Submission to the Senate Standing Committees on Economics Review of the Australian Renewable Energy Agency (Repeal) Bill 2014

First Solar () 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 , NSW, and a 3.275 MW (AC) project at Gatton, QLD.

First Solar’s Australian operations are headquartered in , 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

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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:

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• 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.

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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 resistance; and part of the reason is technology related – utility scale solar PV projects operate with no moving parts, no water use and no emissions; and • Geographic Diversity: A strong nationwide solar resource and the modular, scalable nature of solar PV projects create the opportunity for solar projects to be built where they are needed most within our electricity network. This also creates economic benefits across rural and regional communities in all mainland states.

First Solar supports the retention and ongoing support of ARENA as a critical mechanism promoting the development of a diverse, sustainable mix of renewable energy generation in Australia.

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Industry Development and Job Creation in australia 2 industry development and job creation Industry 155MW (AC) Development of solar energy capacity will and Job Creation be built in NSW $450 in australia 450 jobs in construction investment are expected to be provided

First Solar, AGL Energy Limited (AGL), the Australian Expected to provide significant value to the region Renewable Energy Agency (ARENA) and the New with up to 450 direct construction jobs, the South Wales (NSW) Government are supporting the projects will also offer scope to develop regional delivery of Australia’s largest utility-scale solar farms skills and create more sustainable employment. to-date. Located in NSW, the Nyngan and Broken Hill The projects’ impact on regional development is solar projects have a combined capacity of over 155 highlighted in the following ways: MW (AC). • On-site jobs involved in the delivery of the project Together, they will generate 360,000 megawatt hours of electricity each year, sufficient to meet • Off-site jobs involved in the supply of materials the needs of over 50,000 average homes in NSW. for the project

The projects represent a total investment of • Off-site jobs involved in the design, management $450 million, supported by $166.7 million of and support of the project ARENA funding and an additional $64.9 million in funding from the NSW Government. The scale and footprint of these projects demonstrate that utility-scale solar is a proven, bankable source of power generation in Australia today. 4 industry development and job creation project project details Nyngan Broken Hill Owner: AGL Energy Owner: AGL Energy overview EPC Contractor: First Solar (Australia) Pty Ltd EPC Contractor: First Solar (Australia) Pty Ltd Size: 102MW (AC) Size: 53MW (AC) Estimated completion date: Late 2015 Estimated completion date: Mid 2015 Type: Ground Mount Type: Ground Mount Output: ~233GWh per year Output: ~126GWh per year CO2e Displacement: Over 203,000 metric tons per year* CO2e Displacement: Over 109,000 metric tons per year* (over 53,000 cars off the road) (over 29,000 cars off the road) Modules Used: Type: FS–395 Quantity: Over 1.3 million Modules Used: Type: FS–395 Quantity: Over 650,00 O O Angles: Mounting Tilt: 25 Azimuth: 0 North Angles: Mounting Tilt: 25O Azimuth: 0O North *Based on national average data for Australian grid electricity and car emissions. *Based on national average data for Australian grid electricity and car emissions.

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fs O&M

nyngan Broken hill SMA AMPCONTROL Prysmian

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Transformer 1 iXL SOLAR Deltaflex iXL SOLAR mayfield Hofmann industries Engineering key statistics

Capacity/Generation: Nyngan Broken Hill MW (AC) 102 53 Project Construction Jobs (500) Annual GWh (at plant boundary) 233.4 126 Nyngan (300) AC Capacity factor (at plant boundary) 26% 27% Broken Hill (150) UQ Gatton (50) Construction: Scheduled construction start Jan 2014 June 2014 Offsite Jobs (162+) Scheduled construc tion end June 2015 Nov 2015 First Solar Corporate (25) First Solar O&M (2) Peak Direct construction jobs created 300 150 Suppliers (135+) Design Details: Site area (ha) 460 200 Jobs Supporting Project Sites (34) Solar Field area (ha) 250 140 First Solar O&M (4) Accomodation (10) Number of modules (approx) 1,350,000 650,000 Transportation Services (10) Number of posts (approx) 150,000 75,000 Catering (10) Number of inverters 81 42 Number of strings 105,000 55,000

