Outback applications

Despite being known as the sunburned country, in Australia some parts of the PV industry have been operating under dark clouds. Feed-in tariff (FIT) schemes, which were administrated on a state-to-state basis, did not wind back remuneration in keeping with module price reductions. They then found the programs vastly oversubscribed and installed capacity reaching quotas suddenly and without warning.
As is to be expected in these circumstances, the FIT schemes were then wound up or halted, at times literally from one day to the next. Some firms were caught out by the changes and throughout 2011 and early 2012, both manufacturers and installers fell one after the other (see p. 35).
Aidan Jenkins, Managing Director of PV installer Infinite Energy, says that while many companies have gone out of business, by anticipating the end of the FITs, many others were able to survive the transition. Nonetheless, Jenkins explained that because there was no notice that the FIT schemes would be halted, it has been a difficult time. “We had 13 installation crews working at one stage and we had to trim that right back to five. We had to trim staff and we got caught with a fair bit of stock as well,” says Jenkins.

New opportunities

But as one door closes, another opens and rapidly falling module prices have meant that PV is becoming a truly competitive power source option in many parts of the country. “Falling prices have saved the industry and prevented a fair bit of heartache,” Jenkins sums up.
Infinite Energy is based in the state capital of the vast state of Western Australia and has worked on remote and rural PV installations such as the Future Farm project with the University of Western Australia (see p. 12). The state is not only remarkable for its size, but also for the pace of economic and population growth occurring there. On the back of a mining boom – the state is rich in everything from pearls, diamonds and gold through to mineral sands, natural gas and iron ore – Western Australia’s economy has continued to grow throughout the recent worldwide economic turmoil and is forecast to grow by 5.5 percent this year. To make up for a labor shortage, the state’s population is expected to increase by 2.6 percent, by attracting immigrants from other parts of Australia and overseas.
Much of this economic growth has occurred in the North West of the state, which also has very good irradiation levels. At the same time, Western Australia is over two-and-a-half million square kilometers in size and the vast distances between each town, homestead and community in many parts mean that providing grid electricity to these areas is extremely expensive. The state’s Economic Regulation Authority (ERA) estimates that electricity consumers in the populous South West subsidize electricity for remote areas to the tune of AU$200 million (US$206) per annum. This subsidy is collected by Synergy, the electricity retailer in the area, and adds an average of AU$0.016 (US$0.017 cents) per kilowatt hour (kWh) to electricity tariffs.
Previously, the Western Australian electricity utility was state-owned and operated. However, the process of liberalizing the electricity market led to the formation of Horizon Power in 2006 to serve customers outside of the South West.
In July Horizon will introduce a new system of tariffs for renewable energy fed into the grid, which is unique in the country. It will incentivize PV installations in those areas where providing grid electricity is particularly expensive. John Grimes, the Chief Executive of the Australian Solar Energy Society (AuSES) points out: “It’s demonstrating that sophisticated utilities are using solar as an important technical tool to strengthen the network and drive down prices.”

Varied tariffs

Horizon serves around 47,000 customers across vast distances in Western Australia. Its new location-specific tariff system will involve residents receiving different tariffs for PV electricity fed back into the grid – according to the cost of supplying energy to them via the grid. The payments will be called a “renewable energy buyback” and they replace a net metering system (where producers are paid the retail price) that Horizon operated previously.
The buyback rates for residents in remote towns like Kulumburu or Wiluna will be AU$0.50/kWh (US$0.52/kWh), while those close to industrial hubs like Port Hedland will receive only AU$0.10/kWh (US$0.11/kWh). Some towns like Kununurra, Wyndham and Lake Argyle despite their remote location, also happen to be close to hydropower sources and therefore will receive only AU$0.16/kWh (US$0.17/kWh).
Infinite Energy’s Jenkins says that he expects PV in the areas with the top AU$0.50/kWh (US$0.52/kWh) tariff to flock to PV: “That’s just a financial ‘no brainer’ at the moment. If you’re getting a 50 cent tariff, people will be looking to put the biggest system they can onto their roof or into their backyard.” That wouldn’t be a major problem, says Horizon Power’s Manager of Sales, Marketing and Product Development, Scott Davis. He says around 2.5 percent of its customers have solar installed on their roofs, and that Horizon hopes to see up to 30 percent of customers eventually follow suit.
Larger installations are also being encouraged by Horizon and the utility is investigating ways larger structures like council buildings or community centers can supply roof space for installations that corresponds with the electricity demand in the area. Community-owned “PV gardens” are also being encouraged by Horizon, with Davis adding that even if you’re not in Australia, “you could contribute to a larger installation in one of the areas with the higher tariffs.” The scheme has been warmly received by the PV industry. AuSES’ Grimes says that utilities in other states are taking note of the Horizon scheme and investigating similar initiatives: “There are a number of forward-thinking utilities that are faced with similar problems: reasonably small populations that are geographically isolated and the investment required to run the grid to that location is not always economically viable, so solar in the sunburned country, is coming to the fore.”

