A few years ago the prevailing wisdom held that it was a lot easier to build a solar farm in Australia than it was to build a wind farm. They were quicker to build, had fewer hassles for the development application, fewer objections from nearby residents. Why go through all the fuss of wind energy when you can get a solar farm up and running within 24 months.
That might have been the case briefly, but it is no longer the case now. Solar farms have only joined the grid in force over the last two years, but already they are becoming something of a headache for developers and contractors alike.
It's not just the lack of clarity on federal policies or the intricacies of state targets that are causing problems, numerous barriers - mostly relating to connection and commissioning - are now emerging that are causing delays, cost escalations, and even cancellations.
In Queensland, a rule from left field, or more specifically from the Electrical Trades Union, means that no one is too sure when the next solar farm might begin construction. The new rules introduced this week by the Queensland Labor government, at the urging of the ETU, mean that only licensed electricians can do much of the installation work, and it has stunned the industry.
Developers and the clean energy industry describe the new rules as a joke and a farce. Even the Master Electricians say it is impractical and should be dumped.
It is generally agreed that the new rules will bring new investment to a halt, cause delays (because it will be so hard to find that many electricians willing to do manual labour), and increase costs. Some installers that specialise in large scale rooftop installations fear that business will dry up altother.
So dire is the situation that the Clean Energy Council is predicting the state will not meet its 50 per cent renewable energy target, and some in the industry fear that their may be a contagion to other states.
The other big headline over the past 12 months has been the collapse of a major contracting firm, RCR Tomlinson, and troubles at other contractors because of numerous cost blowouts - a combination of the impact of strict new rules, connection delays, and possibly because some contractors simply didn't understand what they getting themselves in for.
One of the country's biggest engineering and contracting firms, RCR Tomlinson, was liquidated last year after running out of funds - caused mainly by cost blowouts at two big solar farms and issues and delays in most of its other solar projects
Tempo Australia has suspended its shares from trade
because of a potential cost blowout at a solar farm in Victoria, while many other contractors have also been hit by damages claims from developers due to delays, cost over-runs and revenue losses.
Others are finding that they are being marked down by the Australian Energy Market Operator on what is known as “marginal loss factor”,
which is the amount of output that gets credited to receive revenue. One solar farm, in Broken Hill, has been marked down to 0.75, which means only 75 per cent of its output gets paid.
Many others are rated below 0.9, and as this graph below from Ekistica illustrates, the average solar farm is only getting credit for around 90 per cent of its output.
In effect, the solar gold rush has ended up cannibalising itself.
AEMO made this point clear in the explanation for its changes to the MLFs.
“With increased generation connections of the same technology in an area, a daily pattern is observed due to increased supply and low demand during daylight hours. As a result, MLFs in these areas are declining sharply.” (A really good insight into the changes in MLFs, and a useful explanation and observation from one leading project manager can be found in this story)
The story about MLFs, and the growing list of connection and commissioning challenges and rules, goes to a common theme: Not many people in the energy industry anticipated the scale of the build-out in wind and solar farms these past two years, and even fewer were prepared - the network operators and the regulators principally among them.
MLFs, for instance, are not new. Most solar farms commissioned modelling from industry experts and consultancies to advise them of the risks and prospects. Most were told that there shouldn't be any problem. Those giving the advice had no idea how many wind and solar farms were in the pipeline.
Partly, that's a result of archaic National Electricity Rules that put a premium of confidentiality. As Simon Taylor from Powerlink described the situation on Thursday, he might get half a dozen different developers coming into the office asking about connections to a promising part of the grid. He knew that one development could fit in fine, but six would be an MLF and connection train crash.
Yet he was unable to suggest they all get together and work it out, or even advise them of the competing ideas, because the rules prevented him. Powerlink, which runs Queensland's transmission network, has asked the market rule-maker, the AEMC, to make a rule change to allow him to do so.
And the networks themselves were not prepared. Taylor admitted that the Powerlink did not anticipate the “system strength” issues that have cascaded through the system.
Did we see it early? No. Could we have managed it better? Yes.” Taylor told the large-scale solar forum in Brisbane on Thursday. He even conceded that the network operator did not even have its own modelling known a PSCAD (power systems computer aided design) to match those being required of aspiring developers. It had to go to Canada to find the expertise required.
Those system strength issues have been amplified throughout the network. New guidelines that reinforce the mantra that new projects “do no harm” to the grid have raised the barriers even higher, as have new generator performance standards introduced in February, causing developers to invest more in modelling, and extra gear such as synchronous condensers, capacitor banks, and more inverters.
The Karadoc solar farm in north-west Victoria, for instance, will have to spend tens of millions of dollars on a “syncon” to ease its connection issues. The Finley solar farm in Queensland was told the same thing, just days before it expected to sign a connection agreement. Again, transparency was an issue.
We had no visibility of studies that the network operator and AEMO were running,” said Catriona McLeod, from Esco Pacific, the project developer. “We suspect that the network operator didn't have full visibility of the AEMO studies.” They worked out a compromise in the end, but other solar projects are being hit by the same request.
