Solar Flagships – ‘Grandiose And Cumbersome’

AGL price hikes on electricityAGL price hikes from July 1.

Seeing large scale solar getting a bit of a helping hand in Australia certainly isn’t a bad thing per se; but just how good a deal is it for the battling Aussie taxpayer?

AGL Energy and USA-based First Solar were recently announced the successful grantees in the Australian Government’s troubled Solar Flagships Program.

The $450 million project will see two solar panel based facilities established – one in Broken Hill and another in Nyngan. Together, the facilities will boast 159 megawatts capacity, enough to supply the electricity needs of approximately 30,000 homes.

The Federal government is kicking in $129.7 million and the NSW Government has committed to provide $64.9 million to the projects; totalling $194.6 million in grants – or  $1.22 per watt of capacity.

While AGL (and its shareholders), First Solar (and its shareholders) and Minister for Resources and Energy, Martin Ferguson may be rejoicing, some industry commentators haven’t shared the exuberance.

“Solar Flagships is an idea full of good intentions, but it is grandiose and cumbersome,” says Giles Parkinson, pointing out the project won’t be up and running until 2015; whereas the ACT Solar Auction will have projects up and running well before then.

Climate Spectator’s Tristan Edis says the cost of the  projects at $2.80 per watt installed is barely cheaper than a large residential solar power system.

“It has been three years since Solar Flagships was announced in the 2009-10 budget and the selected project won’t be operational until 2015. So that’s between five to six years to get 159MW of solar PV installed,” says Mr. Edis.

“Yet the Australian solar PV industry installed over 800 megawatts in the prior calendar year alone using a market-based policy mechanism which entirely avoided the need for government to get involved in picking a winning project.”

Mr. Edis also points out First Solar is predicting that by 2016, just a year after both projects are expected to be operational, it expects to be able to deliver projects at between $1.40 to $1.60 per watt – as much as half the cost for AGL’s project.

However, Mr. Edis acknowledges the windfall for the US company will play a role in helping it to develop and further reduce costs of its CdTe (cadmium telluride) technology, which he says is not well suited to small-scale installations. First Solar had been experiencing a pounding in recent months on the stock market, some of that reportedly due to fallout from massive costs it was incurring due to defects in its solar panels.

With a sea of under-utilised rooftops in every town and suburb throughout Australia, some would say the government is better off putting the Solar Flagships cash towards more support for home and medium scale solar instead of into the hands of a few major players who will reap massive profits from such schemes and further entrench their control over energy markets.

Big Energy certainly doesn’t like seeing small scale solar eating its lunch and AGL’s  CEO, Michael Fraser, who is also Chairman of the Clean Energy Council, sees feed in tariffs – a popular incentive associated with home solar power – as providing a “sub-economic outcomes.”

But the case for small and medium scale solar is strong. Aside from the warm and fuzzy concept of power to the people by the people, decentralised electricity generation achieved through rooftop solar panels has minimal impact in electricity price rises, reduces the need for investment in electricity network infrastructure, is a powerful jobs-creation vehicle, enhances energy security and also lessens line loss associated with power transmission; which can account for up to 10% of electricity production.