SOLAR FARM FEASIBILITY STUDY

District Council of Mount Remarkable

November 2013

Solar Farm Feasibility Study

DISTRICT COUNCIL OF MOUNT REMARKABLE

Client contract No.: IT Power reference: 2013 062 MS (L) A0121

Solar Farm Feasibility Study

November 2013

Prepared by: IT Power (Australia) Pty Limited Southern Cross House, 6/9 McKay St, Turner, ACT, 2612, PO Box 6127, OConnor, ACT, 2602, Australia. Tel. +61 2 6257 3511 Fax. +61 2 6257 3611 E-mail: [email protected]

http://www.itpau.com.au

Document control File path & name C:\Users\Nic\Dropbox\A0121 MTR Solar Farm Feasibility\Final\131120 Final deliverables\A0121 131119 Solar Farm Feasibility Report.docx Nic Jacobson, Joe Wyder, Simon Franklin Nic Jacobson Joe Wyder 19 November 2013 Final

Author Project Manager Approved Date Distribution level

Template: ITP REPORT Form 001 Issue: 01; Date: 20/04/12

ITP/A0121 November 2013

Solar Farm Feasibility Study

About IT Power
The IT Power Group, formed in 1981, is a specialist renewable energy, energy efficiency and carbon markets consulting company. The group has offices and projects throughout the world. IT Power (Australia) was established in 2003 and has undertaken a wide range of projects, including designing grid-connected renewable power systems, providing advice for government policy, feasibility studies for large, off-grid power systems, developing micro-finance models for community-owned power systems in developing countries and modelling large-scale power systems for industrial use. The staff at IT Power (Australia) have backgrounds in renewable energy and energy efficiency, research, development and implementation, managing and reviewing government incentive programs, high level policy analysis and research, including carbon markets, engineering design and project management.

About this report

This report was commissioned by the District Council of Mount Remarkable with the assistance of the Local Government Association of South Australia.

ITP/A0121 November 2013

Solar Farm Feasibility Study

CONTENTS
EXECUTIVE SUMMARY ................................................................................................... 6 1. LARGE-SCALE SOLAR FARMS ............................................................................... 8 Economic benefits ....................................................................................................... 8 2. ESTABLISH THE VIABILITY OF LARGE-SCALE SOLAR FARMS IN THE SOUTHERN FLINDERS ............................................................................................. 9 Results ...................................................................................................................... 11 100 kW roof mounted system ................................................................................ 11 1 MW ground mounted system .............................................................................. 11 10 MW ground mounted system ............................................................................ 12 Analysis of the Cost-Value Gap ............................................................................. 12 3. REVIEW OF FUNDING OPPORTUNITIES ............................................................... 14 Renewable Energy Target ......................................................................................... 14 Carbon Price ............................................................................................................. 15 Clean Energy Finance Corporation (CEFC) .............................................................. 15 Australian Renewable Energy Agency ...................................................................... 16 Emerging Renewables Program ............................................................................ 16 Regional Australias Renewables Initiative ............................................................ 17 Accelerated Step Change Initiative (ASCI) ............................................................ 18 Renewable Energy Venture Capital Fund .............................................................. 18 Regional Development Australia Fund ...................................................................... 18 South Australian Government Support ...................................................................... 19 Summary of funding opportunities ............................................................................. 20 4. IDENTIFY PREFERRED AREAS FOR LARGE-SCALE SOLAR FARMS ............... 21 Multi-criteria analysis ................................................................................................. 21 Data sources .......................................................................................................... 21 Processing ............................................................................................................. 24 Combining the criteria ............................................................................................ 25 Results ................................................................................................................... 26 Investigation improving the grid .............................................................................. 26

ITP/A0121 November 2013

Solar Farm Feasibility Study

5. OPTIONS PAPER FOR COUNCIL ACTIONS .......................................................... 28 6. DISCUSSION ........................................................................................................ 30

Recommendations for further investigations ............................................................. 30 7. REFERENCES ........................................................................................................ 32 APPENDIX A.PREFERRED AREAS FOR A 1 MW SOLAR FARM ............................... 33 APPENDIX B.PREFERRED AREAS FOR A 10 MW SOLAR FARM ............................. 34 APPENDIX C.10 MW PREFERRED AREA FOR AN IMPROVED GRID ........................ 35

