Are millions of solar roofs making solar farms pointless?

Are solar roofs making solar power stations uneconomic?

Utility scale solar, or solar farms, are fields of PV panels which generate electricity that is fed directly into the grid.  Currently we don’t have much of this in Australia.  Over 99% of our solar capacity is point of use which is mostly on rooftops and the juice it does produce is first used to power the household or business it is on top of and then after that the excess is generally fed into the grid.

While there are countries that have gigawatts of utility scale solar, sunny Australia had none until 2012 when a small 10 megawatt solar farm was opened in Western Australia and no more was built for two years until the completion of the 20 megawatt Royalla solar farm near Canberra last month.  This new development resulted in utility scale solar soaring from about a quarter of a percent of the country’s total PV capacity to a not at all massive eight tenths of a percent.  But there is still more to come.  A small slew of solar farms have either been approved or are under construction.  A 56 megawatt facility is under way in Moree and 102 megawatts in Nyngan.  Several additional small solar farms have been approved for the ACT and a 53 megawatt solar farm will be built in Broken Hill.  Altogether they could take the portion of Australian PV in utility scale projects to over 6%.  It certainly looks as though solar farms are finally taking off and soon the sun soaked Australian landscape will be dotted with fields of solar panels, not at all gently waving in the wind, supplying the nation with clean electrical power for air-conditioners, hair dryers, shock therapy, and cattle prod Tuesday down at Fight Club.  This is a reasonable conclusion to arrive at, but it is wrong.

The solar farms under way now only got the nod because the current Coalition government could not stop them.  For some reason they do not seem to like renewable energy.  I mean, they really don’t like it.  My impression is if it would not cost them votes they would be quite happy to agitate their caucus until it was raucous and then rush out and smash solar panels with hammers, jump up and down on the pieces, and then train dingos to eat the fragments until their kidneys’ turned fetid.  Now pieces of silicon don’t have that effect on dingo kidneys, but my opinion of the acumen of Australia’s current leadership is so low I doubt they have even a cursory understanding of dingo urology.

It seems very likely the Coalition will prevent any further expansion after the current projects are completed.  However, an unpleasant political climate is not the main difficulty that utility scale solar faces  in Australia.  After all, government policies change.  And they will do so either when we get a new government or perhaps close to the next election when the stinkiest part of a rotting fish is likely to get the chop.  But that won’t be enough to save utility scale solar in Australia. Economics also gets in the way because utility scale solar simply cannot compete with rooftop solar.

The cost of utility scale solar in Australia is quite frankly embarrassing.  Not one single project so far will be able to install PV at a lower cost per watt than local installers putting it on  rooftops.  That is the opposite of how it is supposed to work.  To pay more for solar off in a field somewhere when it is cheaper to put it on your roof is, quite frankly, nuts.  With experience the cost of building utility scale solar should come down, but it is not going to have the opportunity to get that experience, as its situation is only growing worse.

The main reason why rooftop solar knocks its competitor into a cocked hat is that solar farms compete with the wholesale price of electricity during the day which averages about five cents a kilowatt-hour, while rooftop solar competes with the retail price of electricity which averages about 28 cents a kilowatt-hour.  In other words the price that rooftop solar has to beat to turn a profit is more than five times higher than for solar farms.  Currently utility scale solar is not competitive in Australia without the government picking up a large portion of the costs while rooftop solar is extremely competitive and is the cheapest source of electricity available to Australian households and small businesses.  And that leaves utility scale solar lying in a hat full of cocks where it will no doubt be clawed and pecked and terrified by their horrible red wattles.

What really dooms utility scale solar in Australia and ensures we’ll never be likely to have more than a paltry amount is that rooftop solar pushes pushes down the wholesale price of electricity during the day.  People are installing PV panels on their roofs right now because it saves them money and the more that is installed the lower wholesale electricity prices go.  And since the retail price of electricity is so high in Australia and the cost of installing solar so low, people have an incentive to continue to install it even if wholesale prices during the day drop to zero and people get no feed-in tariff for the electricity they export to the grid. This means the natural end point is people keep installing rooftop solar until it ends up supplying the majority of Australia’s daytime electricity use.  So if you listen very carefully you may be able to hear solar photons banging into silicon in the panels on your roof.  Those utterly imaginary tapping noises are the sounds of trillions of little nails being hammered into utility solar’s coffin.

Rooftop solar is already clearly pushing down wholesale electricity prices across the nation.  In South Australia where we get about 6% of our total electricity use from rooftop solar it is not uncommon for it to supply over a third of total demand around noon on weekends.  It did not take us long to get to this point and our capacity is continuing to expand.  If you want to see an example of what wholesale electricity prices may be like across the country in the future take a look at this 30 Minute Demand and Price Graphs for South Australia that I nabbed from the Australian Electricity Market Operator at 12:43 on Saturday:

The lower graph has the price in “dollars per megawatt-hour”, or if you prefer, “tenths of a cent per kilowatt-hour”, the upper graph has demand for grid electricity in megawatts.

Time runs along the bottom of the graphs but since South Australia is in a different time zone from the rest of the National Electricity Market and it is a 30 minute graph you have to add half an hour or so.  As you can see if you have good eyes and roll your mouse over the lower graph, the wholesale price of electricity was slightly negative for  a considerable period during the day.  When I checked at 12:15 Adelaide time the price was negative three tenths of a cent per kilowatt-hour.

Now I want to be clear that rooftop solar was not the only renewable energy source pushing down electricity prices at this time.  South Australia’s wind power also played a significant part.  Rooftop solar would have only been supplying about 28% of total electricity use at around noon, but it is easy to see how further expansion of rooftop capacity would result in a similar effect on wholesale prices.  After all, it’s not as if we are going to run out of roof space.  Technically it would be possible for Australia to generate its entire electricity demand from rooftops alone.

And I would also like to be clear about the reason why the price was negative.  Because the state’s Northern Power Station is not a modern flexible coal plant it doesn’t like shutting down if it doesn’t have to.  After all, it is not as if they have to pay a carbon price on the coal they burn.  As a result it was still operating at about 60% of capacity and the surplus electricity it provided  pushed prices into negative territory.  Also, because of fossil fuel unreliability, a unit of the gas Torrens Power Station was probably also running at about a quarter of capacity to provide spinning reserve in case  a mechanical failure caused the coal plant to clunk out.

And to be even clearer, so clear that I become almost wholly transparent like a jellyfish, I would like to say that I think utility scale solar in the right place is wonderful.  After all, it is far superior to burning fossil fuels on account of how it doesn’t kill people and it has a bright future ahead of it in many countries that are not Australia.  Its future just isn’t as bright as some people think, for while Australia is an outlier, other countries are not immune to having point of use solar out compete it.  And even if there was some sort of miracle in Australia and retail electricity prices dropped to 15 cents a kilowatt-hour, utility scale solar would still not be out of danger.  For while the incentive to install rooftop solar would be greatly reduced, it would still be there, and its installation cost would continue to fall.  But currently in Australia it is clear we would see far better economic return and reduce greenhouse gas emissions at a much lower cost if we invested in rooftop solar rather than utility scale solar.