Solar Power in Australia

Since discovering Eric Sprott's social media agency I've been unimpressed by any (or all) precious metals 'news'; I have recently been turning some of my research efforts to the energy sector. I have a few observations that I wanted to share with anyone who will listen (apologies to anyone awaiting the next GLD article installment - it's coming soon ... in the meantime please do check out Costata's new gold series). This is not a research article specifically, it's more of a personal checkpoint, and if I can attract at least a few oil lobby shills denigrating the solar industry then I have achieved my secondary goal.

I once asked an electrical engineer what he thought about Solar Power, he poo-poohed the entire industry pointing out that an entire solar panel only powers the equivalent of a few light bulbs. He's right of course but his analysis was incredibly narrow-minded; what matters is whether the power can be provided at a profit or not - and at that point the free market can be an effective conduit/proxy for discovering the best Energy Return On Investment (EROI). Our physical world is awash with energy, it's simply a question of how effectively we can redirect it. Unfortunately, this is not really on the agenda of the people in charge:

Not entirely accurate, but incredibly PITHY! (source unknown)
Australia has an embarrassing record of government waste; a friend of mine once described a public service job in the Department of Agriculture in Canberra - as far as I recall the story: some dude's job for an entire year was to watch videos of sheep at troughs, and count the sheep (presumably with the intent of recording the figures). But the prize for waste and incompetence however, must surely belong to the recently deposed Gillard/Rudd government who created the 'Federal Government Solar Credit Rebate Scheme'.

To cut a long story short, the government offered a rebate as high as $0.44 per kilowatt of power (in Queensland) for power generated from small scale photovoltaic systems. The goal was to stimulate the industry and reach a mandated target of 20% renewable energy mix by 2020. Some figures I have seen, state the response was 130 times greater than the planners anticipated. Think about that for a moment. It won't surprise you to know that last year, they announced the scheme would stop.

Government shouldn't be surprised people will respond favourably to an opportunity to protect themselves from rising costs of living, but the program has unfortunately instilled (yes) the wrong mindset in the eye of the public. I've been at parties where enthusiastic rooftop solar-owners will tell me strategies for optimizing the amount of money you 'get' by minimizing daytime usage. The reality is that on the wholesale market, their exported energy is really only worth about $0.05 / kilowatt hour ... not only that but thanks to supply and demand the massive rooftop installation base in Australia of the last few years is actually REDUCING that price. The money is an illusion, the government has distorted the real market by dramatically overvaluing the real commodity. This is typical lever-pulling which has greatly accelerated the boom+bust cycle of various solar operators around the country. However, the cat is out of the bag. Production costs for photovoltaic are falling, the average householder now has a cultural perception that their kilowatts are worth something and feedback loop has been created - as more people produce rooftop solar, the customer base for supplying the $ necessary for network maintenance shrinks, so electricity prices rise to cover the costs (even as the wholesale price drops), which provides more incentive to install more capacity, etc.

Here is a 2012 estimate from the Australian Energy Market Operator forecasting the growth of Photovoltaic capacity to 2030 (source), overlaid with more recent figures:
"Australia had 1,094,941 rooftop PV systems, representing 2,825 MW of installed PV capacity, as of Aug. 31, 2013. The country had 2,404 MW of cumulative installed rooftop PV power at the end of 2012 and of 1,328 MW at the end of 2011" photon magazine
source: AEMO, showing potential scenarios for growth of
PV capacity in Australia (National Energy Market), 2012.
Updated figures (in magneta) show that the actuals were way
ahead of projected 'Rapid Uptake' scenario.
This suggests rooftop Photovoltaic is already well on its way to becoming a reckoning force in the energy market. But while the steep rise in the last few years can be directly attributed to the honey-coated offerings of Government, and although the price of solar equipment is falling (solar panel makers losing profits as the market become flooded), I can't help but add the figures and be dismayed. Here's the kicker for me:

