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All-Energy Australia 2013

Category

Speeches & presentations

Date

15 October 2013

Project

N/A

Keynote address by ARENA CEO Ivor Frischknecht.

Good morning and thank you for the kind introduction.

This is a picture of the distribution of solar rooftops in Queensland. The darker the colours, the more solar roofs there are in a particular post code. QLD has the greatest number of solar roofs and is just barely behind South Australia in terms of uptake, which is at 20% of homes versus QLD’s 19%.

And here is a rooftop solar map of Melbourne, the City we are in today. You’ll notice that it is not the hip and wealthy inner-urban residents who have solar on their roofs, but people who live in the outer suburbs. This is a pattern we see repeated across Australia.

Before we get back to this study, let’s roll the opening credits. I’ll leave you with the national penetration by post codes.

I’d like to pay my respects to the traditional owners of the land and to their elders past and present.

The Australian Renewable Energy Agency is focussed on increasing the use of renewable energy in Australia by making it more affordable and better able to compete with fossil energy.

With that broad goal in mind, I will give you a snapshot of the Australian renewable energy sector, an overview of our challenges and opportunities, and we’ll dive further into rooftop solar.

Firstly, the harsh reality: the renewable energy sector has grown significantly in the past decade, with generation capacity almost doubling, but still only represents 10% of Australia’s total energy generation, as it did in 1990. This is because with less rain hydro power and biomass have both declined while wind and solar have grown strongly, albeit from a small base.

Our energy mix remains dominated by fossil fuels but is notably more diverse than it was 20 years ago.

Nevertheless, there is a silver lining: while successive government policies and programs might not have grown the renewable slice of the pie, they’ve laid the foundations for Australia’s future energy generation portfolio. The dramatic cost reduction in solar photovoltaic technology, and resulting impressive adoption by Australian households, is without doubt linked to the existence of those programs and policies.

By investing along the entire commercialisation pathway, from desktop research through to near-commercial demonstrations, ARENA will play a critical role in the coming decade by helping renewable energy technologies get the edge they need to become competitive with traditional energy sources.

This will not only reduce the nation’s greenhouse gas emissions and deliver improvements to our environment, but advance Australia’s technological capability and reputation for world-leading renewable energy solutions. It will do so at lower and greater resilience, particularly in regional and remote areas.

Painting the distributed generation picture

Being able to take a big picture approach to renewable energy enables ARENA to identify and pursue the best opportunities for bringing new technologies to commercial readiness. It also allows us to apply knowledge gained at one point of the commercialisation pathway to another.

It was with such learning in mind that we commissioned ACIL Allen to help us understand distributed energy; that is: what’s driving the uptake of photovoltaic systems in Australia.

Due to the nature of the data available, the insights we gained are by postcode and not by individual household. It still makes for interesting data, as you saw in the first few slides.

We know overall rooftop solar PV penetration increased from 7% in 2011 to 12% in 2013, with over one million PV and hot water systems now installed on Australian dwellings. That’s one in 8 homes.

As I showed you before, installation rates are clearly higher in regional and rural locations than in urban locations.

Owning your own home also makes you much more likely to have a PV system. That’s what we’d expect, because the Australian rooftop solar business is dominated by up front system purchases by home owners and then the occupant benefits from lower energy bills. It rarely makes sense for a landlord to provide solar energy for their tenant.

In contrast, in California more than 75% of rooftop solar systems are sold on a pay-as-you go basis with users getting a discount on their prior electricity bills. In some cases solar companies effectively lease rooftop space from the property owner and sell electricity to the occupant. The rooftop owner and the occupant can be the same—an owner/occupier such as in Australia—or they can be different, as in a landlord and a tenant.

ARENA is looking to support some of these alternative financing models in Australia, which have the potential to make the benefits of rooftop PV accessible to all Australian households.

New solar financing models that eliminate the up-front payment allow lower income households to benefit from the reduced energy costs that solar increasingly provides. Some of these models also make solar available to renters or those who live in apartments.

We’ve been hearing a lot about PV and low-income households: this study shows income is not as big a factor as we thought. There is a modest increase in solar penetration as income increases, but only to a point. At income levels in the top 20%, solar penetration declines slightly. We need to do more analysis to find out why, but in the meantime we know there is only about a 50% difference in uptake between the highest and lowest income deciles.

So, if you’re a homeowner in a rural town, aged over 54 and earning around $77,000 a year, the study infers you’re most likely to have PV on your roof.

The data shows there’s plenty of room for increased take-up across Australia. ARENA’s Chair Greg Bourne, who’s known as a visionary thinker, believes that in the not-too-distant-future whole suburbs could embrace distributed generation and, by generating their own power, have no need to be connected to the grid at all.

Challenges and opportunities

The surge in solar installations leaves us in no doubt that Australians want to use rooftop PV for their electricity. Although take-up has slowed since feed-in tariffs have been dramatically reduced, it has by no means stopped.

This enthusiasm is borne out in a recent community study by Ipsos, which found 88% of Australians support roof-mounted solar panels on homes.

This is a no-brainer in most respects. Rooftop PV makes energy costs more predictable and increasingly saves money, which is particularly pertinent for low income earners. Only last week the Australian Bureau of Statistics revealed that households with solar electricity and/or solar hot water spent around $6 less a week than households which didn’t have solar. That’s $300 less each year, and these savings can usually be realized with an up-front investment of only a few thousand dollars.

Recent research by Bloomberg has also shown that renewables put downward pressure on our rapidly rising electricity prices, so if you take that view, there’s another reason for supporting the rebalancing of Australia’s energy mix.

