As the fall in manufacturing costs of solar PV systems – projected at about 10 to 15 percent per year – continue to hold in the international market, the future of large-scale solar in Australia is poised to play out well, causing a watershed moment in coming weeks. The ARENA tender, which is scheduled for release in a fortnight, will become a catalyst for over $1 billion in investment in 2017 in the renewable energy sector.
Already, the agency’s tender process has brought about considerable price reductions and, since the cost of utility-scale solar cost has fallen faster than experts expected, about half of the 20 short-listed projects might receive funding from the $100 million pool.
The New South Wales and Queensland governments will provide additional assistance to some of the projects. That alone is expected to trigger about 400MW of large-scale solar investments.
Several large-scale solar projects have been put on hold, pending the outcome of ARENA’s tender. The agency’s initiative to give the sector a massive push forward comes at a pivotal moment for many projects that have been on hold since last year as they jockey for more funding while others wait for the tender’s outcome.
The competitive nature of the tendering process has led to a significant fall in the offers to ARENA. ACT Environment and Energy Minister, Simon Corbell, has echoed this view and states that the recent large-scale renewable energy tender means large-scale solar can now compete with wind energy.
There’s also an increasing appetite for solar projects that can turn the capital strike of major utilities that have drawn power purchase agreements into “merchants” to sell their energy output on the spot market.
This is possible because of the increasing interest by financiers especially from Europe, where the utility-scale solar market is well established through solar investment funds.
LGC prices are also sky-rocketing, with trading at $80/MWh. Miles George, Head of Infigen Energy and Chairman of the Clean Energy Council says this is a result of the difficulties in obtaining contracts from the various involved parties (i.e. large utility companies).
George believes more projects will “go merchant” and the appeal of solar is also being boosted by the prospect of marrying solar farms and wind farms.
Perth-based Sun Brilliance has launched a project to upsize its Cunderdin solar plant from the current 25MW to 100MW, and will also “go merchant” in a bid to take advantage of high REC prices, high electricity prices, and the growing interest from bankers and equity investors.
Jack Curtis, Head of First Solar, told analysts that he expects the ARENA tender to be a “watershed” experience for large-scale solar in Australia.
“I think it could be the biggest tipping point in the industry we’ve seen,” Curtis said. He adds that the tender has attracted multiple projects and participants – from off-take partners, banks, equity investors, installers to manufacturers.
It has “localised” those possibilities and brought more international expertise to Australia – keeping in mind that Australia’s solar boom has always been in rooftop solar, but has trailed lagged in the area of large-scale solar.
“ARENA does not get enough credit for the work it has done to drive down the cost. The broader market does not have a sufficient appreciation for that,” Curtis claims.
JinkoSolar, a Chinese-based manufacturer and the biggest in the world, is the largest supplier of solar PVs to the Australian market and concurs that the outlook in Australia is strong.
“No doubt that due to the delayed RET review, over the past few years most major projects just dried up and vanished from the Australian landscape,” a spokesman for the company in Australia said by email.
“The result being many companies just downsized or withdrew from the market. Thankfully the Australian Government has now settled on a target so there is some certainty around a renewable future.
“Jinko anticipates that during the next few years at least, there will be a bright future for large-scale solar farm construction around the country and that the industry will be in growth mode with many more employment opportunities for Australians.”
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