In 2013, photovoltaic capacity can be installed large scale for about $1 / watt. At a lazy figure, the total demand for Eastern Australia (National Energy Network) can be met with around 20 gigawatts of capacity. We've got lots of land and sunshine here, basically if money were spent on really large scale photovoltaic then the entire nation could be running on solar, in a matter of years for less than $50 billion. Yes I know that issues like storage would have to be solved (nothing that a bit of pumped Hydro can't fix), my point is that it's really just a case of political will and priority. Our politicians decided it was okay to spend $38 billion of public funds to get faster internet, and America spends $85 billion / month pumping the stock market long may it live. With the money already spent 'stimulating' the rooftop farming public, would that money not have been better spent actually building solar infrastructure direct, for better return on investment? The future (measured in decades) is solar whether you like it or not, it's just the ride will probably be smoother without government interference and waste.

Counting Sheep (Your tax dollars at work)


AdvocatusDiaboli said...

at the end of the day it is hard to measure energy by money, because actually energy has mainly to do with transfer of physical resource whereas money applies to labour wages past, present and future that clot into goods in the first place (energy from those goods would be only second).

True, by governments planning you can be sure that you get an return of investment depending on the qualification of your political central planers, you have to ask yourself how suggessful that might be. In Germany it is really crazy, since we only have much less sun at all anyway.

My personal take: Those photovoltaic modules are not the final answer, because you need plenty of energy to manufacture those, plus you need lots of nasty chemicals and nobody knows today on how to recyle those effiently after 15-25yrs. So personally for Australia I think gas turbines with a mirror field might look better.
Greets, AD

Warren James said...

Good points AD. I would actually like to explore that energy/money dynamic a bit more because I strongly suspect the government incentives had more to do with FIAT support (i.e. through broad dollar distribution) than it did with energy reform. But the government and every solar installer will swear black and blue you you're doing your bit for the planet because it fits their agenda. What most of these wannabe rooftop power producers don't appreciate is that solar panels in their current form are not really environmentally friendly. Actually there's a lot of parallels (of popularized market misinterpretation) with gold and fiat if you look closely enough.

I heartily agree PV isn't the final answer, A large scale solar strategy like I mention above would have the effect of polluting so many Chinese villages that it might be considered an act of war.

One thing I can guarantee though - if you were to fast-forward 30-40 years into the future, most of the solar capacity installed won't be the same technology we're using today, all the old panels will have bust and everyone will have upgraded to the newer quantum dot or nano-tube based units (or whatever is coming in the future) which will be a lot more efficient in terms of both cost and materials.

Australia has enough cheap coal to last several hundreds of years so we're not under so much pressure. But we truly do have lots of sunlight and empty land that we're not taking advantage of. It's my belief that the free market will eventually sniff out that opportunity ... government just needs to step aside and stop pulling levers.

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AdvocatusDiaboli said...

Hi Warren,
it is great to see that on the other side of the world there are still some people around willing to question things.
Seriously, in Germany things have gotten so bad, that in public you better dont even say a critical word about solar, otherwise you will be completely put into the camp of jerks and extremist public enemies. Gotten really bad by now.
Here's a take on the consequences:

About your take of interdependencies between power and monetary policies I can only tell about my take on Germany:
1.) If you cripple the german industry, you stop the exports surplus and therefore solve the euro crisis, simple as that. But in the end everybody loses and has less in the physical plane.
2.) Much of the global debt crisis (especially the euro crisis) has also to do with the ratio of performing loans versus non performing loans. If the non performing loans overtake severly, you have destroyed fiat, game over.
Now in Germany we try to increase the performing loans, not by real production but rather encouraging performing possible debtors to take on new debts. And here comes the solar crap into place: Everybody who has a mortage free house (therefore can be assumed to be a net producer) is propagandized to take out a state subsidized loan (1.9%-2.4%) to buy that toxic waste gadget.
See my suspicion on how this is played?
Greets, AD

Warren James said...

In Germany, they are now proposing a TAX on the self-consumption of electricity created on-premises. This is equivalent to a tax on sunshine. Awesome - not. Has the potential to kneecap Germany's entire solar industry .. only applies to large systems, but is enough to create a KO.

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