As we continue to wean off fossil fuel sources of power generation in favour of renewables, solar energy has massive potential for meeting the national and global targets and goals. With the growth of the renewable energy industry, the diversity of models for solar energy delivery is also expanding such that there are an increasing number of choices and opportunities to participate in the solar revolution.
Policy makers, investors, entrepreneurs and even consumers should assess the differences in costs and benefits between the different models for solar deployment. Understanding these dynamics will help to get the overall “mix” of energy sources optimised to get the most effective use of public budgets and private resources, as well as allow both businesses and consumers to benefit from innovative solutions.
Currently, Australia has one of the highest percentages of solar deployment per capita in the world. It’s primary solar strategy has been to drive the uptake of small scale “rooftop” solar installations, which now accounts for about 4.5GW of total solar generated power in the country. As a result of the significant subsidies and incentives, nearly one in six households now have an installed system.
Meanwhile, large scale solar plants have had negative social connotations as it they are perceived as just another utility, with associated high capital costs, wasteful land use and ‘industrial’ health and safety issues.
With plenty of open space and ample sunshine, Australia is an ideal environment for large scale solar installations. However, the utility solar industry has been slow to get going, and Australia is still not even ranking in the top 20 countries for total installed capacity. But thanks in part to significant funding from the Australian Renewable Energy Agency (ARENA), the utility scale solar market is poised to grow.
Investing in Large Scale
2016 is set to be a “breakout” year for large scale solar in Australia. Another 56MW of photovoltaic solar power came online this week as the Moree Solar farm in northern NSW starting feeding electricity into the grid. Late last month, First Solar officially cut the ribbon on two recently completed large scale solar projects: The 102MW plant in Nyngan is the largest solar installation in the Southern Hemisphere, and when combined with the new 53MW sister facility in Broken Hill, can supply power to over 50,000 homes. This brings the total PV capacity in Australia to more than 5GW, or 9% of the total electricity generation.
Currently, there is a shortlist of 22 high value proposed PV power plants in the running for their share of the AU$350 million in funding, representing a total potential of 250MW of new power.
Australia’s first concentrated solar thermal plant, developed by Vast Solar, is close to reaching the commissioning phase, and will supply 6MW of power to the grid. This pilot facility will test innovative technology before Vast commences construction of a 30MW plant later this year.
Approval has also just been granted for a massive 2000MW plant in Queensland at Bulli Creek to be built by Solar Choice, and is attracting the attention of global investors. Genex Power received approval for a 150MW project in Kidston, QLD. And just this week, SolarReserve announced its proposal to build a 110MW concentrated solar power plant in South Australia.
The Role of Rooftop
The distributed model of energy describes the trend of shifting away from the traditional large, centralised power generation in favour of many small, localised points of energy sources collectively powering the grid. As battery storage technology improves and products becomes more accessible, the distributed model incorporating rooftop and localised solar installation emerges as a viable reality where end consumers create and even share their own power (see my previous post on micro grids).
However, as government incentives such as rebates, tax credits and feed in tariffs are gradually phased out, the real costs of these systems become exposed. As such, in Australia, the residential market has been declining over the last few years.
The Economics of Scale
A study recently released by Brattle Economics took a detailed look at comparing the costs between utility scale and residential rooftop solar installations. After correcting for a multitude of factors, they found that the Levelized Cost of Energy for large scale utility solar is about half the cost of residential systems.
As a “solar to solar” comparison of equal amounts of residential-scale and utility-scale PV solar deployed on an operating utility system, the study attempts to arrive at the baseline cost to customers and accounts for differences in installation, transmission and distribution expenses, and also factors various subsides and credits available.
Simply stated, most of the environmental and social benefits provided by PV systems can be achieved at a much lower total cost at utility-scale than at residential-scale, by as much as 50%.
This large difference in cost is primarily attributable to significant economies of scale gained by large installations, as well as greater efficiency realised with optimised panel installation and sun tracking capabilities.
Another highly in-depth report by M.I.T. arrives at similar conclusions and further explores the dynamics of the distributed model, highlighting the additional costs that residential systems place on network infrastructure. While it is true that generating electricity close to the load reduces energy losses as well as requires less overall line infrastructure, those benefits are currently overshadowed by the additional strain placed on the grid due to mismatches in energy generation and demand.
In other words, distributed PV generation is using the current infrastructure in a manner for which it was not originally designed. In order to effectively accommodate the distributed residential solar model, active management solutions must be put in place to correct for mismatches, surge overloads and network utilisation requirements. This will require regulatory changes and innovative business solutions.
Of course there are many other, more difficult to quantify benefits of rooftop solar. Perhaps the most obvious is the sense of self sufficiency and independence, as well as a feeling of directly and actively contributing to climate change solutions. In the immediate future, battery storage will be successfully deployed first into the residential market, and will continue to improve the robustness of those systems.
Choices and Opportunities
By directly comparing the costs and benefits of PV solar deployed in equal amounts of residential and utility-scale systems based on measurable data, these studies provide key information to the policy discussion about solar PV and should be essential inputs for regulators and other policy makers, as well as trend indicators for businesses.
As the industry continues to mature, a mosaic of diverse PV business models is emerging and will provide a wealth of opportunities. Companies outside of the utility sector are becoming increasingly focused on sustainable energy solutions and have begun to seek arrangements to own or receive credit for the output of utility-scale PV solar facilities as a basis for directly serving or offsetting their energy consumption.
Other arrangements for the deployment of utility scale PVs are also emerging, such as “community solar,” which can allow residential customers to participate in the ownership of, and to receive a beneficial share of, the output from a larger, centralized PV facility.