Coalition reportedly investigating ways to promote large-scale solar ahead of wind

Solar energy could be favoured under the revised Australian renewable energy target, with Coalition ministers reportedly looking at ways to accelerate the development of large-scale solar projects, ahead of wind farms.

It is understood that Industry Minister Ian Macfarlane and Environment Minister Greg Hunt are facing strong party-room resistance to the cut-down 33,000GWh target agreed with Labor.

Despite representing a cut of 8,000GWh, or around 3,000MW of new capacity, from the previously agreed target of 41,000GWh, many in the Coalition think the new target is still too much, and are against the idea of more wind farms.

That feeling extends to the front bench. Prime Minister Tony Abbott told 2GB Radio on Thursday that wind farms were not nice to look at and had health impacts.

Abbott admitted what has long been clear: that it was the intention of the Federal Government to reduce the number of wind turbines as much as possible. He would rather the RET not exist.

Treasurer Joe Hockey told the same radio station last year that wind turbines were “utterly offensive”. There are precious few supporters of wind energy in the Coalition.

Hence the push to find ways of promoting large scale solar in the revised RET. There are a range of views about whether the reduced target will squeeze out large scale solar our not.

Some say yes, others, such as Bloomberg New Energy Finance, point to the Queensland market, which is the only state likely to see increased energy demand (thanks to the needs of the LNG plants), and which has excellent solar resources and a bunch of solar projects in the pipeline.

BNEF says 2,600MW of large scale solar could be built in Australia under the RET by 2020 if the conditions are right.

The question is how to improve the conditions for solar. Cross-benchers such as Nick Xenophon have long proposed “banding” – reserving a certain portion of the RET to particular technologies such as solar. But this is thought to be too expensive.

Another measure being mooted is rewarding solar with higher tariffs or a higher ratio of certificates to reflect the greater “value” of its output, given that it delivers its electricity during the day.

That, however, is more of a moot point given the impact that rooftop solar now has on day time peaks (it has largely removed them), and the idea of providing additional certificates to solar output risks repeating the errors of the early days of the small scale scheme, when the market was flooded with certificates.

The most likely solution is to call on the resources of the Clean Energy Finance Corporation, using its resources to provide cheaper finance to large scale solar projects. It is already doing this with the Moree solar project, which as also got funding from ARENA.

Large scale solar PV projects are being built for as little as 6c/kWh in the Middle East, and that is due to the low cost of finance and the low cost of labour.

The cost of large scale solar PV is thought to be at least twice that in Australia, but some of those costs can be reduced if funding costs are reduced. Banks are unlikely to do that without a lead from the CEFC because there have not been enough of them built in Australia.

Jack Curtis, the Australian head of First Solar, which built the first large scale solar farm in Australia, and more recently the biggest so far at Nyngan (102MW) told RenewEconomy in an interview earlier this year that he big ticket item for cost reduction in solar projects is finance.

Curtis says the US is the key barometer for prices for large-scale solar farms. After backing out subsidies such as investment tax breaks, the US market is seeing prices in the $90-100/MWh mark.

“If we can do that here, large-scale solar will be competing against wind,” Curtis said. “But in Australia, the cost is probably around $140/MWh, and it could be another 3-4 years until the solar can hit the same numbers as the US.”

“Finance will be a big key to that,” he added. But finance costs in Australia will likely come down slowly because the deployment rate will be vastly inferior to that in the US, where innovative financing structures and corporate interest have brought down the costs.

That is where the CEFC could come in. Ironically, the Abbott government wants the CEFC to be dismantled, even though it is delivering a profit for the government and is underpinning investment in infrastructure that would not have happened otherwise.

But it may grant it a stay of execution (well, it can’t get the numbers in the Senate anyway) if it can encourage the CEFC to accelerate solar. The RET bill is due to be presented to the Senate next week.

© 2015 Solar Choice Pty Ltd

Giles Parkinson