ITP/A0121 November 2013

Solar Farm Feasibility Study

EXECUTIVE SUMMARY
The District Council of Mount Remarkable is investigating the potential of renewable energy, in the form of large-scale solar farms to add to the economic development of the district. The key to understanding this potential is to understand the current financial viability of these projects at a suitable scale. Following from the viability, to make an informed decision on the next actions requires understanding the financial support and incentives available to support the development, the areas likely to be targeted by developers and what actions the Council can take to improve the project economics and draw investment to the District. The viability of large-scale photovoltaic solar farms in the District Council of Mount Remarkable was investigated by estimating the levelised cost of energy produced and comparing the cost to the current price of energy from projects of similar scale. The difference between the two prices indicates the price barrier to the development of solar farms. To attract investment in solar farms in the DCMR, the price barrier needs to be reduced, if not overcome. The LCOEs from the three representative solar farms and the price barriers for each is given in the table below. Representative solar farm 100 kW roof mounted $175 $120 to $140 $35 to $55 $90 to $110 $137 to $147 $90 to $110 $77 to $97 1 MW ground mounted $247 10 MW ground mounted $187

LCOE1 ($/MWh) Retail price ($/MWh) Retail price barrier ($/MWh) Wholesale price2 ($/MWh) Wholesale price barrier3 ($/MWh)
Table 1

Price barriers for solar farms in the District Council of Mount Remarkable

To assist the understanding of the Council, a multi-criteria analysis was completed to identify the areas of the Council most suited and favourable to the development of solar farms. The analysis used scale factors to give weight to different constraints to development. The analysis was conducted for the 1 MW and 10 MW ground mounted solar farms. The resulting maps are shown in Appendix A and Appendix B.

1 2

Based on 25 years for 1 and 10 MW and 10 years for 100 kW Wholesale price is based on average NEM Pool Price and REC value 3 Wholesale price is based on average NEM Pool Price and REC value

ITP/A0121 November 2013

Solar Farm Feasibility Study

The actions that can be taken by the Council are discussed in a separate Council Action Options paper. The recommended actions for the District Council of Mount Remarkable selected from a range of financial and facilitation based actions are: Action A2 Soft loans B1 Fast track planning and environmental approvals B2 Re-zoning rural to renewable energy solar farm
Table 2 Recommend actions for DCMR

Evaluation of impact Medium to High Medium

Suitability for the District Suitable Suitable

Medium

Suitable

ITP/A0121 November 2013

Solar Farm Feasibility Study

1. LARGE-SCALE SOLAR FARMS

There are two groups of solar technologies used for the conversion of solar energy to grid quality electricity in large-scale solar farms. These are: photovoltaic systems and solar thermal systems. A description of these two different technologies is available in Box 10.1 in Chapter 10 of the Australian Energy Resource Assessment [1]. Solar thermal and concentrating photovoltaic systems will not be considered in this assessment. They are currently less cost effective than flat photovoltaic module systems [2]. Solar thermal systems for electricity generation are typically in the tens of megawatts scale and unsuitable for connection to the existing distribution network in the Southern Flinders region. Concentrating photovoltaic systems (CPV), as in use at the Alice Springs airport (Fresnel lenses) and near Mildura (mirror parabolic dish), are not deployed widely as the capital cost of fixed PV has decreased significantly relative to the cost of tracking CPV systems.

Figure 1 Concentrating solar PV at Alice Springs Airport

This report will investigate the viability of solar farms using fixed array, flat photovoltaic module systems. While tracking increases output, the additional capital and maintenance costs lead to most large PV farms being fixed tilt.

Economic benefits
The economic benefits of developing large-scale solar farms extend beyond the boundary of the project into the wider community. While estimates of these impacts are beyond the scope of this document, the direct on going employment created by large-scale solar farms has been estimated at 11 job years per MW during construction and 0.3 full-time equivalents per MW during operation [3]. The development of a 10 MW system in the District would be expected to provide 110 job years of employment over the construction period and a further 3 full time positions during the operation of the plant.
4

http://www.alicesolarcity.com.au/solfocus-flat-plate-concentrator-systems

ITP/A0121 November 2013

Solar Farm Feasibility Study

2. ESTABLISH THE VIABILITY OF LARGE-SCALE SOLAR FARMS IN THE SOUTHERN FLINDERS

In order to examine the financial viability of large-scale solar farms in the Southern Flinders a number of different sized systems were considered. This is due to significant variation in the financial characteristics of the difference sized solar farms. ITP conducted in-depth performance and financial modelling for the following systems: 100 kW roof mounted system, 1 MW ground-mounted system, and 10 MW ground-mounted system.

