New Lease of life for solar
The push by construction and property giant Lend Lease into the solar energy business could be one of the most significant interventions to date in Australia’s nascent renewable energy market.
The move is based on a couple of simple premises. The most important of these is the belief that, within a few years, solar photovoltaic technology will match, and then displace, wind energy as the most cost-effective and efficient renewable energy source in Australia.
If that comes to pass, it could turn most forecasts for the build-out of renewable technology in this country on their head, and Lend Lease will be in a position to become a dominant player in what will rapidly become a multi-billion dollar a year solar PV market.
Lend Lease has been quietly working on its plans for the past 12 months, ever since it signed a deal with the world’s biggest solar PV maker, the US-based First Solar, to install 10MW of its panels on the roof-tops of its commercial building portfolio.
The two companies found that there was a meeting of minds, culture and ambition, and Lend Lease has now signed a deal to become the local partner for the distribution and installation of First Solar’s thin-film solar panels, whose modules are scalable from roof-top solar to commercial and industrial scale installations, and to large scale utilities.
Lend Lease, of course, has capabilities across all three markets; from its Delfin home business, to its large commercial and industrial property portfolio, and its construction business, where it has already been involved in two large-scale utility proposals that have been shortlisted for the federal government’s Solar Flagships program – one with AGL and First Solar and the other with TruEnergy and First Solar.
For good measure, Lend Lease has decided to take a completely new business approach to the solar PV market and, rather than focus on direct selling like the current incumbents, it has signed an alliance with a yet-to-be-named major bank and an energy utility (one would presume AGL or TruEnergy) to tap into their multi-million customer bases to market and distribute the product. It has also struck an alliance with the Norwegian firm REC, which will provide silicon-based solar panels.
Lend Lease notes that, even with the rapid boost in the solar PV market in the last 18 months aided by the proliferation of state-based feed-in tariffs, less than 3 per cent of Australian householders will have rooftop solar by the end of the year. The market is ripe for the picking.
“This will be a step change in the domestic market,” says Chris Carolan, the head of Lend Lease Solar, who was the project director for Australia’s first 5 star CBD building, The Bond, the company’s headquarters. “No one saw Bond coming, no one knew what green star was,” he says. “We want to make the same impact with solar PV.”
Carolan expects the “tipping point” of the solar PV market in Australia will occur at around 2014. That will follow three years of anticipated and consecutive 20 per cent rises in local energy costs (mostly to fund grid upgrades) and declining costs in solar. First Solar is already the market leader in costs, has forecast a 20 per cent reduction in costs per year for the foreseeable future and has achieved a 6 per cent fall in the last quarter alone.
The economics of the venture will be boosted by the Brumby government’s large-scale solar target of 5 per cent by 2020, and the country’s first large-scale feed-in-tariff, an initiative Carolan expects will soon be followed by other state governments.
The 5 per cent Victorian target alone equates to around 2000MW of solar by 2020. Given that it will take a few years to roll out the first projects, that equates to a billion-dollar industry in Victoria alone.
Carolan says that quicker approval time, scalability and the wide availability of sunshine will make it a more compelling energy source than wind. And solar may have a price advantage too.
Lend Lease will also be able to bring its financial strength and its impeccable ratings to bear – something that many utilities would be unable to emulate – and its entry to the solar energy market has an even broader significance.
Firstly, it makes a nonsense of the argument that the only companies with the balance sheet and the motivation to bring such industries to life are those that are currently in the generation game, and should therefore be somehow protected because of this. Let’s strike that off the list of justifications for carbon price compensation packages.
Secondly, Lend Lease is putting itself in a prime position for what many describe as the next industrial revolution – an event marked not just by the introduction of new technologies, but also new business models.
And while Lend Lease may be the first large Australian industrial group to take such an initiative, it is in good company – GE, Siemens and a host of Asian companies such as Samsung, LG and Panasonic are taking a similarly proactive approach to the so-called green economy.
Carolan is being coy about targets for market share and financials, but he is starting the business with 30-odd staff and expects to boost this to more than 100 within six months.
Lend Lease has been working assiduously at the task, using 250 of its staff as “guinea pigs” so that Lend Lease could learn the business while installing solar PV on their rooftops. One thing it learned was that it was not satisfied with industry standards, so it is establishing a Lend Lease solar academy.
“We’ve put a lot of thought into this,” Carolan says.
Comments on this article
PV: way of the future?
It's great that PV is gettting so much cheaper, and it can seriously offset a lot of peak daytime electricity use. This is of great use in ironing out peak usage spikes and keeping electricity prices down, as well as the demand for expensive (and polluting) peaking gas plants.
