Suntech, the world’s largest solar manufacturing company, has produced stunning forecasts for the solar PV industry in Australia — saying it could supply 5% of the nation’s power demand by the end of this decade, reaching the target three decades ahead of the federal government’s most recent forecast.

Stefan Jarnason, the technical director of Suntech Australia, says solar PV capacity in Australia could reach 10 gigawatts by 2020, when it would be growing at a phenomenal 2GW a year. He bases these forecasts on rapidly declining costs, which mean electricity from rooftop PV that is already cheaper than coal-fired energy delivered by energy retailers in some parts of the country, will reach parity for commercial users around 2015, and parity for utility-scale developments towards the end of the decade.

It’s just a forecast, but it represents a growing realisation within and without the industry that in a very few years the rollout of solar PV will be dictated less by the scale of financial incentives — because it might not need much — but by the scale of regulatory protection for the current energy suppliers, because they might need all the help they can get.

Jarnason predicts installation of rooftop PV will slump sharply to about 250MW in 2012 because of the dramatic changes in government incentives over the past six to 12 months, but will grow at 20% per year as more consumers use it as a hedge against rising electricity prices. Again, this will depend more on the removal of regulatory barriers than on government financial support.

He predicts commercial-scale solar PV will be about 40MW in 2012 and grow at 40% a year, while utility-scale solar will grow at 20-60MW per year, before experiencing massive growth from around 2018, as solar costs come down, and hidden subsidies are removed from fossil fuels. “Until the government is able to remove hidden subsidies, growth in utility-scale will remain slow — when we hit grid parity there will be a boom,”  he told a seminar on “The Future of Solar,” hosted by the Grattan Institute and the University of Melbourne last night. By the end of the decade, he says, the combination of solar PV and solar thermal with storage will be able to deliver base-load power.

Such a scenario would appear to be a significant threat to the energy incumbents, particularly in the coal and gas industries, because it would reduce opportunities for new deployment and eat into their earnings because of the impact of solar and other short run marginal cost technologies in the so-called merit order effect (more on that tomorrow). It would also come as a shock to the government, which forecasts just 5% solar by 2050 in scenarios painted in its Clean Energy Future package. The long-awaited energy white paper, which will be delivered in the next month or so and will become the blueprint of the country’s energy planning over the next decade, will also be unlikely to have such a bullish forecast, seeing that none of the 23-person panel advising the government is a specialist in solar technology.

Indeed, Jarnason says the main impediments to the industry are not cost but regulatory barriers, with politicians seemingly unaware of the technology’s potential. “Unfortunately, politicians view solar PV, and probably to an extent all renewable energy, as a political exercise than an energy generation exercise,” he said. And the small numbers of incumbent generators, retailers and network operators are highly influential and also keen to maintain regulatory barriers. “They’d rather not have to change,” Jarnason said. “Solar PV is a form of distributed energy, so (the utilities) need to rethink how to generate supply to get you and I to pay for their energy.” This echoes the thoughts from the CEO of US utility NRG Energy.

Suntech’s forecasts may come as little consolation to the likes of SilexSolar, which announced on Tuesday that it would suspend manufacturing at its Homebush plant in Australia, blaming a trifecta of cheap Chinese imports, the high Australian dollar, and the policy changes on solar PV, particularly in NSW where the market has fallen to virtually zero. Ironically, the company’s decision to shut down came just a week after the carbon pricing legislation was finally passed by the Senate, and on the same day as a Chinese-based solar PV parts manufacturer announced a $6 million float on Sydney’s new venture capital market, the SIM-VSE.

Suntech’s Jarnason says that while the modules needed to meet his bullish solar forecasts would almost certainly come from China, more than half the economic value of the solar PV build-out would be for building, operating and maintaining the plants. He says solar PV generates more jobs per gigawatt hour than other technologies, and Australia still has the opportunity to export PV technology and know-how. He says Suntech is spending $40 million a year on research and development, much of it in Australia where it supports programs at the world-leading UNSW and elsewhere. Suntech’s chief executive, chief operating officer and chief technology officer are all Australian citizens.

Incidentally, Silex CEO Michael Goldsworthy also believes that Australia has great opportunities in the large scale solar space, which he says will not be commoditised as the small-scale sector. Silex is soon to begin construction on a 2MW pilot plant in Victoria for its unique concentrated solar PV technology, a prelude it anticipates for a 100MW plant near Mildura. “I don’t think we’ll ever going to get it as cheap as Co2 emitting coal fired power stations — but if we focus on the daytime market, when utilities sell power for 25c-30c/kWh, there will be a big market for solar delivered at a daytime wholesale at 10c -15c/kwh — depending on the local market, solar conditions, and peak requirements.”

Daytime power — utilities sell electrical power for 25-30c/kWh in daytime. We think that there is a market for daytime wholesale at 10c -15c/kwh depending on local market, conditions, peak requirements, etc.The large-scale solar industry will get a push along today when the ACT government unveils legislation for what will be the country’s first feed-in tariff for commercial-scale renewable energy generation — a mechanism that many in the industry believe will be far superior to the grants-based schemes that have dominated public policy making.

The ACT government will establish a reverse auction — one that encourages companies to compete for support at lowest cost — for up to 40MW of capacity in the first stage of its plan. The government expects it will provide about 14% of the minimum electricity demand of the city. The first auction process is expected to get under way before the end of the year.

“The ACT’s reverse auction is an innovative way of driving investment in Big Solar,” said John Grimes, the head of the Australia Solar Energy Society. “It will require solar companies to demonstrate how they can deliver zero pollution, large-scale solar at least cost to ACT taxpayers.”

Meanwhile, construction of Australia’s first utility-scale solar PV plant, the  10MW Greenough River facility near Geraldton in Western Australia, has begun. Project developer, the US solar giant First Solar said the first of its thin-film solar PV modules will be installed in March next year and the solar farm is expected to be fully operational by mid-2012. The solar farm is jointly owned by the WA state-owned power utility Verve Energy and GE Energy Financial Services. The WA government is providing $20 million of the $50 million cost, including $10 million from the WA Royalties for Regions program. The construction program will provide up to 150 jobs.

*This article first appeared on Climate Spectator

Peter Fray

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