Clean Energy Investment in Australia

7.1 % of contrinution of each technology to renewable in Australia

Estimated Percentage of contribution of each technology to renewable generation. Source: Clean Energy Australia Report 2011

In Australia more than $5.2 billion was invested in renewable energy during the 2010–11 financial year (compared to $243 billion globally), including approximately $4 billion on household solar power alone. This is more than 60 per cent higher than during 2009–10.

In the year to October 2011, 9.64% of Australia’s electricity (over 300 TWh) came from renewable energy. This represents a large rise on previous years due to a resurgent hydro sector and more power generated by the country’s wind farms.

Australia has the potential for vast renewable energy capabilities. However, solar and wind energy sources are being harnessed on a comparatively small scale, and are at the stage of commercialisation. Other sources are being investigated and considered, such as geothermal and wave power, although these sources have yet to be used on a commercial scale in Australia.

Hydro power accounts for two thirds of the renewable energy generated during this period, rising from its more modest contribution in recent years. Rainfall continues to be one of the strongest influences on the country’s clean energy generation, followed by wind. Although there was significantly more wind power generated compared to the year before, its relative contribution fell slightly (21.9%) due to the increased contribution by the hydro sector. Wind was followed by bioenergy (8.5%) and solar photovoltaic (PV) power (2.3%).

Key trends in renewable energy growth

 7.2 Annual Renewable Electricity Geenration Oct 2010-Sep 2011

Annual Renewable Electricity Generation 1 Oct 2010 to 30 Sept 2011. Source: Clean Energy Australia Report 2011

  1. Growth in solar power with from 380 MW of installed solar power in 2010 to 1031 MW at the end of August 2011  (513,585 systems installed across
  2. Solar water heaters/heat pumps showed 1800 MW of installed capacity in 2009 (704, 459 systems installed)
  3. Large scale energy projects with 400 MW of additional generating capacity since October 2010 from three wind farms and a hydro upgrade (this is a decline from 2009 when 993 MW power came online). Major projects since 1 October 2010 includes:
    • Waterloo Wind
    • Hepburn Wind
    • Ilparpa (Uterne) Solar PV
    • Mayfield Solar Thermal
  4. Job creation for around 8000 full time equivalent jobs in the Australian renewable energy industry in 2010
  5. Total investment increased from US$3273 in financial year ending 2009-10 to US$5264.1 in 2010-11. This include $1.16 b investment in wind and $4.01 b investment in solar

7.3 Solar PV uptake

Solar PV

In November 2011, Australia recorded 2 GW of solar PV installed.

This equates to just under 4% of the 50GW of national capacity installed in the National Electricity Market and around 1% of Australia’s annual energy demand; perhaps more if you consider that demand is falling and conventional generation is starting to come off line.

Solar Hot Water

The greenhouse gas emissions associated with the electricity
required to produce hot water is the single largest source of household emissions, accounting for almost a quarter of
household emissions.

The energy saved from solar water heating is equivalent to 7.2% of the clean energy generated in Australia. Federal Government rebates introduced early in 2009 led to a spike in sales in that year.

Large Scale Solar PV

Australia’s large-scale solar industry is still in its infancy, despite having access to some of the world’s best solar resources. The Federal Government announced the successful applicants to the first round of its $1.5 billion Solar Flagships program in June 2011. The program will deliver the first truly large-scale projects in Australia, building valuable local expertise that will help in the development of future projects.