Each of the different systems has its own unique characteristics that affect its overall financial viability. Key items of note for the systems included: The 100 kW system is eligible for Small Technology Certificates (STC) which significantly reduce the upfront capital costs of the system The 100 kW system (because it is (roof-mounted) requires a much simpler mounting structure which reduces construction costs The 100 kW system is able to be directly connected to the LV grid of the building on which it is installed. This both reduces the grid connection costs for the project and increases the potential revenue of the system through the off-setting of onsite electricity use. The 1 MW system benefits from some economies of scale over the 100 kW system, however, has increased grid-connection and civil costs. The 10 MW system further benefits from economies of scale, however, requires a higher grid voltage for network connection. It is likely that only the larger plants would be able to attract commercial project finance and therefore benefit from a reduced cost of capital.

The expected outputs for each of the systems considered were modelled using the industry standard software package PVSyst. The modelled generation for each of the systems was between 1,600 and 1,700 kWh/kWp/year. The smaller roof mounted system was at the lower end of the production range, having lower output than the larger ground mounted systems. The reduced output from the roof mounted system is primarily due to reduced airflow behind the panels compared to the ground mount system leading to increased operating temperature of the modules.

ITP/A0121 November 2013

Solar Farm Feasibility Study

The key assumptions used in the financial models are shown in Table 3 below.
Capital costs Representative Solar Farm Item 100 kW roof mounted 1 MW ground mounted 10 MW ground mounted

Cost per W (AUD) $0.77 $0.17

Total cost (AUD) $77,000 $17,000

Cost per W (AUD) $0.75 $0.22

Total cost (AUD) $750,000 $220,000

Cost per W (AUD) $0.70 $0.20

Total cost (AUD) $7,000,000 $2,000,000

PV modules Inverters (inc transformers for large systems) BoS Components Civil Works Labour Shipping & transport Contingencies Engineering Grid Connection Land STC value $35/STC TOTAL

$0.30

$30,000

$0.38

$380,000

$0.35

$3,500,000

$0.00 $0.20 $0.05

$0 $20,000 $5,000

$0.25 $0.20 $0.05

$250,000 $200,000 $50,000

$0.20 $0.20 $0.05

$2,000,000 $2,000,000 $500,000

$0.05 $0.00 $0.10

$5,000 $0 $10,000

$0.05 $0.10 $0.50

$50,000 $100,000 $500,000

$0.05 $0.10 $0.25

$500,000 $1,000,000 $2,500,000

$0.00 -$0.73

$0 -$72,500

$0.005 $0.00

$5,000 $0

$0.0025 $0.00

$25,000 $0

$0.91

$91,500

$2.51

$2,505,000

$2.10

$21,025,000

Table 3 Capital costs of large-scale solar farms in the District Council of Mount Remarkable

10

ITP/A0121 November 2013

Solar Farm Feasibility Study

Results
100 kW roof mounted system
The key modelling assumptions for the 100 kW system were: Capital Cost: $91,500 O&M Costs: 1% of capital Roof lease costs: $2,000 Permits and approvals: $10,000 100% equity financed at 15% cost of equity

The results of the modelling for the 100 kW system are shown in Table 4 below.
Project lifetime LCOE 30 years $0.132 25 years $0.135 20 years $0.141 15 years $0.152 10 years $0.175 5 years $0.268

Table 4 LCOE - 100 kW roof mounted system

As many commercial buildings change occupiers relatively frequently a system life of 10 years assumed when conducting further analysis.

1 MW ground mounted system

The key modelling assumptions for the 1 MW system were: Capital Cost: $2.5M O&M Costs: 1% of capital per year Insurance and other costs: 1.3% of capital Setup costs (permits and approvals, legal costs, etc): $204,000 Debt to equity: 60% Cost of debt: 8%, Loan term: 15 years Cost of equity: 15%

ITP/A0121 November 2013

11

Solar Farm Feasibility Study

The results of the modelling for the 1 MW system are shown in Table 5 below.
Project lifetime LCOE 30 years 25 years 20 years 15 years 10 years 5 years

$0.242

$0.247

$0.257

$0.279

NA

NA

Table 5 LCOE 1 MW ground mounted system

As the loan term for the system is 15 years only LCOEs for a system life of 15 years of greater are considered. The assumed system life for further analysis is 25 years.