Other solar farms like Tailem Bend (and many others) have effectively had to downsize their expected capacity because of system strength issues, and new rules that require solar farms to deliver sufficient “reactive power”.
That meant that the Tailem Bend solar farm targeted at 108MW was rated down to 95MW.
Other solar farms have also been downgraded, or have had to invest in more inverters or capacitor banks to meet the requirements.
One of the new requirements to emerge is that for “harmonic filters”, that also may require expensive pieces of equipment such as capacitors. Some solar and wind farms have been either denied access altogether, or curtailed by up to 50 per cent unless they retrofit their installations to the satisfaction of the local network owner.
It is thought that the Silverton wind farm, near Broken Hill, a 200MW installation that was supposed to have been finished in the middle of last year, is a victim of this new standard. It is running at barely half its capacity.
Then there are the ongoing issues of curtailment, although the extent of this has fallen dramatically and was barely 1.6 per cent in the last quarter in the state most affected, South Australia.
To top all of this off, some new projects simply can't get a connection at all.
This map by Transgrid, part of its submission to the AEMO Integrated System Plan, is illustrative. It notes that there are nearly 40,000MW of enquiries from aspiring developers of wind and solar farm. It simply can't manage them all and in some areas there is no new capacity while in other areas only limited capacity.
And if strict new connection requirements and the lack of network capacity weren't enough, there is also the question of policy, and the lack of any coherent plan. That may be resolved after Saturday's federal election, but if the Coalition retains power then the uncertainty will remain.
Labor will offer much hope with the 50 per cent renewable energy target for 2030, which is likely to be achieved through a series of auctions held by the Clean Energy Finance Corporation and through the National Energy Guarantee. But even a 50 per cent target reflects a significant slowdown in the activity of the past year, and a build out of little more than 1GW a year of new wind and solar over the next decade.
The one wild card could be the ability to use renewable energy certificates as carbon offsets by the 250 large corporations targeted under the safeguard mechanism, a key component of Labor's economy wide emissions reduction target of a 45 per cent cut in emissions. If that emerges as a plan, it could lead to another boom in wind and solar projects, if the connection and commissions issues are resolved.
Many solar projects are looking to the corporate market to underwrite their investments by signing long term power purchase agreements - but while some are being written there are too many projects for too few PPA offerings.
And, as RenewEconomy revealed last month, some new contracts are imposing tougher requirements, forcing solar farms to switch themselves off - and sacrifice production - if the market price falls below zero.
This happened to the two major solar farms in South Australia in April. And for those going “merchant” on the spot price, the growing “duck curves” (when operational demand falls in the once lucrative daytime market) is creating revenue uncertainty and this is reflected in financing costs.
Ironically, pool prices are tipped to rise, and even plunging renewable energy certificate prices have reversed their sharp fall, because of the delays being experienced in construction, connection and commissioning.
Some of the issues may be able to be addressed by adding technology such as battery storage. But even this is not easy - archaic rules in the market actually prevent wind and solar farms with batteries acting as the one installation. That adds duplications, added costs and greater complexity. And many of the assets of a battery are still not recognised or valued by the market, or the rule-makers.
As Kane Thornton, the head of the Clean Energy Council, described it at a large scale solar forum in Brisbane on Thursday: “It is very very clear that we are introducing our modern sophisticated technology into a grid that was designed for last century.
“It's fair to say that we are playing catch-up …. (the industry and the institutions) weren't prepared for this sort of project pipeline.”
Or, as Ian Christmas, the head of engineering at Edify Energy described the ups and downs of the connection and commissioning process: “It is like a game of snakes and ladders.”
AEMO, whose responsibility is to keep the lights on, feels it has been caught in the crossfire in all this, between developers wanting to move quickly and accelerate the transition, and rule makers and regulators moving at glacial pace. And the fact that if the lights do go out, the buck stops with them.
AEMO says it is doing all it can, and under CEO Audrey Zibelman there clearly has been a cultural shift that is yet to embraced by other institutions, and it points to the Integrated System Plan as a blueprint to unlock the roadblocks.
“Have a look at the ISP, AEMO is trying to take charge and lead,” AEMO principal engineer Greg Elkins told the forum on Thursday. “AEMO doesn't write the rules. We are carrying the rules as much as the industry is.”
AEMO has said it is seeking solutions to the way MLFs are imposed, and has worked out to address curtailment issues in South Australia. This is acknowledged, amidst a few grumbles, by the industry, who note the ISP is likely to lay out a plan for a clean energy transition much more ambitious than any being discussed by major parties at the moment.
But for the moment, for many frustrated solar farm developers, it is not fast enough. “What we are going to see is a pause,” said Morgan Stanley analyst Rob Koh, before adding that one good thing about a pause button “is that you can alway hit the play button again.”
Giles Parkinson is founder and editor of Renew Economy
, and is also the founder of One Step Off The Grid
and founder/editor of The Driven
. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.