The Solar Silver Thrust

In early July, Japan set a premium price for solar energy that was three times the rate of conventional power. This meant utility companies would be paid three times more for electricity sourced from solar. It's widely expected that the premium will ignite the use of solar power -- and solar uses a lot of silver.

Silver Demand From PV Panels

As you may know, silver is used in photovoltaic (PV) technology to generate solar power. A typical solar panel uses a fair amount of the metal -- roughly two-thirds of an ounce (20 grams). To put that in perspective, a cellphone contains around 200 to 300 milligrams (a milligram weighs about as much as a grain of sand). A laptop contains 750 milligrams to 1.25 grams.

Photovoltaic technology is relatively young, but its use is growing rapidly each year. Just since 2000, the amount of silver consumed by solar-panel makers has risen an average of 50% per year. Demand grew from one million ounces in 2002 to 60 million ounces in 2011. Last year demand from the PV industry represented almost 11% of total industrial demand for the metal (excluding jewelry). According to statistics from CPM Group, demand grew by 11.2 million ounces, the strongest volume growth of all major sources (jewelry and electronics). And this was before the Japanese announcement was made.

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The largest end-user of solar panels is Germany, though that's changing. Last year, Germany accounted for 27.3% of global installations, but due to subsidy cuts, solar-panel installation capacity dropped from 7.7 gigawatts (GW) to 7.5GW. In the big picture, that decline was offset by increases in China, France, Italy, the UK, Japan, and the U.S.

In their 2012 Yearbook, CPM projected a slight decline in silver demand from solar panels due to a reduction of new installation in Europe and oversupply from excess production in China. But with the initiative from Japan, that estimate is almost certainly low.

Japan Gives New Life To PV Industry

After the Fukushima disaster, Japanese authorities wanted to cut the nation's dependence on nuclear energy. Approximately 30% of Japan's power was generated by nuclear before the catastrophe -- now the focus has shifted to other green energy alternatives, including solar.

The new tariffs might work. The suggested rate of 42 JPY ($0.53) per kilowatt hour (expected to be maintained for 20 years) is more than twice the rate in Germany (€0.17, or $0.246). Bloomberg estimates that this generous increase will create $9.6 billion investments in Japan alone.

Here's what that amount of money would do to the sector: There were approximately 1.3GW of solar capacity installed in 2011, but experts anticipate that number to nearly double to 2.3-2.5GW for 2012, and hit 3.0GW in 2013. According to SolarBuzz, Japan could see 28GW of solar capacity installed by 2020 and 50GW by 2030.

That's a lot of solar panels, and -- even assuming improved efficiency -- it'll take a lot of silver.

Price Factors

During recent years, solar panels have become significantly less expensive and more end-user friendly. However, the fact that each panel contains a lot of silver can make it susceptible to large price fluctuations. If the silver price gets too high, manufacturers might seek alternatives, of course, but they can't easily eliminate use of the metal. And if the product gets too expensive, demand could fall. Companies are already looking for ways to reduce the amount of silver used in PV panels, or to replace it with another element.

At the moment, there are two main solar panel technologies on the market. The traditional one is "thick film," where silver is the main component. The other one is a less-expensive "thin-film" method, which replaces silver with another material, cadmium telluride. The development of thin-film solar panels has picked up due to its lower price, but the technology is less effective.

Thick film is more efficient in gathering energy from the sun, and this type of panel still prevails on the market. CPM reports that it accounted for roughly 91% of total installations last year, and analysts expect thick-film panels to maintain their dominance for at least the next several years. Further, both panel types use silver outside of the cell for reflectivity and other functions, so the odds of silver being eliminated from solar panels entirely are very low at this time.

For investors, this means that at least in the near term, the solar industry will continue to use silver-intensive technology, thus supporting growing industrial demand for the metal.

But that's not all, folks…

New Era For Silver Usage

For a long time, silver industrial demand was dependent almost entirely on one industry: photography. Silver-based camera film dramatically changed the structure of silver demand at the beginning of the 20th century. By that time, silver had primarily been used in silverware, jewelry, and as money. At its peak, photographic demand accounted for about 50% of the market.

But this is the 21st century, and in spite of substantial declines in film use, the modern world has developed many other important uses from silver's unique properties.

Probably the most important shift is that industrial demand for silver no longer comes from a single field, but from numerous applications -- almost too many to count -- virtually none of which show any signs of slowing.

This fact makes the forecast for silver demand more positive and stable. When one industry drops, others may offset the decline.

Here's a smattering of uses, many of which are still in their infancy:

• Solid-state lighting (SSL), which uses semiconductors to produce light with either light-emitting diodes (LED) or organic light-emitting diodes (OLED), rather than the more traditional electrical filaments. SSL is used in traffic lights and some car headlamps.
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• Radio frequency identification (RFID) uses printed silver ink made from silver nitrate. RFID chips have become so ubiquitous, it's hard to find any new product that doesn't have at least one -- even if that's only in the security tag affixed to the package.
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• Supercapacitors and superconductors, autocatalysts and new types of more effective batteries.
• Medical applications, like aseptic coverings for surgery, traumatic wounds, antibacterial bandages and fabrics, dental amalgam, and silver salts that help prevent infections in newborns. It's also used to treat dermatological problems and certain types of cancer.
• Water purification systems, washing machines, air conditioners, and refrigeration. NASA used silver to sterilize recycled water aboard the space shuttle.
• Food packaging and preservation. Manufacturers of commercial ice machines are using silver-embedded hoses, clamps, pipe fittings, and in other places where gunk can build up and harbor bacteria. Meat processors use silver-embedded tables, grinders, tools, and hooks. Silver is used to keep fruit, vegetables, and cut flowers fresh while in transit.
• Public hygiene, such as antimicrobial protection of telephone receivers, door handles, bed rails, toilet seats, counter tops, children's toys, socks, underwear, bed linen, towels, etc.
• Other wide-ranging consumer products used every day: makeup, antibacterial soaps and kitchenware, hand and air sanitizers, and facial creams and masks.

Though the total contribution from these new silver uses is relatively modest, the Silver Institute rather dryly forecasts that "there is a potential for a number of these segments to boost their silver consumption." As you can see in the chart below, its forecast for silver demand for new industrial uses projects that the biggest increases will be in batteries, SSL, and RFID.



The primary uses for silver are growing, too. For example, the automobile industry is increasing consumption, due to both increases in the number of vehicles manufactured and the expanded use of electrical contacts. As the number of improvements in vehicles increase, so does the amount of silver used. For example, silver is used to control seat and mirror adjustments, windshield wipers, and manage navigation systems.
Based on their research, the Silver Institute forecasts that industrial usage will rise to 665.9 million troy ounces by 2015, and account for more than 60% of total fabrication demand.




What It Means For Investors

Since half of silver demand is for industrial purposes, it can act like an industrial metal in addition to its precious metal component. This means it's susceptible to more forces than gold, making it more volatile, as well as more difficult to predict its future price.

Conclusions:

1. The solar industry has great potential to become one of the more important sources of silver demand. This will lend strong support to prices. This industry had zero impact on silver 10 years ago; it now represents 10% of total industrial demand.And it's not just Japan. According to a news report, 102 countries are now installing solar panels -- from just 18 two years ago. Heavy and/or growing usage is reported in Germany, Italy, Japan, France, Belgium, Portugal, Spain, the U.S., Australia, and Asia, including China and India.
2. It appears that the development of the solar industry didn't occur as a result of natural forces, since to a large degree, it was initiated by government subsidies that supported the industry (and indirectly, the silver price). You may like or not like these market interventions, but as investors, it's important to recognize these trends, regardless of whether we agree with them. It's particularly important to keep an eye on these subsidies, as they could vanish if cash-strapped governments change their priorities. That won't happen overnight, however, so we should have ample warning.
3. Due to its unique properties, the number of applications for silver continues to grow. Researchers at the Silver Institute are upbeat about the future for silver industrial demand. That's no surprise, but it doesn't make them wrong -- the implication here is that only the worst type of economy would have a negative impact on demand.
4. If demand grows fast enough, it could impact not only the price, but the availability of the metal, in spite of rising mine production. If that happens, bullion purchase premiums will rise as supply becomes tighter.