10 MW ground mounted system

The key modelling assumptions for the 10 MW system were: Capital Cost: $21M O&M Costs: 1% of capital per year Insurance and other costs: 0.6% of capital Setup costs (permits and approvals, legal costs, etc): $1.09M Debt to equity: 70% Cost of debt: 8%, Loan term: 15 years Cost of equity: 15%

The results of the modelling for the 10 MW system are shown in Table 6 below.
Project lifetime LCOE 30 years 25 years 20 years 15 years 10 years 5 years

LCOE

$0.183

$0.187

$0.195

$0.212

NA

Table 6 LCOE 10 MW ground mounted system

As the loan term for the system is 15 years only LCOEs for a system life of 15 years of greater are considered. The assumed system life for further analysis is 25 years.

Analysis of the Cost-Value Gap

It is assumed that the 100 kW system would be able to offset the electrical usage of the building it is installed on while the 1 MW and 10 MW systems would sell directly into the grid. As such, the tariffs available for the systems fall into two categories; off-set retail electricity prices for the smaller system and long term PPA pricing (based on NEM and LGC prices) for the larger systems.

12

ITP/A0121 November 2013

Solar Farm Feasibility Study

While retail electricity prices in many areas are quite high (relative to pool prices) the 100 kW roof mounted system would only be able to offset the electricity consumption component of the tariff as the system is unlikely to have an effect on demand charges for the site. Therefore, the value of the off-set electricity is likely to be in the order of 12 to 14c/kWh ($120 to $140/MWh). At present, any electricity feed into the grid from the roof mounted system is likely to only attract a value of 9.8c/kWh. The PPA pricing for the large scale systems is likely to be similar to that of recent wind farm PPAs in the area with an allowance for the time of day benefit due to the output profile of a solar farm compared to a wind farm. The PPA price is likely to be in the order of $90 to $110/MWh. Table 7 below shows provides a summary of the financial viability of large scale solar farms in the region. Representative solar farm 100 kW roof mounted $175 $120 to $140 $35 to $55 $90 to $110 $137 to $147 $90 to $110 $77 to $97 1 MW ground mounted $247 10 MW ground mounted $187

LCOE ($/MWh) Retail price ($/MWh) Retail price barrier ($/MWh) Wholesale price5 ($/MWh) Wholesale price barrier6 ($/MWh)

Table 7 Price barriers for solar farms in the District Council of Mount Remarkable

The LCOE estimates for the ground mounted systems in Table 5 and Table 6 show a decreasing cost of energy, and increasing viability of larger ground mounted solar farms through economies scale effects. As a comparison, the feed in tariffs offered in recent ACT reverse auction for the successful proposals: $186/MWh for a 7 MW solar farm and $178/MWh for a 13 MW solar farm [4] are similar to the results above.

5 6

Wholesale price is based on average NEM Pool Price and REC value Wholesale price is based on average NEM Pool Price and REC value

ITP/A0121 November 2013

13

Solar Farm Feasibility Study

3. REVIEW OF FUNDING OPPORTUNITIES

This section provides a scan of the Commonwealth and external funding opportunities for solar farms in the region. The Australian Government has a range of measures which aim to increase the uptake of renewable energy in Australia. These include the Renewable Energy Target (RET) of 20% renewable energy by 2020, carbon pricing, the Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA). How these measures may change after the Federal election will depend on the result for the House of Representatives and the make up of the new Senate. This summary outlines the measures existing at the start of the 2013-14 financial year. It does not explore in detail, the various scenarios that may eventuate following the Federal election on 7 September 2013. However, it is worth noting the Coalition has announced it intends to abolish the carbon price and the CEFC. It has also announced that it intends to reduce ARENAs budget and review the RET in 2014. This introduces uncertainty for renewable generation investments due to the reviews potential impact on renewable energy certificate prices.

Renewable Energy Target

The RET commenced in 2001 and is a legislative scheme that creates a guaranteed market for renewable generation by using a mechanism of tradable certificates. Demand for the renewable energy certificates is created by placing a legal obligation on liable entities, (mainly electricity retailers) to surrender a calculated number of certificates each year. On 1 January 2011, the RET was split into two parts: Small-scale Renewable Energy Scheme, (SRES); and Large-scale Renewable Energy Target, (LRET).

