Central Victorian Greenhouse Alliance Response to Medium-Scale Solar Discussion Paper
08 November 2010
The Central Victorian Greenhouse Alliance, comprises 14 local governments, and businesses and community organisations, is facilitating the creation of sustainable, climate-aware communities and profitable, climate-friendly economies in our region.
Central Victorian Greenhouse Alliance
The following is a listing of questions extracted from the Medium-Scale Solar Discussion Paper and cross-referenced to the relevant section for ease of reference.
Please note that there is no requirement to provide an answer to all of the questions posed in the Discussion Paper.
Section 4: Definition of Medium-Scale Solar
QU1: It is appropriate to define medium-scale solar as falling between 100kW and 5MW?
NO. We would prefer the definition to be above 5kW and below 5MW.
QU2: Do you agree with such a definition and if not, why not?
The current definition has produced a ‘hole in the market’ where the Victorian standard feed in tariff - SFIT does not appear to encourage the development of projects And projects are too small to access ‘large scale Solar subsidy’ funding from state and federal schemes .
Such Solar PV projects are by their nature expensive and an equitable support mechanism would need to be developed to encourage investment in Medium scale solar.
Section 5: Identification of Potential Barriers to Uptake of Medium-Scale Solar
QU3: What are the immediate financial short-term barriers to investing in the medium-scale solar sector and how do these differ from investment in small or large-sale solar?
Medium scale solar like small scale solar primarily uses a PV solar cell based technology. This is currently one of the most expensive forms of generation, but it is also one of the easiest renewable technology to install and for communities to access. Though it appears that with continuing technological advances, the trend of costs reducing will continue, the cost of installation continues to be higher than competing non solar technologies, and acts as an economic barrier to the establishment of projects. The primary financial barrier to medium scale solar investment is the low rate of return on investment and the long payback periods. This however doesn’t necessarily exclude community ownership models of facilities and their development but makes the access of funding more difficult to obtain.
QU4: What are longer-term financial barriers to investing in the medium-scale solar sector and how do these differ from investment in small or large-scale solar?
With a suitable transparent and long term economic mechanism to encourage investment in medium scale facilities, we believe that there are regional and rural communities that would gladly invest in medium solar facilities despite the lower than commercially acceptable rates of return. For an investment to occur, the market must be more transparent, with stable long term policy guidelines and incentives such as detailed in the paper i.e. those occurring throughout Europe. However with changes in cost and technology the policy and any tariff support must be adaptable and not disadvantage the early movers in the industry.
QU5: Have all the relevant barriers to uptake of medium-scale solar been identified in this Discussion Paper, and if not, what are they?
We believe the paper has identified the most of the financial barriers and mechanism used globally to over-come them. The costs of connection of facilities and the arrangements for metering are difficult to establish for a project and provide a barrier to their establishment. In particular those associated with a load / behind meter connection where the power user is not the facility owner. Current arrangements are a strong disincentive to third parties forming agreements with neighbouring power users to provide supply from a medium scale facility.
QU6: Can these barriers be differentiated by market segment (for example, are business entities likely to encounter different barriers to government organisations or community groups?
The barriers are segmented with the majority of current projects having being heavily subsidised by government or large corporate. There are differing financial models depending upon whether the project is community owned, stand alone generation or associated with a load, or financed by a large business, corporation or government.
QU7: What is the most significant barrier affecting your particular market segment?
Inability to access a low level of tariff support, difficulty in obtaining a suitable forward pricing structure (power purchase agreements) that satisfy finance providers of the projects longer term viability.
Section 6.1: Broader Policy Aims for Medium-Scale Solar
QU8: What level of uptake would be required for medium-scale solar to make a significant contribution to meeting renewable energy and greenhouse gas reduction targets and how feasible is such a level of uptake?
We believe that with a suitable policy mechanism to support medium scale solar, community owned facilities could be rapidly established across regional Victoria, with 40MW capacity being installed at a cost per kW basis much lower than current small scale solar.
QU9: What contribution is medium-scale solar likely to make to the security and reliability of supply?
The use of distributed and embedded medium-scale solar facilities in strategic locations can provide a suitable method of to offset local peak demand and augment generation capacity at a local level and in way that is more predictable for network control.
QU10: How does this contribution differ from the contribution that is likely to be made by small or large-scale solar?
Larger generation will be more subjected to constraints of the network both transmission and distribution. The long term reliability and predictability of generation from medium scale projects should be advantageous over smaller scale installations.
QU11: What are the opportunities for establishing local manufacture and production of solar technologies? To what extent are these regionalised?
QU12: What are the benefits of increased community engagement in this space over and above financial benefits? To what extent can these be quantified or do they remain largely intangible?
QU13: What support models for medium-scale solar are likely to provide the greatest opportunities for community engagement?
QU14: Are there any further broad policy aims which should be considered?
Section 6.2: Specific Drivers for Investing in Medium-Scale Solar
QU15: What are the immediate short-term financial drivers for investing in the medium-scale solar sector?
Commercial drivers are a reasonable rate of return on investment. We believe that community investment / ownership models will tolerate a much lower rate of return on investment, and hence any financial support model such as a feed-in tariff should be structured to enable community ownership to be established.
QU16: What are longer-term financial drivers for investing in the medium-scale solar sector?
In the longer term a lowering of technology costs will be the main driver for large scale investment in medium and large scale solar facilities.
QU17: What other drivers exist for investment in medium-scale solar and to what extent are these differentiated by different market segments (for example business, government and community groups)?
Regional and rural Communities are concerned with the rising cost of energy and their disadvantage as a result in being at the ‘end of line’ of the transmission and distribution networks.
QU18: What is the primary driver in your particular instance and why?
Our primary driver is to promote sustainable development and sustainable economic growth throughout the region, whilst moving Central and Regional Victoria to a low carbon future.
Section 6.3: Potential for Medium-Scale Solar in Victoria
QU19: To what extent is increased uptake of medium-scale solar a regionalised opportunity?
QU20: If a support mechanism is deemed appropriate, to what extent should this be differentiated in relation to the type of grid connection?
QU21: To what extent is the need to import system components likely to impact on a project’s capital costs (for example through foreign exchange rates and increased distribution costs)?
QU22: Is labour density likely to increase or decrease when investing in larger installations? In other words, is the relationship between kilowatts installed and number of jobs created a constant, or are medium-scale installations likely to require more or less employees than smaller-scale installations?
QU23: How are safety and OH&S concerns best addressed when implementing medium-scale solar?
QU24: Is there a need to modify or extend current accreditation procedures in relation to medium-scale solar?
QU25: What opportunities are available for increased training in the solar sector?
Section 7.1: Potential Solutions to Addressing Current Barriers to Medium-Scale Solar
QU26: Given the barriers you have already identified as being the most significant in your particular instance, what would be the most appropriate solution and why?
We believe that community ownership models of medium scale solar should be supported over other facility development models as they provide multiple benefits to the wider community and allow for engagement of a maximum number of participants irrespective of their economic circumstance.
We acknowledge that solar technology in its current form in not as cost competitive as other renewable technologies but believe it provides the community with options to participate in renewable energy projects in the short term whilst renewable energy technology continues to develop.
Appendix C: Case Studies
QU27: Are you aware of or have you installed any examples of medium-scale solar projects in Australia not referred to in this Discussion Paper?
Adelaide Airport Terminal rooftop installation