But the real way of the future is solar thermal with storage. This is the technology that can (in complement to wind and PV) completely replace night-time coal and gas burning. If you're just looking for a quick buck, of course, it isn't so interesting because in these early days it's quite expensive. Yet within a few years, at the current rate of uptake, the costs will be low enough it should be competitive with coal, assuming an effective carbon price is in place. An intelligent government strategy would ensure that we don't miss the boat on this one, but there's no evidence of that in Canberra yet.
solar energy
Cedric Wade is wide of the economic mark in spruiking nuclear. When full waste storage and decommissioning costs are included nuclear is the most expensive form of energy today. It is only "economic" because Government underwrites these costs in every country that uses nuclear.
Distributed solar PV on rooftops is the way to go as Lend Lease has discovered. Most people forget that distributed power only has to be competitive with retail prices (around 20c kwh), where-as centralised power has to be competitive with wholesale prices (around 3-4c kwh).
Solar PV is the classic product that will see falling costs due to modern mass producting methods and constant competitive innovation. Think semi conductors, computers, flat screen TV's etc. Its future is as a household, mass produced product, delivering power at the household level.
Solar PV on rooftops is attractive, not ugly at all.
Saying that carbon is "cheap and available" misses the whole point about needing to reduce atmospheric and ocean carbon levels, plus the oil minister of Saudi Arabia made the spot on observation that "the stone age didn't end because the world ran out of stone".
Feed-in tariffs
David Roberts makes a good point re the viability of feed-in tariffs. I expect that, once the feed-in tariff offered by ACTEW or whoever is lower than the general domestic supply tariff, the domestic units will simply be ignored by their owners, leading to lack of maintenance and premature failure. That which is viable to an owner may well be not viable to a power retailer and vice-versa, especially in the longer term, say >5 years.
In saying this, I have assumed that the 25 year contracts are exclusive, ie that the owners of the panels cannot withdraw their offer from ACTEW and offer their green power to another retail supplier.
The Germans and Spanish have been quoted as having decided on substantial reductions in their own steeply subsidised feed-in tariffs for solar PV. This whole market has a bit of a smell about it - I suspect that the minnows will be screwed by the retailers, who themselves could be caught between a rock and a hard place if the big boys control substantial green power capacity and play hard ball.
Solar PV
Solar PV panels are great in the ACT with its generous feed-in, unsustainable tariff - at least for the first ones to install them. The feed-in tariff pays at 3.5 times the normal tariff, fixed for 25 yrs. Once the number of installed PV panels rises, the electricity company gets less and less income and must therefore put up the normal tariff. The feed-in tariff being fixed, will rapidly fall back to the normal tariff or less. The feed-in tariff system is therefore unsustainable in the long term. Those without PV panels lose out due to rising electricity prices, those with PV panels win in the short to medium term but in 25yrs time their feed-in tariff will be much less than the ordinary tariff.
Solar PV
Solar PV panels are great in the ACT with its generous feed-in, unsustainable tariff - at least for the first ones to install them. The feed-in tariff pays at 3.5 times the normal tariff, fixed for 25 yrs, once the number of PV panels rises, the electricity company gets less and less income and must therefore put up the tariff. The feed-in tariff being fixed, rapidly falls back to the normal tariff. The feed-in tariff system is unsustainable in the long term and will gradually return 1 to 1 tariff or less. Those without PV panels lose out, those with PV panels win in the short to medium term.
Solar energy
Many companies, including Lend lease are expecting rooftop PV to be more cost-effective than retail tariffs by 2014. This will, eventually, lead to millions of rooftop PV systems installed in Australia which doesn't remove the need for other generation but would reduce peak power requirements in the middle of the day and annual fuel consumption.
With '20%' of Australia's electricity 'required' to come from renewables by 2020 (it will be less as solar hot water, phantom, deemed and banked RECs are included), we are a long way from 'retiring' some of the existing, old generation. Especially as load growth is forecast to be more than 20% and the longterm, economic benefits of a carbon price are not widely appreciated.
Most informed commentators expect Nuclear to be generating 0% of Australia's electricity in 2020 as it is too expensive due to various factors including the large size required and the long construction times. Hopefully we will have a carbon price by then and all low-emission technologies can compete to send the old power station clunkers out of business.
Solar Energy
Cedric Wade's comments below are spot on. Solar energy's a good idea that simply won't make the grade economically in the forseeable future. Nuclear is the way to go !!
Solar energy
Solar and wind energy are lovely fantasies, but unfortunately horrendously uneconomic at present and for the forseeable future...not to mention the ugliness of fields full of black glass panels..a couple of square kilometers required at the present state of developement..just to power a village...
No, not for 50 or 60 years.
The world uses 260 million barrels of oil equivalent energy each and every day. Carbon is cheap and available and will be available for over 100 years.
Maybe solar energy will work better by then...but then it hits the wall of how many watts hits the earth per square metre...and all the fantasy in the world cant improve on that.
Nuclear is the future.