Environmental Benefits: Equivalent NSW homes powered @ 7 MWh/yr 33,300 17,000 Equivalent cars off the street 53,000 29,000 6 industry development and job creation construction of a utility scale solar farm

Site geotech and survey tilt bracket installation pcs

site preparation folding table installation pvcs

module install and post installAtion string-in series pv substation

underground cable dc wiring and plant testing and installation combiner box commissioning

ac trenching pcs foundations completE

Solar Plant Component Procurement Item Construction Item

Site Establishment Offices, Fencing, Utilities Civil Works, Delivery/Installation

Solar Modules Modules Module Installation

Mounting Structures Posts, Tilt Brackets, Tables Post Pounding, Structure Installation

DC Electrical Combiner Boxes, DC Cable Installation, Connection, Testing

Power Conversion Inverter, Transformer, Skid Delivery, Connection, Testing

AC Electrical Switchgear, AC Cable Delivery, Connection, Testing

Commissioning and Operation Spare Parts Testing, Analysis, Maintenance 8 industry development and job creation

“Our contract providing transformers Wilson Transformer Company profile and switchgear to the Nyngan and Broken Hill projects represents a overview significant milestone for our business Location Melbourne, VIC (Head Office), and a real boost to our manufacturing solar plant Wodonga, VIC (Manufacturing) facility in Albury-Wodonga. As an Employees 550 Australian owned company with over supply chain Sector focus Utilities 550 employees, opportunities like this

Solar Transformers highlight the strength of Australian opportunities Component manufacturing in an increasingly Solar-Related ~65 Jobs competitive marketplace” First Solar is committed to supporting Australian Total $9-10M manufacturers and our first preference is to source materials Investment within Australia whenever it is viable and appropriate to do so. Recent Events With an increase in off-shore competition, Local procurement accounts for 56.29% of total procurement Wilson Transformer has embarked on a strategy to spending on the Nyngan and Broken Hill projects, with over demonstrate the benefit and value of maintaining Jon Retford, General Manager $66MM spent on local equipment for both projects. local expertise. Despite many low-cost global Distribution Business Unit, competitors, its bid for the Nyngan and Broken Hill Wilson Transformer work was chosen completely on merit due to its competitive costs and high quality.

Breakdown of local equipment procured Local versus international procurement spending IXL Group Company profile “As an Australian owned company that has been based in Geelong for over % % Location Geelong, VIC (Head Office & Manufacturing), 7.57 7.57 150 years, we have had to explore Adelaide, SA (Manufacturing) new business opportunities as local Employees 200+ automotive manufacturing declines. Sector focus Automotive % Making mounting% structures for First 43.71 43.71 Solar Tables Component % Cables/Miscellanous % Cables/Miscellanous InternationalS olarProcurement has been a natural extensionInternational Procurement 46.21 46.21 for our business, and we believe that Solar-Related 40 (at peak) Power conversion/Switch gear Power conversion/Switch gear Local Procurement Local ProcurementJobs Australian-made mounting systems can Total $25-30M Investment Mounting structures Mounting structures be more than competitive with imports. % % % % Since we started working with First Solar Recent Events Historically dependant on the local automotive 46.22 46.22 56.29 56.29 industry to support its steel fabrication business, in 2011, we have been able to gradually IXL is opening a new manufacturing facility in Adelaide in May 2014 that will produce and supply build our capability and competitiveness the structural components for solar projects. by sharing ideas with international 7.57% suppliers and having multiple projects to reduce costs and % 43.71% improve efficiencies.” 46.21% Cables/Miscellanous InternationalInternational ProcurementProcurement Power conversion/Switch gear Power conversion/Switch gear Local Procurement Claude Dagescy, General Manager Mounting structures IXL Solar 46.22% 56.29% 46.22 56.29 *Excludes solar panel supply 10 industry development and job creation 11 industry development and job creation

overview WHBO and PROBUILD Company profileS solar farm WBHO Civil Probuild Civil Location Subiaco, WA Bowen Hills, QLD

contracting Employees 100+ 150+ opportunities Sector Focus Civil construction Civil infrastructure Solar Component Fencing and Civil Site Establishment, Structural Works (post installation), and Balance of Scope Electrical