Commercial Solar Plants

  • Solar thermal concentrator in Liddell NSW (3 MW)
  • Solar PV in St Lucia Campus on University of QLD (1.2 MW)
  • Solar PV at Adelaide Showgrounds SA (1.0 MW)

Projects successful under Solar Flagships Program in 2011 but have since been rejected are

  • Solar Dawn Project in Chincilla QLD by Areva, Wind Prospect CWP & CS Energy (250 MW)
  • Moree Solar Farm in Moree NSW by BP Solar, Pacific Hydro and Fotowatio Renewable Ventures (150 MW)

Bioenergy

Subsectors by percentage

  • Bagass cogeneration 61%
  • Landfill gas 21%
  • Black liquor 10%
  • Sewage gas 6%
  • Food and agricultural wet waste 1%
  • Wood waste 1%

Current installed capacity amounts to 773 MW, or 6.2 per cent of Australia’s total renewable generating capacity. 136 bioenergy plants over 100kW are in operation and 14 are under development.

7.4 Snapshot of installed capacity by state and renewable technology. Source- Clean Energy Australia Report 2011

Snapshot of installed capacity by state and renewable technology. Source: Clean Energy Australia Report 2011

Geothermal

Only one plant currently operating (Ergon Energy in Birdsville 1 QLD) with installed capacity of 0.12 MW

Geothermal companies have commenced deep drilling on three sites in SA.

Geothermal could account for between 13-23% of total electricity needs by 2050 according to the Department of Treasury in 2011.

Hydroelectricity

Australia’s 124 operating hydro power stations with estimated 19,685 GWh of power was 6.5 per cent of all electricity produced in Australia during this period.

There are 9 hydro power plants commissioned in 2010 and 2011

Marine Energy

Around 80 per cent of Australia’s population lives within 50 km of the coast, placing wave and tidal energy resources close to the area of highest electricity demand.

In 2011 more than 15 companies have been actively investigating wave and tidal energy projects in Australia. Wave resources are mostly being explored along the southern and western coastlines, while the northern coastline is the focus for those exploring tidal resources.

In 2010 the CSIRO found that the levelised cost of electricity produced from potential wave energy systems could be reduced to around A$100 per MWh, by achieving efficiencies and improvements in operations and maintenance.

Current wave and tidal facilities in operation (9 in development)

  • Atlantis Resources owns tidal power facility in San Remo VIC (0.15 MW)
  • Carnegie Wave Energy owns wave power facility in Fremantle WA (0.1 MW)
  • The largest grid-connected wave power plant in Australia was operated by Oceanlinx in Port Kembla. This 0.5 MW demonstration-scale wave power facility operated between February and March 2010

Wind energy

Wind power generated over 6400 GWh of electricity. Australia currently has 1188 wind turbines, 57 operating wind farms and 7 uynder construction. The amount of wind power in Australia has grown by an average of 35 per cent per year over the past five years, and the efficiency and power output of turbines are evolving quickly.

In 2009 cumulative installed wind capacitry in Australia is 2.18 GW. Garrad Hassan for the Clean Energy Council in 2011 predicted that there would be approximately 6.9 GW of wind power built under the Renewable Energy Target by 2020. In 2010-11 financial year investment in wind power totalled $1.16 billion.

Energy efficiency

Australia’s emissions per capita are nearly twice those of many other OECD (Organisation for Economic Co-operation and Development) countries. Of the OECD countries, Australia has the third highest per capita carbon dioxide emissions. Australia emitted 18.75 tonnes of carbon dioxide for every Australian, compared with an OECD country average of 10.97 tonnes per person (IEA 2009).

Water heating is the single largest source of greenhouse gas emissions from Australian homes, with heating and cooling together representing the greatest proportion of household energy use. Sources of household emissions in Australia:

7.6

Trends show that 73% of people want more information on how to save energy in their households and 89% of people are willing to take action to use less energy to limit their electricity use.

People have taken advantage of government energy efficiency programs in

  • Packages of energy efficient light globes and shower heads
  • Rebates for energy efficient washing machines
  • Solar hot water system
  • The Federal Government home insulation scheme
  • Gas hot water system
  • Heat pump hot water system

Technology Life Cycle

The technology life cycle is concerned with the time and cost of developing the technology, the timeline of recovering cost, and modes of making the technology yield a profit proportionate to the costs and risks involved. The technology life cycle may, further, be protected during its cycle with patents and trademarks seeking to lengthen the cycle and to maximize the profit from it.