The bottom line on the above is that the growing number of industrial applications for silver represents a long-term shift in this market. Increasingly diverse usage is not only here to stay, but will continue to grow, supporting the price and impacting the balance of supply and demand.

For investors, the thing to keep in mind is that while long-term prospects for silver prices are extremely bullish, to the degree prices are driven by this increased industrial demand, they are vulnerable to economic correction/contraction in the short term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Solar Incentives Slashed Under New Rules

The Baillieu government has cut incentives for rooftop solar panels for next year as part of a shake-up of how small-scale renewable energy is priced in the state.

The changes reduce the Victorian feed-in-tariff for solar to eight cents for each kilowatt hour fed into the grid in 2013 - down from the existing rate of 25 cents - and fulfils recommendations by the state's competition advisory body.

The changes will not affect customers with existing contracts and tariff rates. Households that have paperwork lodged by September 30 with electricity suppliers can also still get access to the existing 25-cent tariff.

A review released today by the Victorian Competition and Efficiency Commission recommends a six-to-eight cents a kilowatt hour tariff be put in place, with the government accepting the top end of that range for 2013.

The tariff will then be adjusted by the government each year in 2014, 2015 and 2016 based on the wholesale electricity price, before moving to a fully floating market price in 2017.

The tariff scheme will also be opened to other forms of renewable energy systems generating 100 kilowatts or less.

The changes fall short of calls by the renewable energy industry that a fair rate of tariff for solar was 12 to 16 cents per kilowatt-hour.

Announcing the changes this afternoon, Energy Minister Michael O'Brien said the falling costs of solar panel systems and rising power prices meant households were taking up solar without the need for over-generous subsidies from other power users.

He said an older 60-cents per kilowatt-hour tariff — closed by the Baillieu government last year — would cost Victorian households $41 million a year to 2024 through electricity bills in subsidies to homes with solar panels.

"People in public housing, tenants who cannot access solar, are paying higher electricity bills in order to subsidise the rooftop solar for other people. Now that wasn't sustainable at those rates, they were over generous," Mr O'Brien said.

Labor's energy spokeswoman, Lily D'Ambrosio, criticised the decision, saying thousands of Victorian families were installing solar panels to reduce their power bills amid increasing cost-of-living pressures.

''The Baillieu government has again shown it just doesn’t care about supporting families who want to reduce their energy costs while also doing their bit for the environment,'' she said.

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Fotowatio Plans to Build Australia’s Largest Solar-Power Project

Fotowatio Renewable Ventures, the solar-power plant developer backed by U.S. energy investor Denham Capital Management LP, won the right to build a 20-megawatt project near Australia’s capital.

Fotowatio will participate in the Australian Capital Territory’s feed-in tariff program, which rewards generators of solar power by paying above-market prices for the electricity, Simon Corbell, ACT minister for the environment and sustainable development, said today in a statement.

The Royalla solar farm, to be built about 25 kilometers (16 miles) south of Canberra, will become the largest in Australia by 2014, according to the statement. The venture will help in an effort to lower carbon emissions and shift away from fossil fuels, the ACT government said.

Fotowatio, which is based in the Netherlands, sought a new project in Australia after losing a competition earlier this year for federal government funds to build a large-scale solar plant in New South Wales state. Denham Capital in March reached an agreement with Fotowatio to invest $190 million in solar projects in markets including Australia.

Clean Energy With a Pinch of salt

A sodium-ion battery being developed in Australia is set to increase solar energy use and reduce our dependence on fossil fuels, according to researchers.

Although bulkier than commonly used lithium batteries, sodium-ion batteries will be cheaper, less toxic, and more environmentally friendly, said Manickam Minakshi, a chemistry and mineral scientist at Murdoch University, in Perth Australia.

“Our water-based sodium-ion battery has shown excellent potential for affordable, low-temperature storage,” he said.

Better batteries

Other batteries used for renewable energy storage – such as molten salt or molten sulphur – only work at high temperatures, making them expensive and impractical. Also, like lead-acid batteries, they are very corrosive and environmental pollutants, which aren't problems with sodium-ion batteries, said Minakshi.

The Murdoch team is now moving towards large-scale commercialisation, and the future could see these batteries connected to solar panels in every home. “This is a very exciting time,” said Minakshi.
The new sodium-ion battery has particular potential when coupled with the green power of solar energy. Widespread use of power from solar panels is limited because there are periods known as ‘non-generation’ times, when power cannot be produced. These include, for example, overcast weather or night-times.

Power in the dark

“Using solar energy panels to get power will only make sense when you can store the power when the Sun’s not shining,” said Stephen Thurgate, vice-president of program development partnerships at Sydney’s Macquarie University.

Murdoch’s new sodium-ion batteries could have applications in small networks with their own battery systems or ‘smart grids’ that use information and communication technology to reduce dependence on centralised power stations, said Thurgate.

While commonly used rechargeable lithium batteries have a higher voltage, making them more suitable for transport and vehicular power sources, they come with a lot of issues, said Minakshi.

Sodium: cheap and abundant

Lithium, for example, is more expensive and far less abundant than sodium in the Earth’s crust.
Another advantage of sodium-ion batteries is that they have a higher density, meaning they are able to store more energy for their weight. Combined with their low costs, they could open up affordable green energy to the developing world.

Lithium and sodium share similar chemical properties, but the sodium ion is 2.5 times the size of lithium, and a big challenge for the Murdoch researchers was finding a ‘host material’ for these large ions.

“Ions travel out of the cathode and into the anode to form a current,” said Minakshi. “As an imperfect analogy, you can think of them as mesh filters that ions pass through. We had to find materials with larger gaps in their mesh.”

Paving a path for alternative energy technology

Murdoch’s new development doesn’t spell the death of the lithium battery, which is still ideal for transportation because of its lighter weight, said Danielle Meyrick, deputy dean of the School of Chemical and Mathematical Sciences. “Sodium is slightly heavier and is much more suitable for stationary energy storage applications [such as] industry,” she said.

The sodium-ion technology could also enable the use of renewable energy in households, moving away from traditional energy generation sources.

“This kind of battery facilitates security of supply and continuity of electricity supply to households," said Meyrick. “It facilitates storage in times when there’s no sunlight, when there’s no wind, [and] when there’s no snow.”

Although there is more research to be done on finding the optimum scale of the battery and cell size, Thurgate said the findings were promising.

“The fact that [sodium-ion batteries are] based on readily available materials, that it’s an aqueous solvent [water-based] – so there’s no fear of the thing being flammable – [and] the fact the energy density is very high... are all great,” she said.

Strong on Solar: Australia Eyes CSP Leadership

A move into concentrating solar thermal power (CSP) could not only drive Australia's de-carbonization but establish a global technology lead, says a new analysis from the Australia Solar Institute.

Solar Dawn, as its name suggests, is a CSP project with aspirations as a catalyst. Based near Chinchilla — "Australia's melon capital" — in rural Queensland, at 250 MW, if completed its impact would be felt worldwide.

"Hugely significant for the industry" is how Dr. Keith Lovegrove of IT Power Australia describes the A$1.2 billion (US$1.2 billion) initiative. The scheme is backed by Australia's federal Solar Flagships Programme and the consortium behind Solar Dawn has dubbed it "the largest solar project in the Southern Hemisphere".

But, while Solar Dawn could bring up the sun for Australian CSP with a jolt, its chances of seeing daylight are fading. On 1 July 2012, the scheme missed an extended deadline for funding. The state of Queensland promptly withdrew its support, leaving a A$75 million (US$79 million) hole. "None of us knows what's happening," says Lovegrove.

But he would deny that Australian CSP's prospects are also dimming. Spectacular daybreak may look off the cards, but several glimmers of light are showing.

