Recurrent Energy submission to the medium-scale solar discussion paper
QU1: It is appropriate to define medium-scale solar as falling between 100kW and 5MW given existing support mechanisms?
Recurrent Energy: Yes, but it should be noted that there are substantial differences between photovoltaic systems consisting of multiple megawatts versus those amounting to several hundred kilowatts. Recurrent Energy recommends subdividing the “medium-scale” category so that different policy mechanisms may be utilized to promote the different subcategories. For instance, a reverse auction system would be an effective approach for promoting larger systems (e.g., 1.5 - 5MW), but would not be practical for smaller systems of only several hundred kilowatts.
QU5: Have all the relevant barriers to uptake of medium-scale solar been identified in this Discussion Paper, and if not, what are they?
Recurrent Energy: An additional barrier facing large rooftop projects is the ability to lease roof space. Proponents who are seeking to rent roof space on industrial buildings for development of photovoltaic projects in which the electricity is sold onto the grid (as opposed to tenants) may find that the building owner must obtain approval from multiple parties in order to proceed: (i) Tenants often have rights to the roof space and therefore need to provide their consent; (ii) industrial buildings are often held in investment funds, in which case the majority fund owner needs to give its approval; and (iii) some buildings have debt on them, in which case the lender has to approve the lease before it can be executed.
QU7: What is the most significant barrier affecting your particular market segment?
Recurrent Energy: The most significant barrier is the inability to secure a long-term power purchase agreement at an economically-viable rate from a credit-worthy counterparty.
QU14: Should support for medium-scale solar consider some form of "local-content" requirement?
Recurrent Energy: Higher degrees of “local content” requirements require developers to select solutions which may not be the most commercially effective. In a competitive PPA environment, such requirements would increase the PPA price paid by utilities and ultimately by ratepayers. Even without “local content” requirements, Recurrent Energy would plan to engage local firms for permitting, design, engineering, construction, installation, operations and maintenance.
QU20: If a support mechanism is deemed appropriate, to what extent should this be differentiated in relation to the type of grid connection?
Recurrent Energy: Rather than creating differentiated tariffs for building-integrated rooftop projects, non-integrated rooftop projects, and ground-mount projects, Recurrent Energy believes that the most economically-efficient policy is to establish a competitive bidding system.
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?
Both from an operating and construction point of view, the larger the project, the fewer the jobs per capital dollar.
As the project size increases, worker productivity typically increases as well. Each site, regardless of size, requires site preparation and has associated ramp-up and rampdown time allotments. But with a larger installation, the amount of time devoted to these efforts is a smaller portion of the overall construction schedule.
Please note, however, that there are breakpoints which affect the amount of on-site and back-office staff required. For example, a very small photovoltaic project that needs only a handful of workers would most likely not require on-site staff. But a very large project would require not only a larger crew – but also on-site staff and a clerk.
Furthermore, larger projects generally provide better quality jobs. Performing one-off maintenance to a handful of small facilities is less ideal than having a permanent assignment at a single large site.
QU23: How are safety and OH&S concerns best addressed when implementing medium-scale solar?
Safety and OH&S for larger projects will likely be better since contractors that qualify for larger projects typically have more robust OH&S programs. It is usually the case that smaller contractors involved in small-scale solar have less robust programs. In Recurrent Energy’s experience, large contractors can typically pass the OH&S screen better than smaller ones. One way to counter this issue when working on smaller-scale projects is to bundle them together – and thereby make it possible to hire a large contractor with a well-established OH&S program.
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?
Recurrent Energy: We would recommend a mechanism which has feed-in tariff components but would more closely resemble a competitive auction system. Recurrent Energy believes that competitive markets are the best way to ensure ratepayers are getting the best price for solar. Therefore, rather than establishing feedin- tariffs, Recurrent Energy encourages policymakers and regulators to adopt the following good practices:
- Avoid fixed-price risk by using a competitive auction-like mechanism.
- Reduce transaction costs by standardizing contracts and clearly defining the award process.
- Reduce gaming with high viability standards on site control, interconnection filing, equity commitments, and development securities.
By doing so, policymaker and regulators could enjoy the following associated benefits of a competitive auction system:
- Competitive, market-clearing prices. The government would avoid the issue of perpetually under- or over-paying. A regulatory price adjustment mechanism would not be able to achieve dynamic pricing in the way a competitive market would.
- Ideally located resources. Competitive auction systems encourage developers to be more discriminatory in terms of where resources are located relative to the grid.
- Strong value chain. Auction-like mechanisms would discourage a simple transfer of wealth from ratepayers and taxpayers to manufacturers.
- Low risk of overcharging ratepayers for solar power.