The SRES allows small-scale installations such as solar hot water systems, heat pump hot water systems, residential PV systems, small-scale wind turbines and small-scale hydro systems to create Small-scale Technology Certificates (STCs). Liable entities are required to surrender a calculated amount of STCs each quarter. Typically, for solar PV, the STCs are allocated based on a forecast output for 15 years, (deeming). Deeming is only available for Small-scale Generation Units and for solar PV this is defined as systems no more than 100 kW. An STC is equivalent to 1 MWh of renewable generation and the STC clearing house effectively caps their price at $40. However, as a tradeable commodity, the price fluctuates based on supply

14

ITP/A0121 November 2013

Solar Farm Feasibility Study

and demand. The price fell to less than $20 in 2011 and the STC spot price was about $37 in mid-2013. A 10 kW PV array installed in the region would be eligible to create 207 STCs. The LRET allows larger renewable generation facilities to create Large-scale Generation Certificates (LGCs). LGCs are also equivalent to 1 MWh of renewable generation but are created on the metered output of the power station. This enables the renewable power station to have two separate income streams, one from selling the electricity and the other from selling the LGCs. However, these are often combined under a Power Purchase Agreement (PPA). The penalty for not surrendering enough LGCs to meet a liability is $65 per LGC, which is not tax deductable. This effectively caps the LGC price at about $93. However, since the market for renewable energy certificates and LGCs commenced, there has been an oversupply of certificates. In mid-2013, their spot price was around $32. It should be noted that the majority of LGCs are purchased through long term PPAs and their price is not published. A 1 MW solar farm generating 1,400 MWh per year would have an annual LGC income of around $45,000, assuming a price of $32 / LGC.

Carbon Price
Operating in tandem with the RET, the carbon price commenced on 1 July 2012. This makes large emitters of greenhouse gas emissions financially liable. Originally, the price was to be fixed for three years before transitioning to an emissions trading scheme. On 16 July 2013, the Prime Minister announced the governments intention to bring the start date of emissions trading forward to 1 July 2014. This is expected to reduce the carbon price from a fixed $24/tonne to a floating price of less than $10/tonne due to linkages with European markets. The Coalition has announced an intention to abolish the carbon price and if it gains a lower house majority, the ability to do this will be determined by the make up of the Senate. The carbon price increased the costs of fossil fuel generation and thus increased wholesale electricity prices. This decreases the cost gap for new renewable generation. However, as the LGC price is influenced by the difference between the wholesale electricity price and the cost of wind energy, the overall effect on project economics is not significant at present.

Clean Energy Finance Corporation (CEFC)

The CEFC commenced operations on 1 July 2013 and has $10 billion to invest in firms and projects utilising clean energy technologies as well as manufacturing businesses that focus on producing the inputs required. It is commercially oriented and expected to make a positive return on its investments. Capital that is returned from investments will be retained for reinvestment by the CEFC, with the Board to determine the quantum of any dividends payable to the Australian Renewable Energy Agency.

ITP/A0121 November 2013

15

Solar Farm Feasibility Study

The CEFC, after assessing the risks and commercial returns, may make obtaining solar farm finance slightly less difficult by providing some of the debt required to reach financial close on a project. Similar to the carbon price, the Coalitions plan to abolish the CEFC will need a majority in both houses of parliament.

Australian Renewable Energy Agency

ARENA commenced on 1 July, 2012 and provides financial assistance for: research, development, demonstration, deployment and commercialisation of renewable energy and related technologies; and storage and sharing of knowledge and information about renewable energy technologies.

It has a range of programs including Emerging Renewables Program, Regional Australia Renewables Initiative, Accelerated Step Change Initiative, and Renewable Energy Venture Capital Fund.

Emerging Renewables Program

The objectives of the Emerging Renewables Program are to provide funding to: drive innovation of renewable energy technologies in Australia, reduce or remove roadblocks, achieve renewable energy industry development and capacity building in Australia, and support the delivery of ARENAs Supporting High-value Australian Renewable Energy knowledge initiative.

The Emerging Renewables Program provides funding for Projects or Measures. Projects are defined as activities that: Progress the development of a renewable energy technology along the technology innovation chain, or Develop or demonstrate a renewable energy technology to remove or reduce a roadblock.

16

ITP/A0121 November 2013

Solar Farm Feasibility Study

Measures are defined as: Knowledge activities, in support of the programs objectives, Renewable energy industry development and capacity building activities, or Preparatory activities for projects, including potential projects for funding by ARENA.

The Emerging Renewables Program is unlikely to support the straightforward deployment of a solar farm in the region. A solar farm project is likely to need an innovative approach to overcoming a roadblock for consideration for Emerging Renewables Program funding.

Regional Australias Renewables Initiative

The Regional Australias Renewables Initiative supports trials of renewable energy solutions in regional and remote locations. It consists of two components: Regional Australias Renewables Industry Program (I-RAR), and Community and Regional Renewable Energy (CARRE) program.

