Renewables get a lot of bad and exaggerated press about their contribution to rising energy costs in eastern Australia. But it may be that they can play a key role in actually lowering energy costs in what are expected to be some of the country’s most energy intensive and isolated regions.

There are two areas where this seems most possible – the Midwest minerals province and the Pilbara iron ore regions in Western Australia. Both areas are largely off grid, both fear a high dependence on exorbitantly expensive diesel power, and both regions anticipate a huge increase in energy demand as the resources boom continues apace.

Renewable energy developers have been talking up the opportunities in these regions for several years – particularly the prospect of building a series of grid and off-grid systems that make maximum use of the regions’ considerable renewable resources. And which could play a pivotal role in helping extract the region’s plentiful mineral resources.

Yet nothing seems to happen. It’s deeply ironic that WA has the best solar resources in the country – and excellent wind, geothermal and ocean energy resources – yet has the lowest penetration of renewables of any state. Absurdly, if WA can’t generate enough renewable energy to meet its 20 per cent target by 2020 – and its current contribution is less than 5 per cent – then its utilities will end up paying penalties that will effectively subsidise the wind and other renewable developments in the eastern states.

The federal government appears to be waking up to the opportunities, however, and on Thursday appointed the international engineering consultancy Evans & Peck to investigate the barriers to renewable energy in off-grid and end-of-grid mining towns and remote communities in the Midwest and the Pilbara, and to see what could be done to ensure that renewables are exploited to the maximum potential.

The appointment was actually part of an election promise made last year by resources and energy minister Martin Ferguson, when he was campaigning (unsuccessfully) for the former state Minister for Planning and Infrastructure Alannah MacTiernan. At the time, the federal government had been embarrassed that none of the eight WA-based applicants made the short list for the Solar Flagships program, despite being situated in the midst of the best solar resource in the country, and Ferguson promised to try to redress the situation.

Ferguson flagged his intention, then, to instigate a study into the opportunities for commercial-scale solar, geothermal and biomass sources; projects that could support localised grid extensions or upgrades, storage technology and the potential of hybrid systems using gas or diesel.

In his statement on Thursday, Ferguson said “renewable energy may offer a real solution in terms of supplying electricity to power some of WA’s remote farms, mines and communities." And he said the study would assess the region’s future electricity demands and network needs, identify the most economically viable renewable energy technologies, and the major barriers to their deployment.

The barriers should not be too hard to find. The Clean Energy Council identified some of them in a submission to the Australian Centre for Renewable Energy late last year, which touched on the problem facing off-grid renewable energy. This included the issues of energy supply security, uncertainty around price triggers, diesel excise, and last but not least “cultural barriers” – the inability of many organisations to get their mind around new technologies or a new way of thinking about energy. It is costing mining companies $350 a megawatt hour or more to supply energy to their mine sites with diesel energy, but some are not interested in looking at alternative or hybrid sources that could significantly reduce those costs. Even early-stage solar thermal can compete on those costs.

(Not all mining companies have been so backward. Galaxy Resources won an award last month for its groundbreaking project at the lithium mine near Ravensthorpe, which is using solar PV and wind in a hybrid model to reduce its reliance on diesel. So far it is small scale, but CEO Iggy Tan is keen to look at options to increase the contribution of renewables, and to reduce the cost of diesel).

The problem is likely to become more acute, not just because the costs of buying diesel – and transporting it – are expected to soar, but also because the Midwest province boasts huge resources of an iron ore variety known as magnetite, which is hugely energy intensive because the ore needs to be processed on site.

Midwest Energy, one of the unsuccessful applicants for the Solar Flagships, has been pushing for the establishment of a solar hub near the end of the new transmission line that is proposed to bring energy from the south-west grid. Midwest had proposed building two stand-alone 100MW solar thermal stations in its Solar Flagship proposal , using Areva technology, but there have been numerous other proposals for hybrid solar/gas, solar/diesel or even solar/biomass power stations, as well as solar storage.

The Midwest could emerge as a unique testing ground for how large-scale solar and other technologies could play a key role in the development of one of Australia’s most energy intensive extractive industries. “We know we are going to have a massive energy demand in that Midwest region,” says McTiernan, who now sits on the board of Sustainable Energy Australia. “It would be absolute lunacy if we were not building major solar facilities in that region.”

The situation in the Pilbara is slightly different. The infrastructure there, including for electricity, is often described as almost feudal. Rio Tinto has its own transmission network, BHP Billiton has one too, and the local utility Horizon Power has one. And never the twain shall meet. That suits Rio and BHP, which are none too keen on reducing the barriers of entry to any competitors. But the sensible thing would be to bring these networks together and to close the loop of the transmission lines that stretch from Port Hedland to Karratha and then inland to Mt Newman.

A proposal for a $1.1 billion Pilbara interconnector was a favourite project for Infrastructure Australia, but the WA coalition government dumped the idea in favour of other infrastructure projects when it got into government. This has been immensely frustrating for the renewables industry, and Horizon Energy, as it is clear that one large grid would vastly increase the potential for the entry of solar thermal power stations and other renewables because it would share the redundancy.

Horizon has already experimented with a couple of solar PV/diesel hybrids in the small communities of Nullagine and Marble Bar – the first high penetration solar/diesel hybrids in the world (the solar provides up to 65 per cent of energy needs in the daytime) but is keen to test these models at greater scale.

Absurdly, the Pilbara is now facing power shortages with an expected four-fold increase in demand over the next five to seven years, and coal-fired power stations are being considered as the answer in the absence of a strategic plan for renewables.