Unsubsidised solar is cheaper than coal in Chile. Australia here we come!
One of the key questions that remains in what has been a forgettable year for Australian renewable energy policy development is: when will unsubsidised solar reach cost parity with fossil fuels? Will it be in 2015 or 2016 that this occurs? Or should we look further into the future? The question is of course crucial as reaching this point in time will sweep away any criticism from the fossil fuel argument that coal, oil is cheaper to produce than renewable energy such as solar power.
If you listen to fossil fuel lobbyists you’ll get the impressions that cost parity is decades away, however the truth is that it is already here in some parts of the world.
A December 15 SunEdison press release announced a $700 million contract awarded by Chile’s National Energy Commission to the company to supply 570 gigawatt hours of clean energy a year. According to the press release, SunEdison will meet this requirement by investing more than $700 million USD to develop 350 megawatts of utility scale solar photovoltaic power plants throughout the country. The electricity generated will be sold to local power suppliers.
The agreement stands as a testament to the Chilean government’s progressive views on supporting solar energy. However the part of the contract that has made headlines has been the company’s claim that the electricity produced will be cheaper than that provided by fossil fuels. Even more importantly, this cost parity has been reached without additional subsidies from the Chilean government.
From the SunEdison press release.
“Electricity generated by SunEdison’s solar photovoltaic (PV) power plants is now 10 to 25 percent lower cost – without subsidies or incentives of any kind – than electricity generated by fossil fuels in Chile,” said the US-based company.
In a nutshell, the progressively-minded Chilean government has looked into the future, realised the benefits of a mix of renewable energy sources for its people and businesses and noted that renewables such as solar are very cost effective having reached cost parity with fossil fuels. The National Energy Commission is investing heavily in projects such as the one by SunEdison as a means to guarantee its energy future.
The consequences for Australia are huge. Like Chile we are a country blessed with high solar radiation and, combined with our wide open spaces, should be in the box seat when it comes to developing utility scale solar projects. With a supportive government, Australia may well be the “solar superpower” described by the Spanish foreign minister on his visit to our country this year to open the Royalla solar farm.
Like Chile, a sensible energy mix based on renewables will not only deliver enormous environmental benefits for our communities, but also cost savings as the price of solar systems (both household and large scale) plummet. We’re not in this position of course, for a number of reasons including government policy sloth — driven by an antipathy towards the renewables industry — combined with the lobbying muscle of the fossil fuel industry.
However try as they might to dilute the renewables message, the day when renewables reaches complete cost parity with fossil fuels draws even closer. Look at Chile.
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Australia has always been hamstrung with the ‘Australia Tax’ on everything imaginable, consequently its hardly surprising that the cost of PV systems here is higher than in every other country. Furthermore the presence of a government subsidy invariably results in price escalation. That said, my $30,000 investment in a 10kw PV system some five years ago was recouped in four years although it would have been less if the installation company didn’t expect as much profit as it did. I’m not particularly concerned as I’ve got until 2028 to enjoy the largely passive income which will pay for more champagnes & lattes than I could conceivably consume. That said, it would be nice to see a more enlightened attitude on the part of the neanderthal knuckle-draggers in Canberra.
Rich, major issues comparing Chile to Australia. First, Chile imports the vast majority of its coal, oil and natural gas. Australia doesn’t import any coal or gas, and despite falling domestic crude production Australia still produces a higher percentage of its requirements than Chile. This ensures that fossil has an advantage in Australia, even if government subsidies were removed.
Second, the NEC moved the goal posts. Yes PV is more competitive… during daylight hours. If the scope of the production was moved to a 24-hour time frame then fossil will still win out. The Atacama desert is also far superior in many aspects for solar radiation assisting PV efficiency.
My personal view is to scrap all subsidies for both renewables and fossil and let the market sort itself out.
‘Competitive’ has somewhat different meanings for governments / power companies & end-users. Sure it may be more cost-effective for the likes of power stations to use fossil fuel rather than embrace renewable energy, but if it wasn’t for solar power, most households in Australia would be experiencing major pain. In that respect, even supposedly lower efficiency PV systems are infinitely more competitive than the alternative of paying through the nose for electricity because our duplicitious elected officials pander to big business instead of honoring their responsibility to constituents. Given the rate of increase in electricity prices, its inevitable that end-user defections from mainstream power companies will escalate, thereby reducing the income of fossil fuelled operations and hence their competitiveness..
Thanks for taking the time to reply John A. You raise some interesting points.
Thanks all for your feedback. Best for the New Year.
A story I’ve told before but one always worth re-telling concerns a little known branch of Queenslands Department of Energy titled ‘The Office of Renewable Energy’. Ah ha thinks I, this just might be a place to drum up official support for an idea I had for a non-profit community solar farm. Well that was OK until the bureaucrazy in charge advised me ‘we wouldn’t support any initiative that threatened the profitability of Energex, Ergon & Powerlink’. Seems the ‘Office of Renewable Energy is (or more probably ‘was’ if it was disbanded by Noddy) exists or existed purely to obstruct renewable energy initiatives rather than to support them.
Mmmm. Sounds like some serious red tape YesMinister. As Sir Humphrey said: always get the tough stuff out in the title.
Solar is the way, or else we’re all going to pay!….and pay and pay and pay and pay. I’m sure you get the drift.
And so begins the third industrial revolution, surprisingly near to a century after the second. True usually math, half century later novelties, then another half century later maturity, efficiency, mass manufacture. Although historians will debate, when the decade of 3IR actually started, for a long time in the future. You would have thought that there’d be more variation, a third, a quarter of a century different from exactly a century between each iR. 1915-25 the 2nd IR, 2015-25 the 3rd IR, what is this, exact change in quantum state of electrons. It’s too accurate, like entanglement, only this time not over distance, but over time. Given how arbitrary our measurement of time is, our technological advances, it must be a coincidence related to the general pattern. I know that steam power reached maturity at around 1815-25, but I would be surprised, if it was exactly that decade, that the number of kilowatts exploded. If it was matched so accurately, then you’d be watching for vacuum energy 2115-25, to give you a 4th IR. But it’s probably, just a coincidence, after all we’d be hoping, for a mid century 50s and 60s boom from fusion. By directly benefitting from fusion rather than, our move far nearer to fusion, by quantum recievers.
Many stages to our use of fusion, fire from photosynthesis, more directly from agriculture, using stored from geo carbon. Now PV systems acting like a radio reciever, not for information, but for energy. Soon big silicon will move in on big carbon, which will become sub prime energy, big carbon will demand bailouts. Because they’ll say, were too big to fail.
Interesting thoughts Stuart. Plenty to mull over in 2015.