For a start, less ambitious CSP projects remain on track. Just down the road from the proposed site for Solar Dawn, the 44 MW Kogan Creek Solar Boost is now under construction. On completion, the hybrid plant will feed additional solar generated steam to the existing 750 MW coal-fired Kogan Creek Power Station.

In strategic terms, CSP's fit for Australia's meteorology, economy and climate objectives is also arguably as snug as a lifeguard's Speedos. In the recent report Realising the Potential of Solar Power in Australia, a team led by Lovegrove floats the idea of CSP providing up to 15 GW in "the near-to-mid-term".

Without a radical overhaul of its grid, Australia could have 2 GW in CSP by 2020 and 10 GW by 2030, according to the report's roadmap. In the longer term, the technology could meet half of the country's energy needs by 2050.

Letting the sunshine in

Blistering sunshine obviously figures in Australia's appeal for CSP. As a technology, concentrating solar thermal requires "excellent direct normal insolation from the sun, mostly met in the 15° to 35° latitude bands," in the words of the International Energy Agency.

But top solar locations are, almost by definition, a poor match with existing distribution and transmission infrastructure. Australian networks have developed to transmit electricity from large central generators near coal, gas or hydro resources. Electricity from CSP would need to flow over long distances in different directions.

To see precisely how well CSP could map onto solar resources and existing systems, Lovegrove's team examined the potential of various types of CSP, both off-grid and grid connected. The study concluded that 15 GW of CSP capacity could be achieved with "only modest grid extensions". Initial installations could cover hybrid systems at existing fossil-fuel plants and smaller off-grid plants for mines and towns. Further down the line, "nation-building" grid extensions could unlock more substantial solar resources.

Of this 15 GW potential, 8 GW would be high-capacity standalone plants with enough thermal storage to justify fairly modest grid extensions. Another 2 GW would be hybrid plants delivering steam to established coal-fired plants, while 3-4 GW would be standalone plants with capacities of 50-150 MW linked to existing grids. Medium-scale grid-connected and off-grid plants are also seen as likely to take off, although totalling less 1 GW of capacity.

Cleaning the energy mix

In any case, the hurdles to adding CSP capacity to Australia's grids could be overshadowed by the risks of sticking with fossil fuel. By coincidence, Solar Dawn's recent thunderclap broke amid a political storm over an attempted overhaul of the energy mix.

Also on 1 July, 2012, Prime Minister Julia Gillard's flagship Carbon Price came into force. From now on, the country's 294 top polluters must pay A$23 (US$24) for each tonne of carbon emitted, although the price is expected to ease from 2015. A glance at Australia's current energy mix reveals why the law's proposers were willing to brave fierce public opposition. Australia's 50 GW of installed capacity is among the world's dirtiest, with coal providing three quarters of electricity. In per-capita carbon emissions, Australia is the developed world's number one.

The new law - labelled the Carbon Tax by its many opponents - is aimed at cutting carbon emissions from 2000 levels by 5 per cent by 2020 and by 80 per cent by 2050. While renewables take on a larger slice of energy mix, a closure program for heavily polluting coal fired plants should help speed Australia down the league of top polluters.

In any cleaner generation future, solar power offers two advantages over other renewables. An analysis of electricity prices within a recent report for ASI by ROAM Consulting, Solar Generation Australian Market Monitoring, found that solar should prosper because its hours of peak generation coincide with peak demand. But CSP holds another ace in its ability to meet peak and baseload demand through storage.

Storing up baseload capacity

For now, in fact, concentrating photovoltaic (CPV) technology is making similar headway to CSP in Australia. Construction is underway on Solar Systems' 2 MW Mildura Solar pilot plant, where a 100 MW facility will be built if the demonstration project prospers. Yet basic economics could still favour solar thermal technology. "CSP without storage is twice as expensive as large-scale PV," says Lovegrove. "Why bother? The real reason is storage."

CSP technologies can feature thermal storage units. As heat can be stored far more efficiently than electricity, these plants open up a rare opportunity for renewables to provide baseload and peaking power. The value of CSP's capacity to meet demand could also rise over time. A future energy mix with more intermittent renewables such as wind would put a high premium on energy storage.

What's more, the ability to effectively time shift solar generation would also protect CSP revenues once more solar power comes on line, with additional PV capacity creating a bulge in daytime generation that would be expected to curb prices, cutting its premium. "Anything fixed in time of dispatch can cause a fall in pricing," says Lovegrove. "Storage means you can adapt to the new peak."

The "strategic" case for CSP

In addition, the ASI sees a strategic case for investing in CSP. "It suits Australia because we're sunny and have experience in power stations," says Lovegrove.

Solar Dawn would provide a showcase for home-grown compact linear Fresnel collector (CLFC) technology already in place at the coal-fired Liddell Power station and being installed at the Kogan Solar Boost. Areva Solar, which is driving both the Solar Dawn and Solar Boost projects, was formed by the purchase of Ausra Solar, a firm that originated in Sydney in 2002.

A lull in global CSP activity could also let Australia make its mark. "Nothing that Australia can do will affect the photovoltaic industry - which is now taken up by China - but one of our conclusions is that CSP offers an opportunity in a technology area that suits Australia," says Lovegrove.

In fact, rather than a crowded field, Australian CSP could emerge into a void. After driving the industry for many years, Spain's commitment to CSP could waver amid its on-going financial crisis. In the US, federal backing for CSP now looks uncertain. Increasingly, the industry is looking to India, where the Jawaharlal Nehru National Solar Mission aims for 20 GW of CSP and PV by 2022, as well as Middle East and North African states.

The prospects for Australian CSP technology in new markets such as India are buoyed by Areva's recent contract to set up two 125 MW CSP plants in Rajasthan. Areva will provide construction management services for the project, scheduled for commercial operation by May 2013.

CSP still too pricey

But one drawback outweighs the host of benefits that CSP could bring. ASI's report pegs the levelised cost of energy (LCOE) for utility-scale solar thermal at about A$250 (US$261)/MWh. Meanwhile, the maximum revenue in main grid-connected markets currently totals about A$120 (US$125)/MWh, including renewable certificates.

In fairness, the gap between CSP and fossil fuel is not as unbridgeable as these figures suggest. A complex study of potential revenue suggests CSP's ability to meet baseload and peak demand through being dispatchable doubles the value of its production. This "time value" means CST would have earned A$87 (US$91)/MWh over 2005-2010 while wholesale prices averaged only A$42 (US$44)/MWh.
But ASI Executive Director Mark Twidell identifies the gap between revenues on the market and the cost of technology as it moves from demonstration to commercialisation as "the critical issue facing CSP technologies".

"There is a range of market and policy drivers that will impact on the widespread, large-scale deployment of CSP but ultimately it is about bringing down cost and closing the cost-revenue gap, which is the responsibility of industry, government and the research sector," he says. An added challenge for CSP is the impact of Australia's commodity boom, which has pushed up the price of construction in the areas where new plants would go up.

Getting to the right price

The study projects that CSP will be competitive with Australia's grid at some point between 2018 and 2030. "There is a 90 per cent probability it will fall within that range," says Lovegrove. Rising demand and falling CSP capital costs would both drive this transformation. While real energy values are forecast to rise by between 1 per cent and 3 per cent per year, capital costs are predicted to drop by between 20 per cent and 50 per cent by 2020.

"CSP is right at the top of the cost curve," says Lovegrove. His optimism rests on the likely trajectory of global deployment as well as a SunShot Vision Study in the U.S., which found "heaps of opportunity to reduce the costs of various elements". In his view, the industry can reasonably expect costs to fall in line with those in the wind industry, giving a progress ratio (PR) of 0.8 or 0.9 with each doubling of installed capacity.

That said, the ASI hardly expects CSP to take off in Australia entirely on its own merits. The purpose of Realising the Potential of Solar Power in Australia is rather to alert authorities to the wider benefits of CSP so these can be rewarded.

A call for new policies

For now, wholesale electricity markets largely determine CSP plants' revenues, with renewable energy certificates adding about A$30-40 (US$31-41)/MWh. But Lovegrove argues plants' income should also reflect their specific advantages for networks.

