by Michael Barker, Analyst
Australia’s Solar Flagships program, having practically imploded only four months ago, is back on track. The program, which supports large-scale, grid-connected installations, has selected established project developers AGL Energy (one of Australia’s ‘Big 3’ utilities) and First Solar (arguably the largest vertically-integrated PV project developer in the world) to construct Phase 1. A brief refresher on the program so far:
- May 2009 - program announced
- May 2010 - total program funding cut by 15%
- Jun 2011 - consortium composed of Fotowatio Renewable Ventures, BP Solar, and Pacific Hydro selected to construct Phase 1
- Dec 2011 - BP Solar exits solar industry in general but tries to keep Solar Flagships project
- Jan 2012 - project fails to secure financing
- Feb 2012 - Phase 1 re-opened to shortlisted bidders
- Jun 2012 - AGL Energy and First Solar selected for Phase 1
The project will see 159 MW-AC of PV capacity installed at Nyngan (106 MW) and Broken Hill (53 MW), with construction slated to begin in 2013 and be completed by 2015. The total project cost was submitted at A$450 million; Solar Flagships is providing A$129.7 million and the NSW state government A$64.9 million. At this price the project will be able to generate an un-subsidized LCOE of approximately A$0.24/kWh, higher than the standard commercial rate of approximately A$0.18/kWh but substantially lower than the peak price, which can exceed A$0.40/kWh. Including the government grants, the subsidized LCOE will reach approximately A$0.14/kWh, lower than both standard and peak tariffs.
This project further amplifies First Solar’s presence in Australia. The company developed a 1 MW-AC roof-mount system in 2009 in South Australia, was the fifth largest module supplier to Australia in 2011, and has a 10 MW-AC project under development in Western Australia. Australia is a natural market for expansion by First Solar as it has high insolation, plenty of available land, rising electricity prices, and a renewable energy target of 20% by 2020.
The fact that AGL is involved in the project bodes well for the development of large-scale PV projects in Australia, as utilities have been vocal in their opposition to solar incentive programs, often extending that opposition to renewable energy in general. This could indicate that utilities have realized that instead of fighting to keep PV out of the market they should instead fight to be the developers of such projects, thus giving them more control over their implementation. The major utilities have been resistant to the increasing amount renewable energy generation being developed as they have (rightly) feared it would challenge their conventional business lines. Perhaps now they have begun to follow Steve Jobs’ advice about launching new divisions that will ‘cannibalize’ existing business: "If you don't cannibalize yourself, someone else will."
Whatever the motivations, the fact that Solar Flagships is back on track is undoubtedly a positive development for the PV market in Australia. Large-scale ground-mount system development has the potential to dramatically grow Australia’s PV capacity and the fact that major international developers and domestic utilities have begun to enter the field means that others will soon follow. The days of residential PV dominating the Australian PV industry are slowly coming to an end, a process that may cause pain for small-scale integrators but one that will benefit the industry in the long-run as it reduces market volatility and speeds the cost reduction of PV systems in Australia.
