The door opens for a solar rival
I suspect the solar power boosters were so busy cheering in late May that they failed to notice the soft noise of a door being opened behind them.
The publication of an Australian Energy Market Operator report on the growth of rooftop solar power on the east coast and on potential for photovoltaic capacity to increase four-fold this decade elated the sector and its supporters.
The report, they said, shows that rooftop solar PV can be an energy game-changer in Australia.
However, this overlooks the potential for a rival to nip in and eat solar's lunch – something stymied at present because Labor federal, state and ACT governments have preferred to cosy up to the Greens by keeping feed-in tariff arrangements a closed shop.
At roughly the same time that AEMO was reporting that solar PV installed capacity, now standing at 1,450 MW and delivering 0.6 per cent of east coast electricity consumption, could rise to 5,100 MW by 2020, the Victorian Competition & Efficiency Commission was recommending to the Baillieu government that it consider amending the state's feed-in tariff scheme inherited from Steve Bracks and John Brumby.
VCEC suggests the government open the scheme to offering a subsidy for any low-emission generation of 100 kilowatts or less.
This is great news for one Victorian-based company, Ceramic Fuel Cells Limited, which until now has had far more success winning support in Germany and Britain for its gas-fired fuel cell system than in Australia – where the renewable supporters have regarded FiTs as their private preserve.
Ceramic Fuel Cells has, in effect, received support from the Commission for its argument that householders, small businesses and community groups should have a wider choice. And naturally it sees that choice extending to its product, BlueGen, which it claims can deliver 13,000 gigawatt hours of power a year (double average national household demand) regardless of weather or time plus 200 litres of hot water a day and a far larger abatement achievement than PVs.
VCEC is using the same argument to support its recommendation to the Baillieu government that it put forward in a report on Victoria's manufacturing sector: selective assistance that lowers the costs of a particular firm or industry may improve its competitiveness at the expense of other sectors.
The Commission adds: “Industry assistance through regulated tariffs and discriminatory eligibility criteria may not be the most appropriate way to support the establishment of a sustainable industry, especially when (in the case of the solar PV industry) it is already reasonably well-established.”
The attraction for policymakers in going down this road, especially in regions where gas is available (and its reticulation now is pretty widespread), is that a larger take-up of distributed generation can cut power generation combustion losses (which are high for coal-fired output) and line losses. Most importantly however, it can contribute to reducing peak demand, which is the monster under the energy supply bed all over Australia.
On the east coast, research undertaken for the Australian Energy Market Commission forecasts that, without significant intervention, peak demand in 2030 will reach 60,000 MW compared with 38,000 MW today.
When you appreciate that it is estimated each megawatt requires about $3.5 million to $4 million in infrastructure capex and that this is one of the major impacts on rising network charges, then finding a genuine mitigation approach needs to be a government priority.
It has been calculated that about $11 billion has been invested in the networks segment on the east coast to meet the extreme peaks – in effect to meet power demand for about 100 hours a year.
Unlike solar power, fuel cells can deliver peak requirements at any time of day and in all types of weather.
With all east coast governments casting around for ways to deal with the peak demand problem, a decision by Baillieu's regime to accept the VCEC recommendation could have an effect outside Victoria's borders.
One can imagine the idea having its attractions for the federal Coalition as well as it seeks policies to plug the energy management gaps that will be left when it repeals the Gillard government's carbon tax and other programs – and that will be attractive for borderline voters thinking about going Green.
Perhaps not surprisingly, most of the commentariat's attention has been captured by the VCEC finding that investors in rooftop solar power should receive between 6 and 8 cents a kilowatt hour for what they deliver to the grid until 2015 and thereafter have to rely on what retailers bid for their product.
The Clean Energy Council sees this attitude as “unrealistic” – which I guess depends entirely on where you're standing when you look at it.
The CEC says a “fair and reasonable” payment is 12 to 16 cents per kWh, but the big solar boosters argue it should be 40 to 60 cents, the latter being where Victorian Labor launched its scheme, leading inevitably to it being slashed to 25 cents as it was rushed by punters who know a good thing when they see it.
However, the real value of the pot of money available over time for distributed generation providers can be seen by looking at AEMO's forecasts.
Under its ‘medium' modelling scenario, which envisages ‘moderate' retail power price rises, PV capex reductions and government incentives, the energy market operator predicts solar capacity will reach 12,000 MW in 2031.
The ‘high' scenario (based on the end of the era of cheap energy) foresees 18,000 MW of capacity.
That's a lot of moola in equipment supply and the solar industry until now has been able to see it as theirs, all theirs.
Now it may not be.
Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of Powering Australia yearbook, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.