As CSP plants are likely to be in rural or relatively remote locations, they could reduce high line losses. Installations could also earn additional revenues through reducing network costs by providing reliable generation at the end of near-capacity lines. Capacity value - the extent to which CSP can cut investment in other dispatchable systems - provides a further case for enhanced revenues. In addition, rising capacity of fluctuating renewables such as wind and solar PV could raise the value of ancillary services for balancing the grid, which CSP with storage is equipped to provide.
The ASI report advocates such technology-neutral incentives as one element in a four-pronged approach. Second, Lovegrove and his team suggest the sector aim to better communicate its value proposition to key organizations, retailers and financiers. They also call for "CSP-solar precincts" in areas of high solar resource, where connections for CSP would be provided to cut development costs. Finally, the report recommends a push in R&D to reduce costs and build confidence. Key areas where Australia could focus include deployments of less than 50 MW, fossil-fuelled hybridisation and advanced cooling technologies suited to water supply constraints.

Getting the message across

But will Australia's authorities heed the ASI's call? That may hinge on the next federal election, due by the end of 2013. The opposition led by the Liberal Party's Tony Abbott looks set to romp home. Which could be ominous for all renewables. Abbott has made a "pledge in blood" to repeal the Carbon Price. But Mark Twidell prefers to stress elements of consensus. "The independent Australian Renewable Energy Agency (ARENA), which has bipartisan support and funding legislated through to 2020, will make investments to develop renewable energy technologies and to help lower their costs, including meritorious CSP projects."

In his view, there is even hope for Solar Dawn. "The Australian government remains committed to the deployment of large-scale solar," he says.

Lovegrove seems more willing to acknowledges headwinds. "It's such an uncertain environment. If you ask most the key stakeholders, what they'd really like is some certainty, so that they can start planning. It's incredibly tricky to see what will happen." While "very, very optimistic" about the sector's global outlook, he is less sanguine about its future in his homeland.

"Whether Australia manages to shoot itself in the foot or not remains to be seen,' he says. On the upside, he sees potential for Australia to 'relatively easily" take a leadership role to become "a major, major player". But he admits that CSP's advocates have a complex message to get across."Everybody loves renewables in a motherhood sort of way, but very few people have cottoned onto the importance of matching demand throughout the day," he says.

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Government to Scrap Carbon Floor Price

After weeks of secretive talks between the Gillard government and the Greens, Climate Change Minister Greg Combet has announced Labor will scrap the planned $15 floor price on carbon permits in a major overhaul of the carbon pricing scheme.

Following intense lobbying from business and threats by the independent MP Rob Oakeshott to block the floor price, the government will ditch the mechanism and instead restrict the purchase of cheap overseas permits from developing countries.

A limit on the amount of United Nations-backed permits that Australian companies can buy will effectively prop up the price at home.

Climate Change Minister Greg Combet plans to scrap the $15 carbon floor price. Photo: Alex Ellinghausen

Mr Combet also announced plans to link Australia's scheme to Europe's emissions trading scheme from 2015, which is likely to have the effect of matching the two prices.

 

The link with Europe means that Australian companies can start buying European permits - which are now trading at $9.80 - right away to meet their future liabilities.

This could make the carbon price cheaper overall for Australian businesses, though the European price is likely to rise by the end of the decade as the European Union moves to make restrictions of its own.

Australian companies will only be able to meet 12.5 per cent of their liability under the Australian carbon scheme with the UN-backed permits.

And from 2018 - or possibly sooner - Australian companies will be able to sell credits in Europe. This could be a boon for farmers, who can generate credits through changes to their land practices, such as tree planting, though Mr Combet said that aspect was still to be negotiated.

The carbon price, which came in on July 1, will initially be fixed at $23 and will rise slightly over the next two years, when it becomes a floating-price emissions trading scheme.

Europe has the largest emissions trading scheme in the world. A linkage means that carbon permits can be traded back and forth between Australia and Europe. The idea is that the free market then finds the cheapest possible way to reduce carbon. From an environmental viewpoint, it does not matter where the carbon cuts are made.

The floor price was intended to create certainty for potential investors in clean energy. But businesses complained it would be an administrative headache.

Without a restriction of the UN-backed international permits, the Australian price could crash to as low as $3 or $4. The Greens have been concerned that a very low carbon price would not be enough to drive investment in cleaner energy such as wind, solar and wave power.

Today's announcement is also likely to have an effect on negotiations between Energy Minister Martin Ferguson and electricity generators who could be paid billions of dollars to phase out their dirtiest power plants.

The likely price of carbon over the next decade is one factor in deciding the value of these power plants. They may argue that scrapping the floor price raises the value of their assets.
The Greens have already backed the changes.

Independent MP Rob Oakeshott said this afternoon he would also support the legislation.
He said the announcement would protect Australia's emissions trading scheme from some ''very difficult decisions into the future''.

Opposition Leader Tony Abbott said the changes showed the government was all at sea on the carbon tax.

''You can't fix it. You've just got to scrap it,'' Mr Abbott told reporters in Rockhampton.

''We haven't had the carbon tax for two months yet and they've admitted there is a fundamental flaw at the heart of the carbon tax.''

Mr Abbott said there would be a ''huge hole'' in the budget as a result of the decision.

''If you can't take the price for granted, you can't take the revenue for granted, and if you can't take the revenue for granted, you can't rely on the compensation,'' he said.

However Mr Combet said the government would not reduce household assistance payments and tax cuts set up to compensate for the price impacts of the carbon tax.

Asked if he was contemplating any further changes Mr Combet said: ‘‘no’’.

''We will not be cutting any household assistance,'' he said.

''We committed to it and you might recall that there are further tax cuts that have been legislated from 2015 as well.''

Australians Led The World in Home Solar Installs in 2011

Australian households installed more residential rooftop solar power systems last year than any other nation.

Approximately 392,500 new home solar systems were activated in 2011 according to data from the Clean Energy Regulator and the International Energy Agency.

A fact sheet released by REC Agents Association (RAA) based on data from the Clean Energy Regulator states Australians had installed nearly 1.5 million solar hot water and solar panel systems to the end of June.

As at 30 June, 2012, renewable energy certificates had been created for 753,844 solar panel systems; representing 1,671,489 kW capacity. A further 743,842 heat pump and solar hot water systems had been installed.

Close to 18 per cent of all Australian families now has one or the other or both installed – 9 per cent of households have solar electricity generation systems.

“Recognition must go to the Howard Government for having the vision to establish a world leading Renewable Energy Target, to the Rudd Government for increasing that target four-fold and to the Gillard Government for delivering on the promise of the Renewable Energy Target,” says Ric Brazzale, President of RAA.

“Whilst four million Australians now have solar on their roofs, many more Australians are keen to get on board. The Renewable Energy Target must be maintained, expanded and extended over time to help deliver solar to all Australians.”

Some corners of industry have called for the scrapping of the Renewable Energy Target due to the introduction of a carbon price. However, last month, Australia’s Minister for Climate Change and Energy Efficiency Greg Combet stated this would “fail to deliver the transformation needed in our energy sector and only increase the cost of that transformation in later years.”

REC Agents Association represents businesses creating and trading inRenewable Energy Certificates (RECs); the mechanism behind Australia’s Renewable Energy Target and the basis of the Solar Credits Scheme. Often referred to as a solar rebate, Solar Credits is an initiative that subsidises solar panel systems.

Low Income earners Burnt As Cost Of Solar Subsidy Spirals

RENTERS, pensioners and other low-income earners are paying for their wealthier neighbours to enjoy cheaper power under the state's skyrocketing solar subsidy system. 
 
The Queensland Consumers Association says costs to subsidise solar are forecast to triple, as the state's bill to fund the scheme continues to grow.

More than 100,000 applications were received last month from homeowners wanting to profit from the state's generous 44c per kilowatt hour tariff - twice the retail power rate - which will continue for 16 years.