Mining applications

Other areas not covered by the new Horizon scheme are in many off-grid applications that link directly into the source of Western Australia’s economic growth. Mining operations, by their very nature, are often carried out in remote locations, in deserts and remote bush land far from settlements and certainly far from the electricity grid. In the past decade, high commodity prices – driven largely by demand from Asia, most notably China – have seen multi-billion dollar projects developed and existing mines expanded.
###MARGINALIE_BEGIN###

###MARGINALIE_END###
In these cases the miners rely on diesel not only to fuel the trucks, trains and heavy machinery at the mines, but also the generators which power everything from refining equipment, conveyer belts, offices, kitchens and on-site accommodation for workers. The price of this diesel has increased along with oil prices. It must also be shipped and then trucked out to the mine locations, adding significant cost operations.
Ray Wills, the CEO of the Sustainable Energy Association (SEA) based in Perth, Western Australia, estimates the cost of diesel to the two major mining companies active in the North West of the state – BHP and Rio Tinto – at between AU$2 and 3 billion per annum (US$2.1 to 3.1 billion). As Wills understands it, at least one-third of this bill can be directly attributed to stationary electricity production, “even conservatively that’s more than a AU$600 million (US$617 million) electricity market annually”.
The per kilowatt hour cost of the diesel-fueled electricity at these locations is far higher than that which PV could deliver, so the market is one PV installers are looking to crack. Jenkins says his company is beginning to examine the opportunities and put proposals to mining companies. In the past, payback periods for PV of around a decade – even on sites burning diesel for power – were too long. However with falling system costs this is no longer the case. “The challenge has always been the payback period. Now we’re finding the payback period coming in at around two to three years – so the financials are stacking up.” Jenkins says that the biggest obstacle to seeing more PV installed on mine sites is concerns from the miners as to PV’s reliability. “It’s definitely not a showstopper, but if you’re running a mine that is generating AU$10 million (US$11 million) a day in production, you’ve got to be absolutely sure that technically the PV system is not going to interfere with the performance of the mine.” The SEA’s Wills agrees that addressing these perceptions of PV’s reliability is a challenge, in a naturally “risk averse” industry. He counters however, that the potential risks to supply chains when shipping and trucking in large amounts of diesel – from storms at sea, flooding on land or through bushfires – are significant and increasing.
“At the moment those sorts of risks are well known to miners, the challenge is of course that with climate change increasing storm events – which is what the data is suggesting – then the risk of that goes up, the risk profile changes.” By contrast, Wills continues, renewables’ “fuel source” is in place on site, presenting a greatly diminished risk to electricity supply and therefore mine production.

Dongas and digs

Most likely the first applications where PV will be introduced to mine sites in Western Australia is to the accommodation facilities and offices at the remote sites. Known as “dongas,” the accommodation is often fairly basic and temporary, but it almost always requires cooling. In fact, in the stifling heat in many mine locations in the North West of the state, air-conditioning units often run 24 hours a day, requiring large amounts of diesel to be burnt. Wills says that the SEA is aware of trial programs on dongas and in mine camps that are already set to commence in the coming months.
“A number of the major miners are looking to start their trials this year because of the increasing cost of diesel, the falling cost of renewables and the oncoming exposure to a carbon price that will further impact the cost of diesel.” The Australian Federal Government will impose a carbon tax of AU$23 (US$23.6) per ton of carbon emissions as of July 1.
Despite the era of subsidized solar drawing to a close in Australia, all indications are that the business case for PV remains strong. One constant is a high and rising electricity tariff. In early April, the ERA reported that electricity tariffs in Western Australia need to increase by 23.1 percent to be truly “cost reflective”.
There are estimates of 650 MW to 800 MW of new PV capacity in 2012 from the AuSES and the SEA. The activity in rural and regional areas is also an area of interest and not only for those in the Australian industry. AuSES’ Grimes sums it up: “The use of solar in a strategic sense can work to strengthen electricity grids particularly in remote and rural Australia, but there are other environments around the world that have the same attributes: large geographic areas and small populations that need energy security at the end of the line.”