams, reactors, it all adds up. Whatever the energy mix is, it will take a massive amount of materials, including steel. You would need a much more sophisticated input-output analysis to tease out whether there would be net effects from a shift to solar and wind on material input by mass. Overall, probably not or negative – solar panels and wind turbines are light structures. There would be some shift in composition. Solar panels need silicon, which is superabundant everywhere. A massive net increase in demand for steel, aluminium and so on is vanishingly unlikely.

    He is on stronger ground in pointing to the increased demand for lithium, cobalt, and nickel for batteries: these don’t have exact equivalents under alternative technologies, though the exotic materials needed for nuclear (uranium, hafnium, etc) will be in less demand.

    • Mike Westerman

      James I think the conclusion is most likely right, even if the analysis lacks some sophistication. Over time, as demand for oil and coal ramp down, and demand for RE and EVs ramp up, demand for much more valuable minerals than coal or iron ore offsets declining income from the latter. Coal at $60/t, iron ore at $70/t for 62% pure compared to copper at $7000, lithium at $9000, cobalt at $60,000. Wind may seem light structures but they’re not in weight of steel per firm MW – wind will typically be 2-300t/MW firm against thermal 2-30t/MW firm. We are heading towards a significant reformation in Australian industry, one that could result in local metal production booming as coal declines. It would be so much healthier to have a government that recognised and began planning for the inevitable.