By installing solar systems up to 5kW, the mostly well-heeled applicants stand to earn $200-$300 a quarter from a subsidy that is costing their non-solar neighbours more each year.

One of those who applied was Algester resident Ron Ruys, who feels badly for his neighbours who are indirectly helping to pay for a $10,000 5kW system that will earn him extra income.

"I'm going to do it and I'm going to make money out of it," he said. "But it is unfair to other people because of the subsidy. I don't think people know what the 44c means to their bill."

Energy Minister Mark McArdle has estimated the tariff would cost $1.8 billion by 2028 if the scheme remained unchanged. The July 9 deadline limiting future payments at an 8c cent rate.

The Government projects that the annual cost of the subsidy will rise from $50 to $100 for each household from the surge in applications, and another $50 for upgrades to the power grid.

Whether the increases will become a reality depends on whether the Government is successful in cutting expenses elsewhere in the budgets of power suppliers, including "community services".

Queensland Consumers Association vice-president Ian Jarratt said the threat of a $100 annual hike should be a concern for many people trying to stretch their income.

"A dollar is always more for a pensioner," he said.

The association said it voiced concerns about the scheme's cost several years ago to state officials. "Things had been done far too quickly and not thought through enough, especially about the cost to consumers who could not afford to install solar systems," Mr Jarratt said.

The solar scheme has had some benefits: creating employment for thousands of installers, reducing the state's dependence on coal and lowering carbon emissions.

Prices of home solar systems have dropped 50 per cent.

Installer numbers have increased from 78 in 2008 to more than 1100 today. The number of customers has increased from 1200 to around 180,000.

On the downside, "all Queensland households and small businesses indirectly foot the bill", Mr McArdle said.

The Government said it was obliged by legislation to continue the 44c tariff for the next 16 years, and risked lawsuits if it reneged.

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Solar Panel Firms ‘Mislead' Over Carbon

Two solar panel companies have been found to have made misleading comments about the impact of the carbon tax on electricity prices. 

POLARIS Solar and ACT Renewable Energy said in leaflets distributed in Western Australia and the ACT in late 2011 and early 2012 that customers should buy solar panels because electricity prices would increase by 20 per cent due to the carbon price.

The brochures also claimed the cost of power would rise by more than 400 per cent by 2019.
The Australian Competition and Consumer Commission found the information was "clearly misleading".

While the brochures said the figures were based on independent studies, they were in fact based on unverified claims in an energy industry association ad.

"There was no reasonable basis for these claims to be made," ACCC acting chairman Michael Schaper said in a statement.

Polaris Solar and ACT Renewable Energy gave an undertaking on Tuesday not to engage in similar conduct in the future and ensure all directors are trained in consumer law.

Assistant Treasurer David Bradbury said it was an important reminder to businesses they could not make false claims about the carbon price.

"This also underscores the fact that the reckless and negative scare campaign run by Tony Abbott and vested interests is putting businesses at risk of breaking the law," Mr Bradbury said.

Subsidy Cut Halts Solar Expansion

A SOLAR panel supplier has axed its plans to expand into Queensland after the government revealed it would slash the benefit for supplying power back into the grid - from 44¢ per kilowatt hour to 8¢.

Madison Australia's rethink came as industry lobby group Clean Energy Council argued the policy change could put thousands of jobs at risk, saying householders would reconsider the benefits of installing solar panels given the time taken to recoup their investment.

But Energy Minister Mark McArdle described the solar industry as viable, saying the scheme needed to be changed because all energy users were paying extra on their power bills to subsidise the feed-in tariff for solar panel owners.

Mr McArdle announced yesterday the feed-in tariff for providing power back to the grid would be cut to 8¢ per kilowatt hour, but anyone already in the Solar Bonus Scheme as of July 9 would continue to receive the 44¢ benefit.

Madison Australia director Yorath Briscoe said his Melbourne-based solar installation and retailing company was about to sign contracts in coming weeks to expand into the Gold Coast market.

He said the company had been planning to directly employ six staff in Queensland and contract up to 18 tradespeople, but the cut to the feed-in tariff would hit demand.

“There's going to be massive demand the next 10 days but after that there will be nothing,” he said, adding the company would no longer pursue the Queensland expansion plans.

“It's quite shocking that a government would pull the plug like this.”

The Clean Energy Council said under the current Queensland system, an average householder would break even on the initial investment after 4.5 years.

The average payback period would jump to about 10 years under one scenario modelled in research commissioned by the Clean Energy Council before yesterday's announcement.

But the cost of buying and installing solar panels was expected to progressively decrease in coming years so the break-even point could be less than 10 years for future customers, a council spokesman said.

Climate Change Envoy Warns Against Cutting Investment in Green Energy

The government's climate change envoy has warned that failure to take more action to invest in a low carbon economy is a threat to the future "prosperity and security" of the British people.

John Ashton, who has just stepped down from his post at the Foreign Office, told MPs that the UK was still considered an influential global player on climate change, but signalled that position was at risk as the country was falling behind on investment in energy efficiency and clean energy.

This in turn would make it harder to meet global targets to limit global warming to 2C - the level at which experts consider most countries will cope with the ensuing disruption to weather patterns.

"Failure to deal with climate change would amplify already dangerous stresses arising from food, water and energy insecurity," Ashton told the energy and climate change select committee. "This potentially unmanageable combination of stresses poses a systemic risk to the security and prosperity of our country."
In 2004 the government's then chief scientist, Professor Sir David King, made headlines around the world when he declared that climate change was "the most severe problem we are facing today, more serious even than the threat of terrorism".

However, the growing political consensus for tackling climate change, which culminated in the 2008 Climate Change Act committing the UK to binding emissions reductions, has appeared to be breaking down in the last two years as lack of economic growth and savage public spending cuts have eroded support for sometimes costly policies.

These issues came to a head in February when more than 100 Conservative MPs signed a letter to the prime minister, David Cameron, calling for an end to onshore windfarms.

Ashton, who left his six-year post two weeks ago, said he sympathised with concerns that UK efforts to combat climate change would be an expensive failure if other countries did not follow suit. However in a thinly-veiled warning about the damage done by draining political support for 'green' policies, he said the UK's diplomatic efforts to persuade other countries to reduce the world's reliance on oil and other fossil fuels "depends on what we are doing at home" and the "consensus across the political spectrum".

Ashton also told MPs that far from leading the world, the UK was falling behind important economic competitors such as Germany, Korea, China and Japan in some of the big future industries such as offshore wind energy and carbon capture and storage systems for gas and coal power stations.

"Internationally we must resolve the false choice, exacerbated by the current crisis, between economic security and climate security," said Ashton. "A rapid shift to low carbon growth is essential for security, competitiveness and prosperity, not an intolerable risk to competitiveness, jobs and growth."

"Politically we must address this not as a distraction from our current problems, but as part of the solution to them," he added.

Tory committee member Dr Phillip Lee challenged Ashton, however, suggesting that there were still hundreds of millions of people who wanted a better standard of living in developing countries like China, and in the UK during the recession, who would not support policies which pushed up the price of energy and so goods and services they wanted to buy.

"It's seen that going green is going to slow down the growth that we need," added Lee.

Harvey Norman Invests in Solar Panels

RETAILER Harvey Norman plans to be a market leader in the domestic solar industry after placing a substantial order for user-friendly solar panels. 

United States-based Westinghouse said today it had received an order for five megawatts of its Solar Instant Connect solar panel systems from Harvey Norman.

The order represents a significant investment in the green technology, which will result in Westinghouse's shipments in 2012 more than doubling from 2011.

Harvey Norman said the uptake of solar energy in Australia was stronger than in most other parts of the world, with over 830 megawatts sold in the local market in 2011.

"With Australian power pricing continuing to rise, we are continuing to see very strong demand for solar installations," Harvey Norman commercial division franchisee Alan Stephenson said in a statement.

"In addition to supplying kitchen, bathroom items, hot water and air conditioning systems, we have established a solar business, which we believe will be a market leader."

