Australia, the sunburnt country, should be racing towards a solar energy future. So why isn't it?

By Oliver Wagg in Australia

Without rapidly rising costs of fossil-fuels, the short-term prognosis for large-scale CSP does in Australia not look good.

Australia’s emissions trading scheme was scuttled by Parliament earlier this month, it appears the 2020 twenty-percent mandatory renewable energy target will do little to jumpstart solar, while the prospect of adequate, targeted government subsidies for renewable energy appears remote.

“The common platitude that you hear about an embedded coal industry is very true,” says Stewart Taggart, founder of Desertec-Australia. Australia is the biggest coal exporter in the world, while coal-fired power stations supply over 80 per cent of the nation’s domestic electricity needs.

Fearing rising costs and the loss of future business to those countries in the world without a carbon impost, Australia’s coal producers and other high-emitting industries – many of which are subsidized - have lobbied intensively against the proposed Carbon Pollution Reduction Scheme, the legislation behind the ETS.

Need for robust CSP policy framework

Dr Jim Smitham, leader of the Commonwealth Science and Industry Research Organisation (CSIRO) Energy Transformed Flagship, says that, in theory: “The trajectory towards reducing the cost of CSP while other technologies have other costs added to them from an ETS means that at some point there would be a crossover of costs on a carbon-adjusted basis.”

The industry has yet to reach this point, but it is not the lack of private funding that is holding potential investors back, says Simon Schwarz, director of Investec Bank, Australia.

“It’s not a lack of project financing, or a lack of debt or equity,” he says.

“Large-scale projects just do not stack up when you look at the market prices for electricity in Australia relative to the construction costs and the efficiency of solar,” Schwarz says.

One such company is Solar Systems, which launched a pilot project in October 2008 with a view to building a A$420 million, 154 MW solar plant in Mildura, Victoria to produce enough energy to power 45,000.

The concentrated PV developer ran out of money in September after one of its biggest backers, TRUenergy, had its A$53 million investment written down by its Chinese parent Hong Kong-based China Light & Power.

''We do not believe that it is justifiable for CLP to continue funding a technology business without an additional strategic or financial partner to share the ongoing development risks,'' CLP said.

When the company was launched, both federal and state governments pledged A$125 million in grants, only a fraction of which have been delivered.

Transmisison issues

Australia is blessed with some of the best climates for solar power. But the geography of the vast continent remains extremely challenging. Desertec-Australia reckons the country is one of the world's three best locations for CSP: an outback area 2500 square kilometres covered with mirrors could meet all of Australia's electricity demand.

Australia is a huge continent with very discreet and small number of population centres, which means even though there is a lot of solar resource there aren’t a lot of places where you can build large scale solar energy plants,” Investec’s Schwarz says.

Until a suitable grid is developed, CSP may have greater application as an off-grid alternative.

Smitham says there is substantial interest in off-grid CSP applications for remote mining communities, where the existing costs of diesel tallied with expectations of higher prices mean a solar power plant with storage could have lot of appeal now.

It may be that some of the future plants will take advantage of the more remote locations to be cost effective – because they are in such unusual environments – and then become mainstream with time.

Waiting on government funding

The federal government committed A$1.6 billion (US$1.5bn; €984mn; £888mn) through the Solar Flagship Program to support construction and demonstration of up to four, as-yet-unannounced large-scale solar power plants in Australia using solar thermal and PV technologies.

The first selection round for the program will be held in 2010 to find one commercially proven solar thermal project and one PV project, with a target of up to 400MW of combined generation capacity.

Importantly, the program is looking for “commercially proven” solar technology, demonstrated at an operational level of at least 30 MW for 12 months, or those with a replicable module below 30 MW, with backing from financial and construction firms for scale-up plans.

A potential candidate is the A$200 million venture between the Queensland government and Ausra Inc, to bolt-on a solar field to an existing 750 MW coal-fired plant at the Kogan Creek Power Station.

Some FiTs, few starts

Australia has no national program of feed-in tariffs (FiTs)-  – only state-run schemes, targeting smaller generators up to a capacity of 10 KW in South Australia, Queensland, New South Wales and ACT, and 5 KW in Victoria.

Most of the schemes are net FiTs, paying the system owner only for surplus energy they produce – and not gross feed-in tariff, which pays for each kilowatt hour produced by a grid connected system.

Elsewhere, the government has legislated for 20 percent of the country’s generated electricity to be produced by renewable energy by 2020, having separated the mandatory renewable energy target (MRET) from the proposed CPRS in August.

The MRET is expected to draw an investment of A$20 billion (US$18.3bn; €12.3bn) to A$30 billion ($27.5bn; €18.5bn) to renewable energy by 2020.

But most of it is likely to go to wind development. The incentives built into the law are too complicated and inadequate to drive growth in solar energy capacity, the solar industry complains.

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Rikki Stancich: rstancich@gmail.com