Australian Renewable Energy Agency (Repeal) Bill 2014 Submission 84
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Submission to the Senate Standing Committees on Economics Review of the Australian Renewable Energy Agency (Repeal) Bill 2014 First Solar (Australia) Pty Ltd (“First Solar”) is the world's largest and lowest cost manufacturer of solar photovoltaic (“PV”) modules. First Solar supplies proven thin film PV module products that have been deployed in over 8,000 MW of projects worldwide including many of the world’s largest solar PV projects. First Solar currently has a global contracted pipeline of over 2,800 MW and is predominantly focused on the delivery of utility scale solar PV systems. First Solar is a vertically integrated organisation with the capabilities to deliver every component of the solar development value chain and a focus on optimising cost, reliability and bankability. First Solar is at the forefront of utility scale solar project delivery in Australia, having commissioned the 10 MW (AC) Greenough River Solar Project near Geraldton, WA, in 2012. First Solar is currently in the construction phase of a 102MW (AC) project at Nyngan, NSW, a 53 MW (AC) project at Broken Hill, NSW, and a 3.275 MW (AC) project at Gatton, QLD. First Solar’s Australian operations are headquartered in Sydney, with activities focused on market development, project development and project delivery. First Solar has significantly expanded its Australian operations over the past five years, using the Sydney office as a base for its Asia Pacific market coverage that includes the management of regional offices in Beijing, Bangkok, Jakarta and Kuala Lumpur. First Solar has also demonstrated its support for the development of renewable energy policy within Australia, through direct engagement of key stakeholders within the renewable energy industry as well as active membership of leading industry organisations such as the Clean Energy Council and the Australian Photovoltaic Institute. 1. Summary First Solar strongly supports the retention and ongoing funding of the Australian Renewable Energy Agency (“ARENA”). ARENA has played a key role in addressing barriers that are restricting the growth of the renewable energy market in Australia, including encouraging participation of key industry stakeholders such as energy retailers, networks, service providers and financiers as well as supporting a range of different project applications including utility scale PV, diesel-PV hybrids and innovative research programs. ARENA funding has been leveraged by the private sector to create numerous industry development opportunities for suppliers and contractors. ARENA is a critical policy instrument and acts as a necessary complement to the Renewable Energy Target (“RET”), serving to increase the diversity of our renewable energy technologies and provide the opportunity for a more optimal electricity generation mix in the future. Eliminating ARENA will reduce the investment in developing renewable energy technologies by limiting the project opportunities that are critical for ongoing commercialization and cost reduction. Such a situation will lead to several undesirable consequences, including: I. A less economically efficient renewable energy industry. Money spent developing next generation renewable energy technologies will be foiled by the absence of a market bridge to bring technologies to commercialisation and maturity. This will limit the likelihood that non-wind renewable technologies are able to penetrate the conventional generation mix and improve the cost, profile and quality of supply, particularly in light of current review of the RET; II. An adverse impact on the environmental landscape. The abolition of ARENA will necessitate an increased amount of emissions from fossil fuels and constrain the development of increasingly environmentally friendly renewable energy generation. For example, utility scale solar PV projects are able to generate electricity with no moving parts, no water consumption and no emissions but will be unable to compete with conventional generators if demand for renewable energy is reduced; and 1 First Solar (Australia) Pty Ltd III. An inequitable outcome for companies that have invested in the Australian renewable energy market based on the creation of ARENA and the existing LRET target. For example, First Solar established a presence in Australia in mid-2009, and has now invested significant capital in a localised engineering, procurement and construction team as well as an Australian supply chain capability. The decision to invest in the Australian market was directly linked to the nature and longevity of the ARENA programs and LRET target. The need to support the development of the utility scale solar industry in Australia is driven by two key factors – the contribution that utility scale solar projects make to the Australian economy and the likelihood that utility scale solar will make a significant contribution to Australia’s long term energy generation requirements. 2. The Impact of Utility Scale Solar Projects on the Australian Economy The dramatic improvement in the cost and performance of PV modules over the past decade has significantly increased the focus on the cost of non-module balance of system (“BOS”) components in a PV system. The figure below outlines the relative contribution of PV modules and BOS components on a PV system price in utility scale projects in 2008 and 2014: Figure 1: Anatomy of a Solar System Price (First Solar Analysis, 2013) This analysis demonstrates that the cost of a solar PV project in Australia is no longer driven by globally manufactured components, such as PV modules and inverters, but instead by highly localised factors, including: • Project specific development costs including site development, permitting, connection studies, transaction costs, engineering, consulting and financing; • The procurement of BOS components including mounting structures, transformers, AC and DC cabling, weather stations, buildings, combiner boxes and fencing; and • The construction and labour cost of installing the project including site mobilisation, civil works, DC electrical, AC electrical, structural installation, commissioning and project management. First Solar’s projects at Nyngan and Broken Hill demonstrate this re-investment of project funds back into the Australian economy. This re-investment information is detailed in a document attached to this submission called “Industry Development and Job Creation in Australia”. To summarise some of the key data in the attachment, the projects at Nyngan and Broken Hill are resulting in: 2 First Solar (Australia) Pty Ltd • Approximately 450 project construction jobs • Approximately 160+ permanent off-site jobs associated with supply chain and procurement from 12 different Australian suppliers that span a geographic footprint across SA, VIC and NSW • Approximately 35 jobs associated with project site support • Approximately $66 million spent on local procurement for both projects, which represents ~56% of the total procurement spend (excluding the panel supply) Importantly, the use of local content for these projects has been performed on a truly sustainable basis. Local content was not sourced for qualitative reasons, but rather, sourced as a way of improving the economic and commercial viability of the projects. The abolition of ARENA will not only reduce the amount of employment and investment, but it will also eliminate the development of the industry capability that is necessary for utility scale solar projects to be delivered at a cost profile that does not require additional subsidy or support. 3. Utility Scale Solar and Australia’s Long Term Generation Mix First Solar is strongly committed to a utility scale solar industry in Australia that is competitive and justified without the need for long term subsidies to support it. Globally, First Solar is already active in several markets where solar makes sense on an unsubsidised basis. As outlined above, the biggest barrier for utility scale solar is the development of a local capability to supply and deliver these types of projects, which over time will develop and enable solar projects to be deployed without the need for subsidy. The analysis in the figure below provides an indicative pathway for the growth of utility scale solar projects in Australian between now and 2020: Figure 2: Supporting the Growth of a Sustainable Industry (First Solar Analysis, 2013) ARENA is the major market driver that will enable the PV industry to develop into a subsidy-free, long-term sustainable industry in Australia. 3 First Solar (Australia) Pty Ltd In addition to the quantitative requirements, there are several qualitative characteristics that underpin the long term rationale for the inclusion of utility scale solar projects in Australia’s energy mix: • Generation Profile: Solar PV projects produce energy when it is needed most, during daylight hours, which not only has a strong correlation with peak demand but is also a strong complement to the wind energy generation profile. This diversity and complementarity reduces the cost and impact of intermittent generation sources; • Community Support: The development of utility scale PV projects in Australia has received strong support from communities countrywide, which makes it an attractive generation source considering the community resistance to other forms of energy generation. Part of the reason for this is resource related – vast areas of Australia have a good solar resource so developers can choose projects that are least likely to have competing land uses or community