The newly ordered solar panels require Australian certification, and the first shipments to Harvey Norman are expected to begin in late-2012, Westinghouse said.

The End of Clean Energy Subsidies?

The federal government has given generously to the clean energy industry over the last few years, funneling billions of dollars in grants, loans and tax breaks to renewable power sources like wind and solar, biofuels and electric vehicles. “Clean tech” has been good in return.

During the recession, it was one of the few sectors to add jobs. Costs of wind turbines and solar cells have fallen over the last five years, electricity from renewables has more than doubled, construction is under way on the country’s first new nuclear power plant in decades. And the United States remains an important player in the global clean energy market. 

 

Yet this productive relationship is in peril, mainly because federal funding is about to drop off a cliff and the Republican wrecking crew in the House remains generally hostile to programs that threaten the hegemony of the oil and gas interests. The clean energy incentives provided by President Obama’s 2009 stimulus bill are coming to an end, while other longer-standing subsidies are expiring.

If nothing changes, clean energy funding will drop from a peak of $44.3 billion in 2009 to $16 billion this year and $11 billion in 2014 — a 75 percent decline. 

This alarming news is contained in a new report from experts at the Brookings Institution, the World Resources Institute and the Breakthrough Institute. It is a timely effort to attach real numbers to an increasingly politicized debate over energy subsidies. While Mr. Obama is busily defending subsidies, the Republicans have used the costly market failure of one solar panel company, Solyndra, to indict the entire federal effort to encourage nascent technologies. 

The Republican assault obscures real successes that simply would not have been possible without government help. Wind power is a case in point. By spurring innovation and growth, a federal production tax credit for wind amounting to 2.2 cents per kilowatt-hour has brought the cost of electricity from wind power to a point where it is broadly competitive with natural gas, sustaining 75,000 jobs in manufacturing, installation and maintenance. 

But the tax credit is scheduled to expire at the end of this year, with potentially disastrous results: a 75 percent reduction in new investment and a significant drop in jobs. That is just about what happened the last time the credit was allowed to lapse, at the end of 2003. 

This is clearly the wrong time to step away from subsidies. But it may be the right time, the report says, to institute reforms, both to make the programs more effective and to make them more salable to budget hawks. One excellent proposal is to make the subsidies long term (ending the present boom or bust cycles) but rejigger them to reward lower costs and better performance. 

The idea is not to prop up clean tech industries forever. It is to get them to a point where they can stand on their own — an old-fashioned notion that, one would hope, might appeal even to House Republicans.

The End of Clean Energy Subsidies?

Huge Solar Project in Limbo as Newman Pulls Funding

The first chance to test whether solar thermal energy can provide large-scale alternative power in Australia may be in doubt under the new LNP state government.

The incoming Queensland government wants to pull out of an agreement formed by its predecessor to provide $75 million towards the $1.2 billion Solar Dawn solar research and power plant at Chinchilla, west of Toowoomba, Premier Campbell Newman said yesterday.

The Solar Dawn project is set to be one of the largest of its kind in the world.

Mr Newman said following the first LNP party room meeting the cost of the federal government's looming carbon tax would affect the state economy and public sector, and said Queensland would be “paying twice” if state-based climate change initiatives were not dumped.

However he said the green programs set to be axed under his government could be revived if the carbon tax was scrapped.

Mr Newman said during the state election campaign he wanted to dismantle Queensland’s carbon reduction schemes to save $270 million for the state budget.

Solar Dawn is a 250 megawatt solar thermal project using sun-heated water in tubes to produce steam-driven energy, and is backed by the federal government and was supported by former Premier Anna Bligh.

It is part of the federal government’s Solar Flagship Program. A similar project at Moree, in New South Wales, has received federal funding under the same program.

The University of Queensland has developed a $60 million research project to link to Solar Dawn.

UQ's Professor Paul Meredith, the head of the university’s renewable energy research, said he was worried the LNP’s decision would damage what he thought was a worthwhile project and one that provided almost 400 jobs.

‘‘Hypothetically if the state contibution of $75 million does not flow that leaves a very big hole in the project’s funding,’’ Professor Meredith said.

‘‘And I think it is anybody’s guess what the Federal Government will do at that point.’’

The Gillard Government has promised $475 million and the Bligh Government agreed in February this year to give $75 million in a ‘‘conditional agreement’’ to help build the huge solar thermal plant, which is scheduled to be operating by December 2015.

The project must reach ‘‘financial close’’ by June 30 this year.

Federal Energy Minister Martin Ferguson, speaking in Queensland yesterday, said he was surprised the new state government was considering backing out of Solar Dawn.

‘‘As the ’Sunshine State’, Queensland is well-suited for a significant solar thermal project able to competitively deliver electricity to the grid,’’ Mr Ferguson said.

‘‘Given the new Premier’s focus on jobs and training, it is worth noting the Solar Dawn project brings with it an average of 300 jobs during the three-year construction phase, with a peak of 450 jobs.’’

Mr Newman has an election promise to reduce Queensland’s unemployment to four per cent in six years.

‘‘If the new Queensland Government chose to breach the existing financial commitment to the Solar Dawn project, the Australian Government would need to consider its own position,’’ Mr Ferguson said.

The other main funding for Solar Dawn is coming from two joint venture partners: AREVA Solar and Wind Prospect CWP.

Solar Dawn project director Anthony Wiseman said his organisation had received no advice from the incoming Newman government that it would not provide the money.

‘‘Solar Dawn has not been notified of any change of intentions of the Queensland Government under the terms of the existing conditional agreement and we continue to work with relevant parties on developing our proposed project,’’ his statement read.

Solar Dawn would not answer what impact the removal of the $75 million in state government funds would have on the project.

Mr Newman said the LNP would examine any contractual commitments entered into by the previous government, but would not “in some silly way” scrap the contract if the cost outweighed the savings.

“If we can exit this project and save $75 million we will,” Mr Newman said yesterday.

Mr Newman has said the Queensland Government was contributing to projects that should federally funded.

BP Plans to Withdraw From Solar-Energy Venture in Australia

BP Plc, Europe’s second-largest oil company, plans to withdraw from a venture seeking Australian government funds to build a solar-power project in the state of New South Wales.

“We’ve indicated that we wish to leave the consortium and that we won’t be part of the new bid process,” Jamie Jardine, a Melbourne-based spokesman for BP, said by mobile phone today.

BP, Fotowatio Renewable Ventures and Pacific Hydro Pty, which won A$306.5 million ($329 million) in Australian funds last year to build the Moree solar farm, missed a December financing deadline. That prompted the government to reopen the competition to other bidders, including AGL Energy Ltd.

The company decided to exit the global solar business after 40 years because it has become unprofitable, Mike Petrucci, the chief executive officer of BP’s solar unit, told staff in an internal letter in December. The industry faces oversupply and price pressures after Chinese competitors increased production.

BP and its partners in the proposed A$923 million solar photovoltaic plant had failed to sign power-supply agreements needed to advance with the project, it said in December. The company said Dec. 23 it was sticking with the Australian project, even after deciding to exit the business globally.

“In the past two weeks, we’ve worked with the consortium to refine and develop the proposal, and we believe the new consortium will be an effective one,” Jardine said today.

The Moree venture will be eligible to bid for the funds and have a chance to show it is “still the most meritorious project,” Australia’s Resources and Energy Minister Martin Ferguson said earlier this month. The government also invited TRUenergy Holdings Pty Ltd. and Suntech Power Holdings Co. to update their applications seeking solar grants.

The government expects to make a decision in the second quarter, according to Ferguson.

Clean-Tech's Surge Masking Troubled Times

SOMETHING very unusual has been happening in the Australia sharemarket. In each of the past three months and for the last quarter as a whole, Australian clean-tech stocks have outperformed the broader index by a ratio of about two to one.

In January, the ACT Australian CleanTech Index, which comprises 77 local stocks with a combined market cap of $8 billion, recorded a 10 per cent gain, double the rise of the Australian sharemarket's benchmark S&P/ASX 200.