The objectives of the I-RAR are to: demonstrate a portfolio of renewable energy solutions, including hybrid and integrated systems, in Australia off-grid and fringe-of-grid areas, ensure knowledge is produced and disseminated regarding the deployment of renewable energy solutions in remote areas catalysing further renewable energy uptake, and remove roadblocks, leading to greater deployment of renewable energy solutions in offgrid and fringe-of-grid areas.

To be eligible, projects must be larger than 1 MW and off-grid or fringe-of-grid. The definition of fringe-of-grid is areas in the National Electricity Grid that are remote, where remote is as defined in the Australian Statistical Geography Standard. The DCMR region is classified as Outer Regional Australia and thus is not eligible under the I-RAR. The objectives of the CARRE program are to: demonstrate technical viability and system reliability of feeding more renewable energy into isolated electricity systems and mini-grids, facilitate the further development of supporting technologies and systems that will improve renewable energy reliability and commercial success, such as system integration and storage, through demonstration and deployment, demonstrate the commercial viability of innovative business models, including community ownership models, for renewable energy systems in these locations, and

ITP/A0121 November 2013

17

Solar Farm Feasibility Study

develop and share knowledge and experience in implementing, operating and maintaining renewable energy systems among regional energy suppliers and distributors and commercial and community customers.

To be eligible for funding under the CARRE program, the applicant must be an Australian electricity distributor and the project not connected to the main-grid. Thus the CARRE is unlikely to support solar farms in the region.

Accelerated Step Change Initiative (ASCI)

The objectives of the ASCI are to fund projects above $20m each that allow ARENA to capitalise on exceptional opportunities that are consistent with its General Funding Strategy but are not captured through ARENAs existing suite of initiatives and programs. It is unlikely that a solar farm project in the region would be eligible for ASCI funding.

Renewable Energy Venture Capital Fund

This venture capital fund is managed by Southern Cross Venture Partners. The primary objectives of the fund are to: increase the number of Australian renewable energy and enabling technology companies that are successful in Australian and overseas markets, foster the skills and management capability of Australian renewable energy and enabling technology companies by providing active investment management, and leverage additional investment in Australian renewable energy technology and enabling technology companies from the private sector, including from international sources.

This fund would not invest in solar farms in the region as it is more focused on commercialisation of new technologies.

Regional Development Australia Fund

The Regional Development Australia Fund (RDAF) is administered by the Department of Regional Australia, Local Government, Arts and Sports. The objective of the RDAF is to support the economies and communities of Australias regions. RDAF Round 5 closed on 22 July 2013. While electricity infrastructure is not listed as ineligible, the announced projects for Round 4 are mainly transport, sport and tourism related. Further information is available from the website: www.regional.gov.au/regional/programs/rdaf.aspx The Flinders Ranges Council led a consortium of four local government councils, including the District Council of Mount Remarkable, which was successful in obtaining RDAF Round 1 funding for 10 solar power systems and 84 solar lights.

18

ITP/A0121 November 2013

Solar Farm Feasibility Study

South Australian Government Support

The only South Australian Government funding program identified that may be relevant is the Regional Development Fund (RDF). The RDF has funding of $3 million year and is delivered by Primary Industries and Regions South Australia (PIRSA). The guides for applicants are available from the website: www.pir.sa.gov.au/regions/programs/rdf The RDF offers grant funding of $50,000 to $200,000 through two streams: i) Growing Stronger Regions For non-metropolitan Regional Development Australia Associations to facilitate regional economic development that directly delivers on: ii) South Australias Strategic Plan targets, PIRSA Strategic Priorities, South Australian Governments seven priorities.

Creating Competitive Regions up to 50% eligible project costs For non-metropolitan private sector businesses, industry associations, community organisations, regional local government, and the South Australian non-metropolitan Regional Development Australia Associations to leverage funds to support the delivery of new regional employment and investment directly linked with the following strategic priorities of the State Government: premium food and wine from our clean environment, growing advanced manufacturing, or realising the benefits of the mining boom for all South Australians.

The Creating Competitive Regions 2014 funding round Expressions of Interest close on 27 September 2013. The Growing Stronger Regions - Guide for Applicants does not specify when applications for this streams 2014 funding round closes. However, the 2013 funding round closed on 28 September 2012. The guide for applicants for both streams indicates that the following is not eligible: projects undertaken on behalf of third parties, and feasibility studies, business cases, plans and reports.