Increasing the uptake of rooftop solar is not without its challenges though.

Some of the distributors are preventing further connections, particularly in regional and rural locations where penetration is highest. In some areas, particularly off-grid, PV has indeed caused technical problems at high penetration rates, primarily due to the rapid ramp up and ramp down of PV energy output when clouds come and go.

Perhaps more importantly, there is a threat to the distributors’ current business models. This adverse impact, known as the death spiral, results from a cost structure geared to late afternoon peak loads that are static or growing due to increasing air-conditioner installations while overall demand is falling.

Distributors are paid for each kilowatt hour they deliver and in a world of falling demand, their prices need to increase if they are to recover their costs.

People respond to higher prices: they install solar, take energy efficiency more seriously or change their energy intensive businesses. This in turn leads to bigger revenue losses for the distributors and higher prices to recover costs, and so the spiral continues. I’ve met early adopters who have added storage to solar and disconnected from the grid entirely. One of them was in North Bondi, in the heart of Sydney.

Solar has received more than its fair share of the blame for this phenomenon, however there is more that we can do to make it a positive for the networks. For example we could site new renewable energy in locations where it is most beneficial and add network smarts and storage strategically to make the most of both renewable energy and the distribution networks that we have.

ARENA is working to address these issues through a new initiative that focuses on integrating renewables into the grid more effectively.

Regional and rural areas are where farmers sustain their livelihood and many Indigenous peoples live; two groups within our community that not only have an intrinsic appreciation for Australia’s natural resources but should also have access to the affordable and reliable clean energy supply that rooftop PV can deliver.

Farming communities are fast becoming aware of these benefits but there’s not a great take-up of the technology amongst Indigenous communities. Despite being one of the sunniest parts of Australia and having the highest Indigenous population, the Northern Territory has the lowest penetration of solar power, at just 3%. Increasing rooftop PV would not only build on the five iconic renewable energy projects developed in the NT’s Alice Springs as a solar city (Alice Springs Airport, Alice Springs Aquatic and Leisure Centre, Araluen Cultural Precinct, Crowne Plaza, and Uterne Solar Power Station), it would also help to strengthen the Territory’s energy security by creating less reliance on gas and trucked-in diesel.

Growth in the use of PV in regional areas would bring new skills, jobs and investment to local economies.

Solar and other renewable energy solutions could also help mines and other high-demand energy users in remote off-grid locations cut costs by switching away from electricity based on high cost liquid fossil fuels such as diesel.

The other opportunity uncovered by the ACIL Allen study is the potential for PV to be installed on dormant commercial rooftops in capital cities.

Melbourne City Council is alert to this opportunity too, with reports earlier this week that a study commissioned by the Council has assessed Melbourne’s inner-city rooftops could host enough solar panels to power 10,000 homes. I understand that South Australia has also announced a new community housing PV pilot program for 100 homes that involves novel funding programs.

As you can see, there is much more to the PV story than just putting panels on a residential roof. It involves giving control to consumers, reducing user costs, development of a viable Australian industry bristling with technological know-how, and the creation of new jobs, skills and investment that will strengthen the Australian economy.

And that’s just rooftop PV, from within the much larger suite of solar energy solutions.

ARENA is tapping into similar potential across a broader renewable energy spectrum.

As ARENA’s Chair, Greg Bourne said last week, increasing renewable energy production is about more than just doing what’s right environmentally. It’s about securing our nation’s energy resources for future generations, adding to economic prosperity and contributing to worldwide technological progress.

Where to from here?

Clearly there is still more work to be done to transform Australia’s electricity market into one that welcomes, and works seamlessly with, the integration of renewables.

That’s why we’re developing the Integrating Renewables initiative. This will involve working with the whole energy market to help prepare the grid for the challenges and opportunities that another million solar roofs and new solar towns and schools will bring. We will also be generating and sharing knowledge on the barriers to increasing the penetration of renewables.

We are already leveraging regional community enthusiasm for renewable energy through our Community and Regional Renewable Energy program, also known as CARRE.

Through the CARRE program we are working directly with key regional energy suppliers and distributors on renewable energy projects for whole communities in locations that are not connected to national electricity grids.

We also have a program for off-grid or fringe of grid industrial sites, such as mines. These areas are often supplied by costly diesel generators whose fuel supply is weather dependent. These same areas are expected to see an increase in energy demand so it makes sense to target efforts here.

But for Australia to have a competitive and resilient energy mix, we need to be working at the next level again.

Utility-scale solar is more challenging than rooftop PV. ARENA is playing its part by supporting a range of solutions that are nearing commercial viability.

To overcome first mover disadvantage, more projects will be needed like AGL’s 155 megawatt solar project in Broken Hill and Nyngan, which will power 50,000 homes and create 450 local jobs during construction.

The future and conclusion

Energy supply, by its very nature, is an industry that requires long lead times and a strategic, commercial outlook. For this reason, ARENA invests through a long lens, looking along the commercialisation pathway and out to the distant future.

We understand the nature of commercialisation, have bipartisan support, and have the longevity in funding to leverage investment at the appropriate times. This coupled with the robustness of our investment process allows ARENA and its co-investors to jointly create investment confidence. This in turn helps progress renewable energy solutions to true market bankability.

Competitive renewable energy generation will be a lasting legacy that ensures Australia’s energy security into the distant future. ARENA looks forward to working with you to achieve this.

On that note I will conclude by inviting you to visit the ARENA booth in the exhibition hall where our staff members are available to speak with you about ARENA activities and funding programs.

We hope to see you there.