Over the last three months, the CleanTech index has enjoyed a gain of 5.5 per cent, compared with a 1.9 per cent loss in the broader index.

Gillard Government Launches $340 Million Energy Programme

The federal government of Australia launched on Thursday a $340-million energy programme designed to provide energy efficiency to businesses, local government and communities.

The bulk of the funds will be for efficiency upgrades to infrastructure, including council buildings, stadia, education facilities, town halls and nursing homes. It will be made up of three programmes, with the funds broken down into $200 million for councils and not-for-profit and community groups, $100 million for low-income households and $40 million for small- and medium-sized enterprises and community groups.

Climate Change and Energy Efficiency Minister Greg Combet, Regional Minister Simon Crean and Parliamentary Secretary for Climate Change Mark Dreyfus jointly in Canberra the new initiative.

"The community accepts the need for action on climate change and the programmes announced today are a step in the transition to a cleaner economy," the ministers said in a joint statement.

It will reach the different groups through grants to interested parties. The government will issue calls for expression of interests next week. The ministers assured there would be proper safeguards to ensure the money would be spent well.

Mr Dreyfus said the energy efficient programs are designed differently from the failed home insulation scheme which caused the death of four Australians and hundreds of razed homes.

Under the community energy efficiency programme, funding for wind and solar power systems are not eligible, but solar hot water systems are included since the latter is not considered a renewable energy generation scheme.

For the low-income energy efficiency programme, the purchase and installation of renewable energy generation systems such as solar photovoltaic, micro-hydro, wind turbine and biomass generation systems are excluded.

The launch came ahead of the July 1 implementation date of the carbon tax, which some sectors blame for the expected rise in prices, including air fare.

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Australia: Wind Energy and Solar Power Needs Support

The Grattan Institute has studied the potential of wind power, solar energy (photovoltaic and concentrating solar thermal power), geothermal energy, bioenergy, nuclear and CCS to generate near-zero emissions power.

No easy choices: which way to Australia’s energy future? explores the acute intellectual and policy challenge Australia faces in energy policy.

Markets must be the primary mechanism by which Australia transforms its electricity supply. Yet it will not be able to meet its emission targets and at the same time produce future electricity at a price acceptable to the public unless governments act to reduce the costs of low-emission technologies.

It is increasingly clear that the carbon pricing scheme alone is not enough to make low-emission technologies competitive and effect the change that Australia needs.

The report analyses the potential of seven clean-energy technologies: wind farm, solar photovoltaic panels, large-scale concentrated solar power, geothermal energy, carbon capture and storage, nuclear and bioenergy.

The report argues that wind turbines and solar photovoltaic may be commercially viable if carbon pollution prices rise to foreseeable levels over the next 20 years. But it states that those technologies can never provide more than 50 per cent of Australia's electricity needs without massive advances in storage technologies.

Geothermal energy, which has huge potential in Australia, is highly uncertain when it comes to reliability and costs because it's still in the exploration stage. The report acknowledges that nuclear and CCS are unlikely to be demonstrated in Australia anytime soon "unless government takes on most of the material risk of the project".

Mr Wood says the carbon tax and subsequent emission trading scheme (ETS) must be the primary mechanism by which Australia reduces its emissions but he argues the market on its own won't make low-emissions technologies competitive.

The Gillard government, at the behest of the Greens, is establishing a $10 billion Clean Energy Finance Corporation which will leverage private sector financing for renewable energy and clean technology projects. But the Grattan Institute report says more needs to be done aside from support for research and development.

Labor's carbon price scheme begins on July 1, at a price of $23 per tonne of carbon dioxide emitted. The government has also promised a $10 billion clean energy finance corporation, due to start in 2013-14, and Australia has a target of 20 per cent of energy coming from renewable sources by 2020.

But the Grattan Institute found government was responsible for several barriers preventing the development of clean-energy technology. They could be removed by changing the rules governing the electricity network, improving mapping of solar and geological resources and giving potential investors greater certainty by releasing annual emissions limits for well into the future.

Further, it calls on governments to expand exploration and mapping of solar energy and geographical resources to aid in the development of concentrated solar thermal power and geothermal energy and the location of suitable sites for carbon storage.

Finally, the think tank's report stresses the need for a complete overhaul of Australia's distribution network. "Existing transmission networks and network regulation are designed around the assumption that almost all electricity generators will be large plants close to existing centres of generation," it states.

Current cost structures mean wind farm, solar energy and geothermal energy plants in remote locations are unviable simply because they can't connect to the grid. Mr Wood suggests existing generators and retailers should foot the bill for new hubs to be built with low-emissions suppliers only paying a share of the cost once they're up and running. New regulatory frameworks are required that ensure long-run cost-efficient trade-offs, the report concludes.

www.grattan.edu.au/publications/124_energy_no_easy_choices.pdf

Realities of Scale Cast Doubts on Gillard’s Carbon Tax and Clean, Green Future

Viewed from a practical background as an electronics trouble-shooter, it seems to me that the Gillard Government’s “clean energy future” is just a document of hope and uncertainty with a glossy cover.
Overblown expectations of wind and solar power sit at the heart of its plans, and it doesn’t take an Einstein to spot the exaggerated claims and glaring errors of scale.

The Gillard Government would have you believe that it is very simple. “Big Polluters”—500 of them—are to be “supertaxed” creating a simple cost incentive to reduce CO2 emissions.

In Victoria, the Latrobe Valley‘s coal-fired electricity generators can do little to change their ways. Paying the tax is their only real option, and consumer tariffs will rise accordingly. Low income households are to be compensated, emissions will stay the same, and nothing will be gained, except some tax revenue for government coffers.

Many people seem to be under the delusion that this carbon tax will fund the replacement of dirty coal with clean, green power. They assume that the much hyped “clean energy future” sold by Gillard and Brown has it all worked out and under control: the “big polluters” are to pay, and any additional costs to consumers will be minimal. A little research into the detail and the realities of scale uncovers the hidden jumbo amongst the glib tossings of our wry-smiling government.

Consider the situation in Victoria.

Any attempt to supply the state’s peak electricity demand of about 10,000 MW from wind and solar will cost tens of billions of dollars, a cost that will inevitably be passed on to consumers. A current submission to the Victorian Government with cost estimate for our wind-powered future offers a clue to the direction some would have us take, the scale of expenditure involved and what it will do to the industries on its hit list. It is available here.

Cost is only part of the problem. The other, bigger issues are those of scale and nature itself, which, in my opinion, also fail to add up.

Averaged over a month or so, a typical 90-metre diameter wind turbine in Victoria, rated at 2MW, generates only about 30 per cent of its 2MW rating, about 0.6MW, due to wind variability. This is known as capacity factor. Capacity factors of some Australian turbines are listed here.

Ten thousand such turbines would be needed to supplant the 6000MW output of the Latrobe Valley’s coal fired plant on a day of average wind speed. Latest figures from the US Department of Energy list the average “overnight” construction cost of wind generators in the US at US$2438 per kW. (See Table 2, line 26 wind, available here.)

On these figures 2MW turbines would cost US$4.87 million each. Ten thousand of same, for Victoria alone, would cost the Australian taxpayer $US 48.7 billion, though economies of scale would no doubt reduce that figure somewhat.

Ignoring secondary technicalities, such as environmental impact, the enormous costs and electrical losses incurred in lengthy transmission lines, made necessary by wind power’s need for “geographical dispersion” a hypothetical string of ten thousand 90-metre diameter turbines, spaced 100 metres apart in the prime location, along the Victorian coast, would stretch all the way from South Australia to the NSW border.

Even then there is no guarantee that large, slow-moving weather systems would not sometimes create circumstances where supply couldn’t meet demand for periods of hours, perhaps days. Nature will always have the final say in matching supply to demand, and we will be the ones who must make the alternate arrangements.

Full baseload back up from other sources will always be required if outages are to be avoided. Who wants to get stuck in a lift, or walk home, when public transport grinds to an untimely halt due to catastrophic load-shedding?

