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09 March 2014

Solar Optimism Beating the Government

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Despite the best efforts of the Abbott government, developments in renewable energy, particularly solar power, will inevitably become part of Australia's energy mix.

I will admit to moments, even days, of despondency since September, watching the Abbott government destroy the suite of painstakingly prepared climate change policies and programs. But one thing has kept my spirits up and offers a light at the end of what might only be a three-year tunnel.

Photovoltaic solar is going to crush everything.

The obfuscation and outright destruction of the new government is really only making a bit of hay while the sun shines. Trends all over the world indicate that even once the subsidies are removed, fossil fuel power plants can't compete with renewables. And it is only going to get worse for them.

The price of solar panels, and the soft-costs of installation and maintenance, are all trending down and have done for some time. Panel prices have fallen by 20-30% in 2011, 2012 and looked set to in 2013. Any forecast using figures even from the beginning of 2013 is now incorrect. In Australia, Solar Choice maintain a record of installed prices across the country, trending down from about $2.50/watt installed in August 2012 to $1.5/watt in some places now. These figures include renewable energy credits, which, if removed, would put those prices up by about 20%, depending a little on the location. If credits are removed tomorrow, prices have still fallen 30% in 18 months. These trends are being mirrored in other countries too, with installed prices roughly halving between January 2011 and the end of 2013.

And they will continue falling.

The panels currently being installed on roofs in Australia operate at between 15%-17% efficiency, comparing the electricity produced with the solar energy being delivered. As this figure shows (and this is my favourite image on the internet) we have a long way to go up that curve. Restricting ourselves to single-crystal silicon we can still go up another 10 percentage points, almost doubling the output per metre squared. Add to that potential developments like perovskites currently at about 16%, with some suggesting these will cost about half as much to manufacture as silicon cells. To really get your heart pumping, consider that the US military has cells in operation closer to 40% efficient.

At first glance it is fair to think that higher efficiency might not lead to lower costs, as the new cells may be more expensive to manufacture, but industry papers show that the increase in efficiency has been outstripping the increase in cost and so cost per unit of electricity is falling. Further, there are advances on the horizon worth getting really excited about.

Much of the cost in solar panels is in the silicon wafers and, more importantly, the manufacturing equipment required to make them. This has typically meant that only the really big players can afford to build a plant, thus limiting the number of people who can compete to lower production costs. The growth in organic/printed/emerging technologies is principally about working on the capital costs and lowering the barriers to entry in the market. More manufacturing means greater competition, innovation and lower costs. These organic cells use the same manufacturing technology as organic light emitting diodes (OLEDs), an industry which already has more manufacturing capacity installed than the whole solar power industry. So once they sort out the chemistry things could change very quickly.

Again though, there is a degree to which the price doesn't matter. Residents like solar and have shown in the past they are prepared to accept longer payback periods than commercial entities. Most comparisons of generation cost assume that it's business versus business. But what if the businesses want 4-year payback, and better, on their investment, where residents are happy with 10+ and sometimes don't even bother working it out?

We already have in the order of 3GW of solar capacity in Australia, installed across about 1.4 million roofs. That's about 8-10% of total generation capacity in Australia, on about 17% of the available houses. We've risen to 3GW from 180MW since 2009, an installation rate of about 600MW a year. For people who are not familiar with the units, a big coal plant is about 1GW, and there is about a dozen of that size in Australia right now. Every year half a coal plant of capacity lands on people's roofs and the business case for running a coal plant gets harder.

Baseload! I hear, shouted, echoing around an empty room. Residents and the commercial sector don't care about baseload and nor should they. They want electricity from 8am until 6pm or so and a little bit after hours. The only end-users who really want baseload are in manufacturing and they can sort out their own electricity with onsite generators and cheap off peak power. Solar provides very cheap electricity during daylight hours and the proportion supplied by solar is only going to increase. Annual electricity use has trended down for nearly 5-years now, while solar rises, leaving a smaller piece of the pie for coal generators each year.

Where does this end? What does a grid do once everyone has solar?

We can see solar is shaving off the peak during the day, and I expect will flatten it completely in 5 years. What's left then is generators competing for the right to supply electricity overnight. From 6pm until 8am, when most coal generators are losing money because they bid in negative to ensure dispatch, will be the most hotly contested time. Coal is utterly unsuited to meeting this load, requiring in excess of 12 hours to bring a boiler up to full load. Gas turbines and hydro typically meet these peaky loads and I expect this to continue. There comes a point where solar is so cheap there is a huge excess of supply during the day, and this will be bought by the existing and future energy storage devices to supply overnight. This is where the Snowy Hydro and Bendeela Pondage will really make their money and I expect they can't wait for solar to really take off.

Leaving the coal burners to complain on the sidelines, utterly sideswiped by a revolution everyone else saw coming.

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