While wind farms in Australia are under attack, it’s a different story for the solar industry. Developers of large plants that rely on the sun to generate power are finally winning support in the sunburned country.
Prime Minister Tony Abbott’s government this week directed the A$10 billion ($7.4 billion) clean-energy bank to boost its focus on big solar projects and stop investing in wind farms. Another government agency unveiled plans to allocate as much as A$100 million to large solar plants.
Australia wants to spur an industry that has lagged markets globally from Romania to Chile, with Environment Minister Greg Hunt saying earlier this week that he “loves” large-scale solar. Companies including First Solar Inc. and Origin Energy Ltd. have signaled they’re weighing new projects.
The driver is a decline in costs. The gap between the cost to build large wind and solar power developments in Australia may close in about two to three years, Jack Curtis, First Solar’s Asia-Pacific manager, said in a phone interview. For now, wind farms remain considerably cheaper than solar.
Even beyond the political realm, the market increasingly “would prefer to procure solar over wind,” said Curtis, whose company is interested in competing for government funds.
The Australian Renewable Energy Agency sees more than 1 gigawatt of potential large solar projects keen to pursue funds to build projects between 10 megawatts and 50 megawatts, Chief Executive Officer Ivor Frischknecht said in an interview in Sydney. Construction could start in late 2016, he said.
“The bigger you go, the cheaper it gets,” Frischknecht said. “We should at least be exploring whether we can make large-scale solar very cheap, and there’s no reason to think it shouldn’t be competitive with wind, but it’s not going to be competitive with wind if there aren’t any projects.”
The cost to supply power from a large solar project in Australia may drop to about A$110 to A$130 a megawatt-hour for projects in the upcoming funding round, from A$140 to A$170, he said. Wind farms are about A$80 to A$100, he said.
Although residential solar panel installations have surged in Australia — fueled by government subsidies and falling costs — the country’s large-scale solar sector is in its infancy. Only three projects have started and another two are under construction, according to the agency.
Australia trails nations including Romania, Chile, Ukraine and Japan in capacity, the agency’s figures show.
Efforts in the past to expand the sector have run into problems. While the government three years ago awarded funds to AGL Energy Ltd. and First Solar to build a large project, it scrapped a plan to provide A$464 million to an Areva SA venture after the government of Queensland state pulled funding.
At the same time, wind power has attracted criticism from the government. The prime minister has called wind farms ugly and noisy, and his government is supporting further research into whether the plants damage health. Abbott’s treasurer, Joe Hockey, refers to wind farms as “utterly offensive.”
The government has also moved to prevent the Clean Energy Finance Corp. from investing in rooftop solar, saying the focus should be on large solar and “emerging technologies.”
Despite that position, wind is forecast to grow in Australia, driven by the nation’s 2020 renewable energy target. More than half of the new capacity that starts through 2021 will come from wind, according to Bloomberg New Energy Finance.
The renewable energy agency says the solar industry is taking steps to avoid the kinds of missteps some wind farms made in failing to ensure community and government support.
“We should be concerned that solar doesn’t end up where wind is currently,” Frischknecht said.
Copyright 2015 Bloomberg
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