The total value of local subcontractor procurement for services Solar-Related Jobs 100 local job opportunities in addition to subcontract opportunities for local companies provided on the Nyngan and Broken Hill projects is over $76MM. Procurement of local services will result in peak Total $50-60M employment of over 450 construction jobs across the two sites. Investment In 2012, WBHO Civil partnered with First Solar on the Traditionally focused on the construction of roads, earthworks 10 MW Greenough River Solar Farm. The projects at and bridges, Probuild Civil is now expanding its civil infrastructure Recent Events Nyngan and Broken Hill allow WBHO Civil to continue services to partner on solar projects. this partnership with First Solar as it expands the company footprint into NSW.

Breakdown of local subcontractor services procured 1.03%

“Our business has traditionally 7.68% been focused on the construction of roads, earthworks and civil construction. Working with First 12.52% Electrical Solar has given our employees Structural the opportunity to understand Civil the challenges of constructing a 1.03% % % 49.23 7.88 Services utility scale solar farm and reduce Pre-mobilisation cost and risk incrementally from Equipment % project to project. Projects like the % 11.81 Design and Engineering 1.03% 7.68 ones at Nyngan and Broken Hill % mean a lot to the communities and 12.52% Electrical 9.85 provides long term infrastructure Structural % and employment opportunities for 7.68 Civil % % remote and regional Australia.” 49.23 7.88 Services 12.52% Electrical Pre-mobilisation Will Grobler, Managing Director Structural Equipment WBHO Civil % 11.81 Civil Design and Engineering % % 49.23 7.88 Services 9.85% Pre-mobilisation Equipment % 11.81 Design and Engineering

9.85% project partners

First Solar (Australia) Pty Ltd Australian Renewable Energy Agency (ARENA) First Solar has been engaged by AGL Energy Limited to build both the The projects will be delivered with the support of funding from the Nyngan and Broken Hill solar projects. First Solar will provide engineering, Commonwealth Government through the Australian Renewable Energy procurement and construction services for both sites, using its advanced Agency (ARENA). thin-film photovoltaic (PV) modules. ARENA was established by the Australian Government as an independent First Solar is a leading global provider of comprehensive photovoltaic (PV) authority to make renewable energy technologies more affordable and solar systems which use its advanced module and system technology. increase the amount of renewable energy used in Australia. ARENA is The company’s integrated power plant solutions deliver an economically funded through to 2022 to invest in renewable energy projects, support attractive alternative to fossil-fuel electricity generation today. From raw research and development activities and increase industry and community material sourcing through end-of-life module recycling, First Solar’s knowledge about renewable energy. renewable energy systems protect and enhance the environment. For more information about ARENA, please visit: arena.gov.au/ First Solar will also operate and maintain both projects for AGL for five years after commercial operation starts. For more information about First Solar, please visit: www.firstsolar.com/

AGL Energy Limited Government AGL Energy Limited is developing the Nyngan and Broken Hill projects as part The projects will be delivered with the support of funding from of, and with support from, the Australian Renewable Energy Agency (ARENA) the New South Wales Government. and the NSW Government. For more information about the NSW Government, please visit: Drawing on over 175 years of experience, AGL is Australia’s leading renewable www.nsw.gov.au/ energy company and largest private owner, operator and developer of renewable generation assets. The development of this solar project demon-strates AGL’s commitment to renewable energy and is a natural next step for AGL to build on its strong track record of wind, hydro and biomass renewable generation assets. AGL is committed to ensuring that all of its projects are delivered in a safe, sustainable and professional manner and that all feedback from interested stakeholders is addressed in a timely and effective way. For more information about AGL Energy, please visit: www.agl.com.au/

First Solar (Australia) PTY LTD (ABN 66 141 686 946) Level 3, 16 Spring Street Sydney, NSW 2000 Australia +61 2 9002 7700

www.firstsolar.com All images are indicative of First Solar plants only and are not necessarily of Nyngan or Broken Hill Projects