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Sep 27, 2011

Will Australia miss the global solar boom?

Ferguson has mostly been interested in protecting the supply of fossil fuels or export or use at home, although he has shown an increasing interest in solar of late, writes Giles Parkinson from Climate Spectator.

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Federal Resources and Energy Minister Martin Ferguson next month will have the honour of chairing the biennial meeting of 36 energy ministers hosted by the International Energy Agency. The topic will be the world’s energy future, and the contents are likely to be surprising — so much so that Ferguson may have cause to consider if Australia is well prepared for the energy revolution ahead.

Since its establishment in the 1970s, after the oil price shock, the IEA’s principal mandate has been around the protection of oil supplies, and its forecasts for the world’s long-term energy mix were viewed — particularly by those pushing renewables — with some suspicion.

In the past couple of years, however, the IEA has focused more on different scenarios for the world’s future energy needs —  both in terms of energy security and in reducing emissions. In doing so, it has emerged as one of the world’s most bullish proponents of renewable energy, in particular solar.

Around the time that Ferguson will host the meeting in Paris, the IEA will produce a study that predicts more than half the world’s energy needs, and most of its electricity needs, will come from solar energy sources by 2060. The question that Australia needs to ask itself, as it signs yet another multibillion-dollar contract to develop LNG resources, is how it is placed to benefit from a solar future that will dominate future energy sources in the same way as coal and oil has in the past.

At a solar summit in Melbourne earlier this month, the Clean Energy Council warned that Australia had a five-year window in which to seize the initiative in large scale solar or miss out on a huge economic opportunity. It warned that Australia, despite obvious expertise, risked being left behind because of the massive rate of deployment overseas of large-scale solar —  PV, solar thermal and with storage — and the rapid fall in costs.

As the world’s biggest energy groups — GE, Alstom, Areva, Abengoa and Siemens (which has abandoned nuclear) — focus more on their solar technologies, and invest billions in new projects, Australia needed to accelerate its deployment and knowledge so that it, too, would have expertise that it could export rather than import.

That warning was made even before the IEA previewed its latest solar road-map, which it has expanded upon at the World Solar Congress in Germany at the start of the month, and at the SolarPaces conference in Spain last week. According to its chief renewables analyst Cedric Philibert, many solar thermal technologies will fall to $US100/MWh by 2030 — making it as cheap or cheaper than the wholesale price of fossil fuels in many countries — meaning that its take-up — as a source of dispatchable power, for district and industrial heating, and as storage, would be irresistible.

Professor Andrew Blakers,  from the Energy Change Institute at the ANU, has a similarly bullish view for solar in Australia. He argues that by 2050, solar could be providing more than half of Australia’s electricity needs, with a mixture of wind, geothermal, ocean energy, biomass and some residual gas plants providing the rest.

He says that the prospects for solar are so bright that even having the wrong policies would merely delay the take-up of solar technologies, rather than prevent it. However, he agreed with the CEC that Australia’s interests would be best served by policies that encourage early deployment because it would give Australia engineering expertise and knowledge that it could export to other countries.

Blakers points to the plunging cost of solar PV, which is already below retail price parity in many parts of Australia. (Like the IEA, he says solar will be the best and cheapest option for 6-7 billion people worldwide, as it is the sunnier climates that will witness most population growth). Blakers says wholesale parity — at about 8c-12c/kWh, could be achieved by the latter half of the decade, given the expectations for the rising costs of coal and gas and the carbon price.

If this is the case, then the take-up of solar could be so great that Australia would be adding 4GW of solar capacity from about 2020 — enough to obviate the need for new coal and gas (apart from some peaking plants), and will mean CCS and nuclear missing the boat. He says that in these cases, planning, infrastructure and security issues are all much simpler.

Blakers is particularly bullish about the prospects of PV — on commercial rooftops and in utility-scale arrays — backed by pumped hydro — a relative cheap and fast response option that needs storage on two levels, rather than a damming a river. He says this will be followed by solar thermal with storage such as molten salt. Others predict an earlier and more prominent role for solar thermal.

The IEA’s Philibert foresees three broad categories of situations — where solar thermal and storage dominates sunny and dry climates, where PV is backed by hydro and pumped hydro, and in temperate climates, where PV in combined with wind power. In the northern climates this is likely to mean a higher contribution from other energy sources.

If these forecasts are right — even if they are half right — it would present an enormous opportunity for the development of a solar industry in Australia, far greater than seems to be contemplated in current domestic scenarios — Treasury only includes a 5% solar target in its forecasts. But to exploit these scenarios would require policy commitment.

This could come from bodies such as the Clean Energy Finance Corporation, and the IEA is strongly supportive — and has been for several years — of early incentives such as feed-in-tariffs to build scale and know-how to accelerate the cost curve decline. “This is the price to pay to bring solar technologies to competitiveness with fossil fuels,” Philibert says.

Australian companies know this all too well — its new technologies, such as Carnegie’s wave energy machines, Atlantis Resources’s tidal energy turbines, Dyesol’s solar dyes, or Ceramic Fuel Cell’s BlueGen units, will be deployed at scale overseas because that is where the greatest incentives lie. Many of Australia’s geothermal companies, as well as the largest independent renewables group Pacific Hydro, are now focused on South America and near Asian neighbours for the same reason.

All this should present some food for thought for Ferguson and his advisers. Ferguson, like the IEA, has mostly been interested in protecting the supply of fossil fuels or export or use at home, although he has shown an increasing interest in solar of late, spending more time in recent months at solar summits and gladly appearing at solar announcements.

His attachment to LNG-style mega projects is all well and good, and the export income is crucial. But perhaps Australia can walk and talk at the same time. Given that Saudi Arabia, and other Gulf emirates, are now looking to a massive investment in solar energy for their domestic electricity so they have more fossil fuels to sell, perhaps it’s time for Australia to consider the same route — particularly given its expertise in solar R&D — allowing it build a major stake in the energy of the future as well as profiting from the boom in commodity energy sales.

*This article first appeared on Climate Spectator

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