24 Jun We’re all going solar, rooftop panels or not
Solar power has gone beyond a revolution on our rooftops. It’s forging ahead to a position where it will become the dominant form of new power generation full stop.
Thanks to rapid cost reductions that have surprised even the experts, large-scale solar is on the verge of transforming Australia’s energy mix, whatever the outcome of the July 2 election.
McKinsey is predicting that in less than 10 years, the only new generation capacity that will get built in Australia will be solar, with one or two exceptions.
Though wind is still set to dominate investment up to 2020 to meet the Renewable Energy Target, it may struggle after that to attract significant new dollars.
McKinsey expects a stalling in any sort of generation investment in the 2020-25 period when none is needed. After that, when new capacity may again be needed to help replace some older coal plants, solar will have come to the ascendancy and will squeeze out competing technologies. New wind is likely to find itself limited to niche locations, says partner Christiaan Heyning.
Mitchell King, founder of specialist infrastructure fund Lighthouse Infrastructure in Melbourne, sees Australia fast approaching a “tipping point” in its transition from fossil fuels to renewables. He expects massive growth in solar capacity in the national electricity market, from a little over 4 gigawatts at present to 52GW by 2040, requiring investment of $40 billion, or $3 billion a year.
And whereas until now solar investment has been concentrated in rooftop PV – some 5 million Australians live under a solar-equipped rooftop – with a few remote, off-grid projects, in future commercial and industrial solar will also strongly feature.
Generation from rooftop panels is expected to reach 25,400 gigawatt-hours by 2035, offsetting some 13.8 per cent of consumption that would otherwise be sourced from the grid, according to the Australian Energy Market Operator’s latest forecast.
In fact the rise of rooftop solar is the biggest factor behind AEMO’s forecast this month that during the next 20 years, demand for power from the grid will be flat, despite an expected 30 per cent growth in population and a surge in LNG production capacity. Rising battery purchases only spur the trend.
But the real story lies in commercial and utility-scale solar – markets that by 2040 will have easily overtaken the residential market, in King’s assumptions.
In new forecasts released on Thursday by the International Renewable Energy Agency (IRENA), the share of global electricity generated by solar PV could jump from just 2 per cent today to 13 per cent by 2030, driven by a further reduction in costs of up to 59 per cent in the next 10 years.
Costs for utility-scale solar PV have fallen to US5-10¢ a kWh in Europe, China, India and the US, with some record low prices seen below US5¢ in Peru and Mexico last year. Last month another record was set in a competitive solar PV auction in Dubai, of just US2.99¢/kWh.
The Dubai pricing – the equivalent of 4¢/kWh –is hardly representative of what can be expected in pricing in Australia, where 10-11¢/kWh is more realistic, according to Citigroup.
But with abundant land in Australia and thousands of megawatts of coal-fired plant heading into retirement, the scene is set. That was confirmed by ARENA’s large-scale solar PV funding round, which closed last week with 20 applications from projects worth $1.6 billion having met cost hurdles that would have been regarded as overly aggressive just 12 months ago.
Bloomberg New Energy Finance still sees new gas generation attracting some investment in Australia, thanks to the flexibility it offers to complement solar and wind, as well as coal generation, although that will be limited to extending plant life. But the overall message is similar: out of $US113 billion to be spent in power generation here by 2040, 89 per cent will be in renewables, with solar to dominate.
Author: Angela Macdonald-Smith, email: [email protected].
Article published in today’s (24/06/16) issue of the Australian Financial Review.