LARGE SCALE SOLAR INNOVATION SHOWCASE

Transcription

1 LARGE SCALE SOLAR INNOVATION SHOWCASE

2 OUTLINE Australia s policy framework for commercialisation of Large Scale Solar Global Pricing Context Localising Global Technological Innovations Changing frame of reference between Wind and Solar Sensitivity of PPA Inputs Next Steps 2

3 AUSTRALIA S POLICY FRAMEWORK - COMMERCIALISATION OF LARGE SCALE SOLAR Mandatory Renewable Energy Target (MRET) 2% by 2010 Expanded Renewable Energy Target (RET) 41GWh by 2020 RET split into Small and Large Scale Targets (SRES and LRET) RET reduced from 41GWh to 33GWh RET target 33GWh Solar Flagships Program Announced ACT Large Scale Solar Auction ARENA Large Scale Solar Competitive Round (LSSR) QLD Government SOLAR 60 ARENA LSSR Construction Royalla Nyngan Broken Hill Moree >200 MW Utility Solar 3

4 2016 GLOBAL PPA PRICING FAR BELOW 2015 PRICING ESTIMATES US $/MWh H BNEF global PV c-si LCOE (Central Scenario) Auction Date Jan-15 Jul-15 Oct-15 Nov-15 Feb-16 Mar-16 Apr-16 Apr-16 Apr-16 Country UAE India Chile India Peru Mexico Germany India UAE Auction Size (MW) NA , Winning Bidder NA MW Bid NA NA 500 NA Tariff (US$/MWh)

5 LOCALISING GLOBAL INNOVATION Reduced costs enabled by smaller civil footprint, longer string lengths, reduced cabling, and the resulting impact on productivity and labour. 5

6 LOCALISING GLOBAL INNOVATION Trackers enable significant additional electricity generation resulting in solar capacity factors above 30-35%. First Solar Single Axis Tracker in use at the Gatton Research Facility in Queensland 6

7 Production (MW) CHANGING FRAME OF REFERENCE BETWEEN WIND AND SOLAR Solar is inherently more predictable and valuable than wind DWA:TWA 1 Ratio Diurnal Profile: NSW Solar Vs Wind NSW RRP 1.00 NSW Solar Fixed Tilt 1.04 NSW Solar Tracker 1.06 NSW Wind Average :00 AM 4:00 AM 8:00 AM 12:00 PM 4:00 PM 8:00 PM 12:00 AM (5.00) Hour of Day NSW Fixed Tilt NSW Horizontal Tracker NSW Wind Boco Rock Wind Farm 0.97 Capital Wind Farm 1.01 Cullerin Range Wind Farm 0.95 Gullen Range Wind Farm 0.97 Gunning Wind Farm 0.92 Taralga Wind Farm 1.01 Woodlawn Wind Farm NSW Electricity Dispatch Weighted Average : Time Weighted Average 7

8 SENSITIVITY OF PPA INPUTS OPTIMISED PARAMETERS Development(1) Capacity Capex(3) Opex(4) Debt Project IRR(5) $1M - $3.5M Factor(2) Fixed Tracker Fixed Tracker Fixed Tracker Contracted Merchant Contracted Merchant 26% 32% $1.60/W - $1.72/W $1.75/W - $1.85/W $17/kW/yr - $21/kW/yr $18/kW/yr - $22/kW/yr Margin: 175 Term: PPA 2 DSCR: 1.30x Leverage: 80% Margin: 200 Term: 15 (CEFC) DSCR: 2.0x Leverage: 50% 7 8% 12 15% PPA Price Assumptions: 1) Development includes network studies, market simulation and MLF and DLF impact report, energy yield verification, financial model audit, community engagement activities, lease option agreement payments, connection agreement negotiation, salaries, legal fees during development; 2) Assumes a site in Northern Queensland 3) Capex includes solar farm EPC, connection costs, O&M mobilisation costs, insurance and site costs 4) Opex includes total asset management O&M plus other services including fence maintenance, grass cutting, security, telecommunications 5) Assumes post tax unlevered IRR 8

9 $/W SENSITIVITY OF PPA INPUTS EPC PRICING CERTAINTY? Average Total CAPEX/Watt System Pricing Variation in EPC pricing indicative of EPC contractor market immaturity. EPC price variation is shown in ARENA s data (right), collected from the 77 projects that entered the ARENA Large Scale Solar Competitive Round EOI. First Solar has seen similar price variation in its tender processes e.g. prices ranging from $1.40/Wdc $2.40/Wdc for the same site. High EPC pricing results in out-sized profits for construction companies and economically unviable projects. Low pricing could result in contractors abandoning unviable projects Capital Costs (DC) per Watt Average DC Capital Costs (AC) per Watt Average AC Notes: 1. Chart extracted from ARENA LSSR EOI Data Presentation 2. Capital Costs includes all upfront capital costs, including financing costs 3. Other includes VIC, SA and WA 9

10 SENSITIVITY OF PPA INPUTS LOSS FACTORS Generators are allocated a Marginal Loss Factor (MLF) by AEMO and a Distribution Loss Factor (DLF) by the DNSP (if applicable). This represents the average loss of conveying electricity through the transmission and distribution networks to the state market node. State market nodes are generally located state s capital city where demand is strongest. Generator is paid for electricity delivered here. Losses increase exponentially with increasing generation and linearly with distance. The best solar sites are generally located north and west, long distances from the state market node. The table to the right gives an indication of the impact of increasing penetration of solar farm generation at different parts of the network. Location/ Capacity Factor SF1 32 % SF2 28 % MW Capacity Annual Production (GWh) Loss Factor Production delivered to Node (GWh) 0 NA 1.09* NA NA 1.03** NA * AEMO s published Loss Factor for Cairns, QLD **AEMO s published Loss Factor for Central NSW 10

11 $80/MWH VALUATION ANALYSIS - SENSITIVITIES Case Unlevered IRR Levered IRR +10% EPC cost 6.2% 7.5% Base Case 6.8% 8.9% -10% EPC cost 7.6% 11.0% +10% O&M cost 6.7% 8.6% Base Case 6.8% 8.9% -10% O&M cost 7.0% 9.3% -10% merchant forecasts 6.4% 8.3% Base Case 6.8% 8.9% +10% merchant forecasts 7.1% 9.5% Note IRRs are post-tax and based on 30 year operating life 11

12 PPA PRICE VS EQUITY IRR SENSITIVITY ANALYSIS PPA Price (2016$) Unlevered IRR Levered IRR $70/MWh 6.1% 7.2% $75/MWh 6.4% 8.0% $80/MWh 6.8% 8.9% $85/MWh 7.2% 10.0% $90/MWh 7.6% 11.4% $95/MWh 7.9% 13.1% Note IRRs are post-tax and based on 30 year operating life 12

13 NEXT STEPS 6 GW of renewable energy build required by 2020 to meet the Renewable Energy Target Up to 4 GW of RET is likely to be large scale solar Outcome of LSSR will enable (or delay) large scale solar industry to achieve cost competitiveness 13

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