7.7 Technology life cycle

The six phases of the technology life-cycle:

1 & 2 Research and development (R&D) phase (sometimes called the “bleeding edge”) when incomes from inputs are negative and where the prospects of failure are high

3. Demonstration phase when anticipated costs will peak and attract investors if the technology proves to be commercially viable and the associated risk reduces (sometimes called the “leading edge”)

4. Deployment phase when out-of-pocket costs have been recovered and the technology begins to gather strength and costs start to reach a minimum point

5. Maturity phase when gain is high and stable, the region, going into saturation and

6. Decline (or decay phase), after a Point D, of reducing fortunes and utility of the technology.

7.8 Innovation Adoption Lifecycle

Innovation Adoption Lifecycle. Source: Wikipedia

Technology Adoption Curve

Technology adoption typically occurs in an S curve, as modelled in diffusion of innovations theory. This is because customers respond to new products in different ways. Diffusion of innovations theory, pioneered by Everett Rogers, posits that people have different levels of readiness for adopting new innovations and that the characteristics of a product affect overall adoption. Rogers classified individuals into five groups: innovators, early adopters, early majority, late majority, and laggards. In terms of the S curve, innovators occupy 2.5%, early adopters 13.5%, early majority 34%, late majority 34%, and laggards 16%.

Globally clean energy continues to set record levels for investment. Bloomberg New Energy Finance estimates that a record US$243 billion was invested in 2010, well ahead of traditional energy and up more than 30 per cent on the year before.

Cost comparison

Hydro Wind Coal Gas
Lead time 5-6 years 1-2 years 5-6 years 2-3 years
Capex ($m/MW) 3-4 2.5 2? 1.5
Asset life 80 years 20 years 50 years 30-40 years
O+M cost(% capex/kW/year) 2.0-2.5% 2.0-2.5% 6-10% 8-12%

Challenges to CleanTech (Clean Technology)

The CEC required an assessment of the economic opportunities as perceived by investors and cleantechs, being two of the three key parties involved in commercialising Australia‟s clean technologies. The three parties are:

  • Investors – the providers of funding, knowledge and experience throughout the key stages of cleantech growth and deployment
  • Cleantechs – individuals, businesses and alliances developing new technologies or new applications of an existing technology3
  • Governments – the providers of policies in response to society‟s changing expectations to maintain prosperity and deliver future economic growth.

Defining stages of development of new technologies

The following diagram shows the different stages of technologies move from being an emerging technology to a mature technology and the anticipated cost of full scale application at each stage.

  • Research
  • Development
  • Demonstration
  • Deployment
  • Mature technology

Challenges to CleanTech (Clean Technology)

Cleantech is also characterised by huge diversity in terms of the costs and time needed to achieve demonstration and deployment. For example, getting a wave technology to the point of pilot scale demonstration may cost $25 million over a couple of years, whereas drilling a single hole for hot rocks geothermal might cost $10 million over a few months. Other businesses have spent $235 million over a decade or more to deploy their technology through an overseas manufacturing business model. Cleantech has applications across multiple industries and diverse cleantechs will compete in the same market.

Finance is critical to the speed that you can progress emerging technologies and while investment barriers can act as a constraint, they tend not to act in isolation of internal factors relevant to investment decisions. Indeed, investors and cleantechs agree that, while the type and scope of any financial incentive from government is important and without it there is an investment constraint, the robustness of management‟s business and commercialisation plans, and the management of technology risk, are more important for investment decisions.

