Good afternoon, and thank you for having me.
For those who don’t know the Clean Energy Regulator, we are a Commonwealth economic regulator with an environmental objective; and our purpose is accelerating carbon abatement for Australia. We administer a range of the Commonwealth government’s climate change laws and today I will be speaking to you about the Renewable Energy Target (RET).
First, I want to mention that only a few minutes ago we tabled in Parliament our “Tracking towards 2020 – Encouraging renewable energy in Australia. This is our annual administrative report and statement to Parliament on progress towards the 2020 Large-scale Renewable Energy Target (LRET). It says the target remains achievable provided the momentum we saw towards the end of last year continues through to this year. It is also available on our website and social media accounts. It has a new look and feel and is an interesting and easy read.
My presentation today will be on the trends we’ve seen in the RET. I will be building an argument in my presentation that solar has had a spectacular performance in all market segments from household through to systems for businesses and utility scale; and that solar will play a much larger part in helping to achieve the LRET of 33,000 gigawatt hours by 2020 than anyone had thought possible.
All this data is current as of 13 April 2017. It looks like, for the first time, we may be seeing a trend upwards in installs, which hasn’t happened for many years. Commercial and industrial solar in the SRES, continues to rise very strongly. Commercial and industrial in the large-scale scheme – this is an opportunity I spoke about this at last year’s conference – is showing an exponential growth and there’s still huge opportunity for the industry in that arena.
In terms of the large-scale scheme, we had 127 megawatts accredited – so that’s built and generating of utility scale solar – in the last 15 months or so, but the really extraordinary thing is the pipeline where there’s 1500 megawatts of large-scale solar projects that we believe have been firmly announced.
Going to small-scale first. A bit of a state by state analysis, and as has already been mentioned, over 5 600 megawatts of installed capacity. So, quite amazing in the small-scale scheme.
In terms of commercial and industrial solar, it doesn’t matter what band you’re looking at – whether it’s 10 to 20 kilowatts, 20 to 50 kilowatts, 50 to 100 kilowatts– all have been on a strong increasing path for some time. This has been a hot area for your industry for a while.
This graph divides small-scale and household systems into zero to two kilowatt (where the original size systems were typically one and a half kilowatts), two to five kilowatts, five to 10 kilowatts. What that shows is everything but the five to 10 had been declining and five to 10 had been increasing in numbers. We are, at the early stage, seeing some data that suggests overall small-scale systems have been on the rise. So they’ve been on a steady decline for a number of years, but with average system size increasing. We look at the small technology certificates that have been produced. They’ve been declining but between 2015 and 2016 remained pretty flat. What we saw late last year, and continued in the first few months of this year, is what appears to be a new trend for increasing number of installs in the small-scale scheme, which is turning around quite a powerful downward trend. I think it’s a little bit early to get too excited. Also, quite interestingly, the states that seem to have jumped up in numbers compared to year on year are NSW, QLD and WA, not states that we’ve heard about energy security issues.
So turning to the LRET, we said in our first annual statement in Parliament when the target was reset in mid-2015 that from 1 January 2016 we needed 6 000 megawatts of build. That needed to be frontloaded to provide adequate certificate liquidity on the way to the target. We said ideally it would be 3 000 megawatts being firmly announced in 2016, 2 000 in 2017, 1 000 in 2018 and the build would all be completed by 2019. What we’ve said in our statement to Parliament this year is that we had a little over 2 000 megawatts firmly announced last year, most of that was in the back half of the year, and that as long as the momentum in announcements continued on this year – as we saw late last year – then the 2020 target can be met.
In effect, what we have seen is the momentum built late last year is accelerating. We also said in our first statement to Parliament that if we didn’t get to 3 000 megawatts last year, we would need to see the delta committed early this year and we would need to see a high proportion of solar because it’s built faster. And that’s exactly what we’ve seen.
On the left hand of this slide, is the capacity in megawatts. We’ve now had more than 3 300 megawatts announced. We’ve had another 1 300 megawatts so far this year, added on to about 2 000 megawatts announced late last year. If this pace of announcement continues for the rest of this year, we could well get to that 6 000 megawatts by the end of this year.
The target, on the right hand side, is in gigawatt hours, and the target, as most of you know, is 33 000 gigawatt hours. That’s the black horizontal line. The one above it is that there are other schemes that link to the LRET, other sources of demand for certificates. They include the ACT Government’s feed-in tariff, GreenPower and desalination plants. There are voluntary surrender demands from those sources. So the build side signal is more like 36 or 37 000 gigawatt hours, which is the blue horizontal line at the top.
The existing generation on the right hand side from the scheme, that’s incentivised under the RET, is a little over 18 000 gigawatt hours last year. That’s the light blue part, and then the dotted part above it is based on that 3 300 megawatts of firmly announced build, assuming that gets built, that lifts the generation to about 28 000 gigawatt hours. So you can see we’re a long way to the target based on those announcements and I have reasonably good market intel – including from the CEFC – that we should see lots more announcements still to come.
This is the area I spoke about last year, in relation to commercial and industrial solar PV. I think your industry had been used to selling the advantages of the small-scale scheme where you get your certificates upfront, but I suggested there may a better option through the large-scale scheme and right-size systems for the needs of the business. This is doubling year on year. Last year we had a little over 16 megawatts accredited in the large-scale scheme in the 100 kilowatt to one megawatt range, which is what we define as being a commercial and industrial scale. It is truly an exponential pathway, I think there’ll be at least 30 megawatts this year, and who knows where your industry can take it. For those of you not leveraging this opportunity, I think it’s a great one. It’s a more sophisticated sell from people I speak to in the market who are looking at this segment.
Turning to the accredited power stations, solar had a great year in 2015, a little bit less last year. You can see on the right hand side, the dotted line, based on the projects that have been firmly announced, we expect to be accrediting a huge amount of capacity in solar this year.
Moving on to the market share, so wind verse solar. We said in first annual statement that in the 6 000 megawatts of build, we might get 75 per cent wind, 25 per cent solar. Overall, of accredited capacity to date, solar is now quite material whereas two years ago you wouldn’t have seen that blue slice at all.
When we look at the firmly announced – that little more than 3 300 megawatts – almost half of it is solar. It can be built a lot faster and the sources that I speak to say nearly all of it will go single-axis tracking, which has a 30 per cent higher capacity factor but it’s also cranking, generating at a high proportion of its capacity, much earlier in the day and much later in the afternoon and hence, better match of peak load. There’s no question that solar is going to help to make up for the fact that we didn’t get that 3 000 megawatts firmly announced last year, and that it was later.
So to conclude, we have said in our annual statement that 2020 target is within reach, if momentum continues at the current rate. That’s the rate we saw late last year, but in fact, the rate so far of announcements is exceeding that. We’re looking in good shape to meet that 2020 target; solar will be a very large player.
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