There are also lessons available from the experience of others, which should serve as a warning to our decision makers. (See ‘A problem with wind’ and ‘Wind power failing to deliver the energy Scotland needs’.)
Wind turbines provide a clean, but costly and intermittent adjunct to baseload power, they are not the answer for cities full of industry, mass transport, factories, with shopping centres, street lighting, and millions of power-dependant consumers. Many, it seems, are pinning their hopes on wind power, but promoting it beyond its capabilities can only lead to very expensive failure.

So where will our 24-7 baseload power come from?

Solar-thermal with storage is the other green answer we hear a lot about in latte-land.

In the sunny desert climes of Spain and the US, solar/storage plants certainly can produce power from stored heat even after sunset, but output fizzles after 12-16 hours. We could no doubt draw intermittent power from a source such as this, but not without full baseload back-up for all those days/weeks of cloudy weather we live with in southern Australia.

Once again realities and matters of scale spoil the fairytale. The total construction cost of a solar/storage plant such as the 110MW Crescent Dunes project in Nevada, is estimated at US$1billion, or about US$9.1 million per MW.

To replace the Latrobe Valley’s 6000MW coal-fired installation with this technology would call for 54 such plants at US$1 billion each, a total of US $54 billion. Scaled up from Crescent Dunes, a 6000MW complex would cover 392 sq kilometers and need unfailing sunshine, often a rare commodity in southern Australia.
Maintenance, including maintaining peak reflectivity of some 900,000 computer controlled heliotats (mirrors) permanently exposed to the elements, would very likely present formidable practical problems.

Back in the real world, southern Victoria’s July sunshine averages 3 hours per day and is sometimes zero for days. Our remote desert areas fare better, but not well enough for the standard of reliability required. Long distance transmission once again becomes a limiting factor.

Put kindly, our green energy future is positive thinking on steroids. The technological miracles upon which it is predicated, are not on the cusp of discovery as many believe. They are already here, and they are inherently problematical. No amount of taxpayer-funded research into wind and sunshine will tame the natural perversity of nature, which condemns the exploitation of its elements to accessory status, regardless of well intentioned hopes and dreams

A baseload capability virtually equal to peak demand is still necessary if power outages and chaos are to be avoided at all hours, and in all weathers. Having ruled out the nuclear option, burning gas instead of coal remains the only 24-7 generating option for Victoria’s largely urbanized population. If we really do have more gas than common sense, we just need a large pipe, a generating site or two, and a willingness to pay at least double for a ‘bandaid’ solution.

Compared to “renewables” construction of gas-fired power stations is relatively inexpensive, typically about $1.2million per MW, though “carbon capture” now on the horizon, may eventually add significantly to that cost. The cost of a typical plant can be seen on fact sheet A.

Even the Greens don’t dispute Victoria’s peak power need of 10,000MW. While the Latrobe Valley can supply 6000MW, Snowy Mountains hydro. and other sources can be imported into the mix to meet the occasional 10,000 MW demand.

A 10,000 MW gas-fired plant would be required to cover Victoria’s needs, at a bare bones cost of around $12 billion. Added to this is a long list of ancillaries, which are difficult to quantify, these include pipelines, distribution terminals, transmission towers, access roads, switching yards, land acquisitions, environmental management, legal costs maintenance, price blow-outs, and of course some “showcase renewables” The final outcome would most likely include all three, wind solar and gas, and the price – enormous.

There will be a scramble for dwindling funds from Canberra’s carbon tax fund, extracted from the 500 big polluters, but this revenue stream has been predicted by many to last about as long as their taxi ride to the airport.

One thing seems certain. If big green power gets its way, the taxpayer/consumer will end up with the bill, regardless of whether he/she voted to receive it. It is hard to see how multi-billion dollar projects such as these can be funded without huge increases in energy tariffs, which are likely to soar by two or three hundred percent to service the vast capital costs.

Measured out by ‘smart’ meters, the future price of electricity may depend literally on the price of gas, the time of day, and the weather forecast .

If anyone believes that Victoria’s share of the carbon tax extracted from a mere 500 targeted businesses will deliver us all nice green power at “little extra cost” they’d believe that little green pigs can fly. To believe it, you’d need to disregard the realities of scale, the limits of technology, the huge capital costs, and switch off any remnants of human intelligence.

But lots of people just swallow it whole … just ask around, it’s a worry!

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Renewable Energy Firms Plan Profits Sans Subsidy

Renewable energy companies are approaching the point where they can generate electricity at a price competitive with fossil-fuels without subsidies, the biggest wind and solar manufacturers said.

Suntech Power Holdings Co. Chief Executive Officer Zhengrong Shi said solar will reach parity with fossil fuels on electric grids by 2015. Vestas Wind systems A/S expects its turbines to compete without incentives "in the coming years," said Peter Brun, head of governmental relations.

"Wind in some cases already is, or can in coming years, be fully cost-competitive with fossil fuels," Brun said today by e-mail from the World Economic Forum in Davos, Switzerland. "Fossil-fuel prices will continue to rise, and that increases the competitiveness of new technologies. We are preparing the whole industry for getting off the subsidy-need."

Caught between oversupply and tumbling prices, the companies are reminding governments that their products are taking the biggest share of new power generation and increasingly rivaling oil and gas. That’s pushing green growth up the agenda as Germany and Japan close nuclear reactors and President Barack Obama defends U.S. support for renewables.

New electricity generation from the wind, sun, waves and biomass drew $187 billion in 2010 compared with $157 billion for added capacity from natural gas, oil and coal, according to Bloomberg New Energy Finance, the first time investment in renewables has exceeded that of fossil fuels.

"Renewables are the energy of the future, and there’s been a larger investment in renewable energy than conventional energy," said Steve Sawyer, secretary-general of the Global Wind Energy Council in Brussels, who first attended Davos in the early 1990s as a lobbyist for Greenpeace when clean energy companies were tiny.

Subsidies to renewables totaled $66 billion worldwide in 2010, according to the most recent figures from the International Energy Agency. Incentives must be retained to meet existing targets of diversifying the energy supply, the Paris- based group said.

Power from solar panels costs more than triple natural gas, according to levelized cost of energy data from New Energy Finance. Onshore wind is close to parity with coal, and about a quarter more pricey than gas.

Solar power will be "very competitive" within a decade, and in some places, it’s already near "grid parity," meaning it can compete without subsidies, Trina Solar Ltd. Chief Executive Officer Jifan Gao said in an interview in Davos. He spoke through an interpreter.

"We see costs coming down and manufacturing efficiency being improved all the time," said Gao, whose company is the fifth biggest maker of silicon-based solar panel. "In places like Australia, this year they will reach grid parity; next year Italy will, and in 2014 regions like California."

Gao’s comments support those of Suntech’s Shi, who told Bloomberg television that with government support, the industry has made "tremendous progress," and solar prices have been cut in half in a year.

"We believe that by 2015, there will be around 50 percent of countries where it reaches grid parity," Shi said.

Brun at Vestas said that the cost of wind power is "site- specific" and that the technology may reach grid parity in the breeziest areas by 2020. He declined to say where. Governments and the industry should consider re-allocating subsidies to turbines in areas with lower wind speeds, and offshore, where winds are stronger and costs are higher, he said.

With incentives for wind and solar power under threat in the U.S. and the European Union as governments tighten budgets, Davos serves as a forum for industry executives to remind governments of the need to promote renewables as part of the effort to stem climate change, said Tulsi Tanti, chairman of Suzlon Energy Ltd., India’s biggest wind-turbine maker.

"Davos is the one place the most important decision makers of the world — be it government or business — converge," Tanti said in e-mailed answers to questions. "The most crucial issue this year will be to argue for policy certainty despite the economic environment."

In the U.S. the wind industry is threatened by the loss of a tax credit which expires at the end of this year. Vestas has said it may fire 1,600 U.S. workers if the credit isn’t renewed, and Obama in his State of the Union Speech on Jan. 24 urged Congress to "pass clean-energy tax credits."

"I will not walk away from the promise of clean energy," Obama said.

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