The decision by ARENA will likely please the Federal Government, which despite wanting to close both ARENA and the Clean Energy Finance Corporation, wants both agencies to focus on large-scale solar anything but wind farms while they still exist.
The push for big solar, and the auction technique, follows the success of the ACT government auctions for both wind and solar, and its upcoming "next generation" solar tender, which will include storage.
Such auctions are widely used overseas, in South Africa, Europe, The Middle East and in the U.S., where it recently obtained prices at less than US4c/kWh, although these included tax breaks. As RenewEconomy reveals today, Windlab is proposing a massive 1,200 MW solar and wind park in north Queensland.
"Large-scale solar PV remains in its infancy in Australia with only three projects commissioned and a further two under construction," the agency notes. "When the projects currently under construction are complete, installed capacity of large-scale PV will total 241 MW. This is well behind the installed capacity of comparable international markets." Indeed, Australia ranks just 24 in the world in big solar.
As reported exclusively by RenewEconomy last week, ARENA is looking to bring down the cost of solar PV in Australia to around $110/MWh and $130/MWh in the medium term. This compares to $140/MWh and $170/MWh now, around three times the price of solar PV in the US, which has better and cheaper financing sources.
"ARENA has observed significant cost reductions in large-scale solar PV over the past few years and expects these to continue due to a combination of international and local improvements," it says. "The cost trajectory of large-scale solar PV is expected to see the technology become competitive without additional support in the medium term."
The decision was welcomed by The Greens, with climate and energy spokesperson Larissa Waters saying it was "a glimmer of hope in an otherwise bleak outlook" for renewable energy in Australia.
"Supporting investment in large-scale solar is exactly what ARENA has been set up to do," she said. "The Greens structured the Clean Energy Package so that ARENA encourages emerging technology to become commercially viable, at which point the CEFC takes over to bring proven technologies to market."
ARENAs funding priorities for the coming year including the integration of renewable energy and the grid, the uptake of renewable energy for industrial processes, which could include solar thermal for industrial heat, and the greater use of renewables in off-grid areas, including mines and remote towns.
Other priorities include fringe of grid networks, where renewables and storage could mitigate the need for network upgrades, and large-scale solar PV.
ARENA chief executive Ivor Frischknecht said the agency would also be streamlining its programme structure, making it simpler to apply for funding and cutting red tape.
"From 1 August we will transition to two funding programmes the existing Research and Development (R&D) Programme and a new Advancing Renewables Programme, which will replace all other existing programmes," he said.
In addition ARENA will continue to run R&D funding rounds and will also announce targeted funding rounds through the Advancing Renewables Programme, which ARENA has said is open to high merit applications at any time.
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