However, investors and cleantechs agree that constraints do exist and that the key constraint to investment is the cost of the clean technology being too high, when compared to traditional technologies in the host industry. Other constraints include:

  • The absence of an Australian market for cleantech
  • Lack of patient capital
  • Stronger investment attractiveness overseas
  • Greater revenue risk with local energy pricing
  • Low investor awareness of technology risk
  • At demonstration:
    • Securing finance for commercial scale demonstration is particularly challenging as it requires the organisation to deliver on the return-on-investment expectations of their existing investors, while at the same time matching new funds to the changing risk profile of the technology and business.
  • At commercialisation of emerging technologies
    • obtaining a fixed price for technology installed
    • guarantee of technology’s performance
    • providing a fixed timescale for deployment
  • Major challenge in next 12 to 18 months (27% of score), is government policy not delivering certainty for investment decisions. This could relate to a number of issues including the Solar Flagships program, Carbon Pollution Reduction Scheme (CPRS), RET, government grant programs and many other policy initiatives. Specific issues relating to the CPRS, REC pricing and government grants were raised by commentators.
    • Solar Flagships Program
      • May 2009 Budget: Solar Flagships program is part of the Australian Government’s $4.5 billion Clean Energy Initiative (CEI).  The CEI complements the proposed Carbon Pollution Reduction Scheme and the expanded Renewable Energy Target by supporting the demonstration, development and research of low-emission energy technologies. The Australian Government has committed funding of $1.5 billion to the Solar Flagships program.  This funding consists of:
        • $1.3 billion of Solar Flagships program funds administered by the Department; and
        • $200 million of EIF funds.
      • 2011-12 Budget: A combined total of $370 million cut from the Solar Flagships program over the forward estimates.
      • 2012: Solar Dawn (QLD) Project (250 MW solar thermal plant) and Moree Solar (NSW) project rejected because they failed to get power purchase agreements from any utilities or energy retailers.
      • Silex’s 600kW concentrated solar PV testing facility estimates current levelised cost of energy (15c-20c/kWh), and where it thinks it will be in a few years (around 10c/kWh).
    • National Solar Schools
      • The lifespan of the National Solar Schools Program (NSSP) has been cut short by two years, so it is now due to close at the end of the 2012–13 financial year. The program has also had its funding reduced by $156.4 million. Over the next two years, a total funding of $498 million will be disbursed in $50,000 grants, with priority given to remote or low socioeconomic areas
    • Solar Cities
      • Additional funding of $13.7 million over two years is being provided to the Solar Cities program which trials innovative energy technologies and concepts in Adelaide, Alice Springs, Blacktown, Central Victoria, Moreland, Perth and Townsville.

The valley of death

The metaphor was rife in science policy in the late 1990s and has been described as the massive transformational change to address another market where you need new capital, new staff and have to become familiar with new foreign rules.

Valley of Death

Reasons for the valley of death:

  • Funding Issue: moving from small to large scale finance
  • Access Issue: borrowing money from a bank for commercial scale demonstration and deployment is restrictred to major corporate players
  • Expertise Gap: not just a funding issue but a skills, knowledge and experience issue

For cleantech, the valley of death is widening and technologies get stuck where later stage investments are considered too capital intensive for venture capitalist but hte technological or execution risk is too high for project finance investors.

6.11 Widening-valley-of-death-for-cleantech-in-Australia

Government support required

Business models that include green economics attract greater scrutiny than those without, and the need to educate investors and others along the value chain of the product cannot be underestimated. While cleantechs need to remain focused on the quality of their business plans, governments need to remain focused on mechanisms to mitigate funding and revenue risk across a portfolio of host industries. This report concludes that, in order to further attract overseas and local investment into commercial scale demonstration and deployment, the following are a priority for current and future policies:

  • Grant programs for scaling up demonstration
  • Loan guarantee for a pipeline of projects
  • Accelerated depreciation
  • Feed-in tariff for specific host industries

Source:

Ernst & Young, Navigating the valley of Death: Exploring mechanisms to finance emerging clean technologies in Australia. A report for the Clean Energy Council

Clean Energy Australia 2011 Report

http://www.bree.gov.au/

Morris, Nigel. 8 November 2012. Australia breaks 2GW of solar PV

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