ITP/A0121 November 2013

19

Solar Farm Feasibility Study

However, the Growing Stronger Regions Guide for Applicants caveats the second dot point by stating: Feasibility studies, business cases, plans and reports will not be funded where they do not form part of an established and broader program that meets the Regional Development Fund Stream 1 purpose and objectives It is recommended that DCMR contact PIRSAs Senior Regional Industry Liaison Officer on (08) 8226 0218 to discuss how this program may support council activities and whether there is any scope for funding solar farm developments in the region or their facilitation. South Australian Feed-in Scheme The South Australian solar feed-in scheme is open to electricity consumers that consume less than 160 MWh per year. For PV systems that receive permission to connect after 30 September 2013, the minimum retailer payment is 9.8c/kWh (GST exc) to 31 December 2013. The minimum retailer payment for 2014 and onwards is being reviewed by the Essential Services Commission of South Australia. Submissions closed on 26 July 2013 and an outcome is expected before the end of the year.

Summary of funding opportunities

As the Solar Flagships program has closed, there is no grant funding available from to support the straightforward deployment of proven, renewable energy technologies, such as solar PV farms, in the region. The Australian Governments principal support mechanism is the renewable energy target. This market based mechanism, predominantly, assists the lowest cost forms of renewable energy such as wind farms. The Emerging Renewables Program may support a solar farm in the region, if it involves an innovative approach to overcoming a roadblock that is replicable for future projects. As the NSW government is funding several community solar farm feasibility studies7, it may be difficult to identify an innovative approach that would attract Emerging Renewables Program funding.

http://www.environment.nsw.gov.au/resources/MinMedia/MinMedia13053001.pdf

20

ITP/A0121 November 2013

Solar Farm Feasibility Study

4. IDENTIFY PREFERRED AREAS FOR LARGE-SCALE SOLAR FARMS

Identifying the preferred areas of the DCMR region is a key element of understanding the opportunity presented by solar farms and the attractiveness of the District to investors.

Multi-criteria analysis
To assist the Councils thinking the areas likely to be targeted by developers were identified through a multi-criteria analysis. Using spatial information, that is electronic maps, ITP combined the criteria that exclude8 solar farm development with those that have a variable9 impact on the attractiveness for development to produce a colour-graded map that indicates the relative attractiveness to developers of solar farms of each part of the District. A separate analysis was carried out for the 1 MW and 10 MW solar farms as the electricity grid connection requirements at the two scales are very different.

Data sources
Spatial information was obtained from public sources where possible. The Government of South Australia and the Government of Australia operate internet-based data portals that provide a range of spatial data. Where required, data was obtained directly from the custodian organisation. Data was obtained from the sources listed in Table 8. Source Number 1. Data portal Internet address

South Australian Government Data Directory Housing Property and Lands, Spatial Data Downloads Government of South Australia

http://data.sa.gov.au/

2.

http://www.sa.gov.au/subject/ Housing%2C+property+and+land/ Building+and+development/South+Australia %27s+land+supply+and+planning+system/ Planning+data+for+research+and+mapping/ Spatial+data+downloads

8 9

Exclusions are factors that prohibit development. The converse of exclusion is allowed. They have a yes or no value. Variables are factors that do not prohibit development, rather have a location specific value that is considered in decision making.

ITP/A0121 November 2013

21

Solar Farm Feasibility Study

Source Number 3.

Data portal

Internet address

NatureMaps Government of South Australia National Elevation Data Framework Portal Government of Australia, SA Power Networks Bureau of Meteorology

http://www.naturemaps.sa.gov.au/ download_spatial_layers.html http://nedf.ga.gov.au/geoportal/ catalog/main/home.page

4.

5. 6.

http://www.sapowernetworks.com.au http://www.bom.gov.au

Table 8 Spatial data sources

Community consultation
A discussion paper and request for opinions on solar farms was circulated to residents of DCMR through the Councils website10 on 23 August 2013. Following distribution to the community the discussion paper was publicised to the industry via the Australian PV Association e-newsletter on 9 September 2013. Community perspectives were not included in the analysis. No responses from the community were received by 16 September 2013 supporting the decision not to use a community view based criterion.

Exclusions
The criteria that exclude solar farm development are given in the table below. The table describes which elements of each data set exclude and which allow solar farm development. These criteria provide a yes or no answer for solar farm development.

