Infigen's large-scale solar reality check

Infigen is pursuing several hundred megawatts of utility-scale solar in the US, but the opportunity in Australia is not as ambitious.

On Friday I caught up with Miles George, chief executive of Infigen Energy, one of Australia’s biggest renewable energy power project developers.

Not much has changed in the Australian market since we last spoke about six months ago – energy retailers aren’t all that interested in signing long-term power purchase agreements.   

Although what is quite interesting is that Infigen are having some success in pursuing utility-scale solar PV projects, but in the US rather than Australia.

They have two 20MW solar PV projects in California, Wildwood Solar I and Pumpjack Solar I, that are highly advanced with long-term power purchase agreements in place. In addition George explained that Infigen have a pipeline of several PV projects in the 20-40MW range across several states which add-up to around 300MW in total.

I asked whether we might see similar levels of utility-scale solar development activity in Australia but George was pessimistic. He couldn’t see much development occurring beyond the two projects under consideration for funding by ARENA (Infigen’s own project and that of Pacific Hydro/Fotowatio Renewable Ventures which recently secured financing from the Clean Energy Finance Corporation).

George's explanation was quite illuminating as to why the US is a more attractive location for investment:

“I think the two key factors that make our US solar PV development activities attractive are:

– One, the legislation that is driving those is clear and stable as opposed to here. So, in various states they have mandates for solar PV within their renewable portfolio standards [similar to Australia’s renewable energy target]; California in particular where our two current projects are. 

– And the second factor is that because of that stability in the legislation and the regulation the utilities over there are prepared to contract long-term and have done so for the two projects where we have PPAs on solar PV projects. Because they can see that the legislation is stable. So they’re prepared to write the long-term offtake contracts that then facilitate underwriting the project development.”

In contrast to Australia’s regulatory environment, Infigen’s financial results statement put it rather bluntly,

“In Australia, in the near term the regulatory environment continues to be challenging. Despite the favourable findings of the Climate Change Authority’s review of the Renewable Energy Target in 2012, vested interests in the fossil fuel generation sector continue to lobby forcefully to reduce the RET. The upcoming federal election has exacerbated the uncertainty to a point where the market for new renewable energy project development is very weak, and the appetite to contract existing assets is poor.”

Of course this regulatory uncertainty is an issue that extends well beyond utility-scale solar, being a particular problem for wind farm developments.

The reality is that in spite of the huge cost reductions that have been achieved in solar over recent years, it is still not competitive with wind at a wholesale electricity market level (as opposed to the delivered retail price of electricity). This is in spite of it generating power during daytime periods when wholesale electricity market prices are higher.

I asked George whether we might see further multi-megawatt solar projects in Australia beyond that funded by ARENA.

He replied: “Not in the next few years. I mean, maybe in the medium to long-term that would change, but at the moment, you know, because it’s not as competitive as wind energy, in order to get solar PV up you need an additional incentive.”