Why Australia must build its own solar future

Today we're publishing the first part of a transcript from a fascinating interview I had with Jack Curtis, Vice President of Business Development and Sales with First Solar, the company that will provide the solar technology behind AGL's winning 159MW solar flagship bid.

First Solar was, for a brief period, the largest producer of solar PV in the world, and the firm is building a number of the largest solar PV projects in the world, including two 500MW projects in California. The firm has specialised in a unique thin-film technology called Cadmium Telluride which enables it to produce the globe's lowest cost solar panels per watt. However these require larger surface area per unit of generating capacity than conventional crystalline silicon. This has led it to specialise in large, multi-megawatt utility power projects rather than rooftop systems. So, in short, First Solar knows what it is talking about in terms of delivering solar power at serious scale and competitive cost.

Out of all the people I've talked to in the renewable energy sector here in Australia, Jack Curtis provides one of the most lucid and evidence-grounded explanations for why Australia needs to be rolling out renewable energy itself, rather than just hoping to ride of the coat-tails of others.  He provides a number of concrete examples based on First Solar's direct experience in building several of the world's largest solar plants in the world, where local experience in deploying solar is essential to realising lower costs.

To help grasp the importance of local experience, Curtis provided the chart below, which provides a breakdown on the cost components associated with First Solar's power projects.

Proportion contribution of different components to cost of a First Solar power project

Note: BOS = Balance of system which includes inverters, racking and installation of solar panels or modules. Financing costs are the interest expenses incurred to fund the construction of a project from mixture of debt and equity. Development involves activities associated with planning out the project and obtaining the necessary government approvals.

Source: Jack Curtis – First Solar (2012)

Conventional policy wonk wisdom is that reducing the cost of solar is all about reducing the cost and improving the performance of the physical solar panel or module. In such a case if you happen to think free loading is an admirable thing, which seems to be surprisingly prevalent amongst members of the senior public service, then you tend to believe: ‘Great, Australia can just import these modules from overseas, so let's do nothing to roll-out solar PV now and then buy it later once everyone else has done the hard work.'

But as the chart above illustrates, the cost of the module, certainly for First Solar and increasingly for other panel manufacturers, is not the only important factor. Curtis' experience suggests that until financiers see repeated projects successfully built in their local market, they charge a substantial risk premium that blows out costs. He also explains that while solar PV involves reasonably simple construction techniques, just like any form of mass production, repeated experience leads to learning and efficiencies in installation.

Curtis has been surprised by how sourcing components locally in Australia could yield important cost reductions as well, but this requires local manufacturers to build up capability and scale. And lastly he explains that utilities working in conjunction with First Solar have helped to reduce the cost of energy in new plants with slight tweaks that build on experience in operating other solar PV projects.