10

http://www.mtr.sa.gov.au/page.aspx?u=148

22

ITP/A0121 November 2013

Solar Farm Feasibility Study

Criteria

Values excluding solar farms All values indicating a park or reserve All values indicating native vegetation All categories except for those listed in Values Allowing column

Values allowing solar farms Nil

Source Number, Data Set Name, Specific URL11

National Parks Native vegetation Land use

1, Conservation Reserve Boundaries http://data.sa.gov.au/dataset/conservationreserve-boundaries 3, Native Vegetation Cover Statewide (Dataset #826) 2, Generalised Land Use

Nil

Agriculture, Livestock, Industry, Rural residential > 2.5 Ha, Vacant > 2.5 Ha Rural, Deferred Urban, Industrial, Infrastructure General

Planning zones

Rural Living. All categories except for those listed in Values Allowing column. High, Medium

2, Land development zones

Bushfire risk

1, Bushfire Protection Areas http://data.sa.gov.au/dataset/bushfireprotection-areas

Table 9 Criteria excluding solar farm development

Variable impacts
Criteria that have a variable impact on the attractiveness for solar farm development on the basis of location, or criteria where the value varies across the area under consideration are discussed in the following table. The table describes the basis for the variable to influence the attractiveness for solar farm development. The table also indicates the source of the data, the data sets used and the specific source of the information.

11

If different from the source URL or website address

ITP/A0121 November 2013

23

Solar Farm Feasibility Study

Variable Electricity network Terrain Slope

Measure Cost based on distance to suitable connection to network North facing slopes above 30 are not suitable. South facing slopes above 10 are not suitable. Hours of shading Annual average MJ/m2

Source, Data Set Name, Specific URL12 5, HV Line, HV Cable, LV Line, LV Cable, Substations Derived from 4, 1 second SRTM Derived Digital Elevation Model (DEM) version 1.0

Terrain Shading Solar resource

Derived from 4, 1 second SRTM Derived Digital Elevation Model (DEM) version 1.0 6, Annual Average DNI (1997 2007)

Table 10 Criteria with variable impacts on solar farm development

Processing
The next step in the multi-criteria analysis is to process each of the criteria to create a gridded data set or a raster map13 of values representing the exclusion or variable. The criteria that are provided in this format require little more processing than identifying the range of values and working out an appropriate scaling or weighting factor. Criteria that are provided as vector or line data, where each part of the drawing is described be a start and end point or a start point and a direction and distance, the information needs to be converted to a raster. For exclusions the map is converted to a raster where each cell has a yes or no value. For the grid network, the criterion is the cost of the connection as determined by: the type of connection, either line or substation; the rated capacity of the connection; the voltage at the connection point; and the distance from the connection point. The shortest distance to a connection point is calculated for each point. Then the cost equation from Table 11 is applied to create a map of grid connection costs.

12 13

If different from the source URL or website address A raster is an image composed of points or pixels. Each point has a reference and value.

24

ITP/A0121 November 2013

Solar Farm Feasibility Study

Solar farm

33 kV line

33 kV substation

11 kV feeder

11 kV substation

10MW

$2.2 million + $300,000/km

$2.0 million + $300,000/km

Cannot take load

$1.2 million + $250,000/km

1MW

Cost Prohibitive

Cost Prohibitive

$800,000 + $200,000/km

$600,000 + $200,000/km

Table 11 Grid connection cost criterion

An important constraint on the development of solar farms in the District is the capacity of the network. The SA Power Networks annual planning document [5] provides detailed information on the rated capacity of the lines and substations across South Australia. In the District, there are a limited number of lines and substations that have a rated capacity that can accept a 10 MW load or generator. This limits the areas where a 10 MW solar farm can be economically connected. For the solar resource the existing raster is used without refinement. However, the solar resource information used has a 5 km grid resolution which leads to artefacts in the final mapping. This can be seen clearly in Appendix B in the area to the north-northwest of the Baroota substation. These step changes could be avoided using higher resolution solar resource data. The terrain in the District is included in the analysis and is based on a ~30 m resolution digital elevation model (DEM). The DEM was processed to calculate shading from the terrain, areas of high slope, and areas of moderate south-facing slope.

Combining the criteria

Once the exclusions and variables have been processed into rasters, they are combined. At each point each exclusion is evaluated in turn by a simple logic statement14. If a point is excluded by a layer, no further evaluation is carried out. If the exclusions layers exclude a point, a numeric value such as -9999 is included in the results layer, and no further evaluation takes place. If after all the exclusions have been evaluated, the point is still included, the cost of the development is calculated at the point using the equations such as this for the 10 MW solar farm: 10MW_cost_total = ($19,610,000 + lowest value from (10MW_33kVcost, 10MW_11kVSubcost, 10MW_33kVcost, 10MW_11kVSubcost)) * (20 / Solar_Resource)

14

Such as if X then Y else Z

ITP/A0121 November 2013

25

Solar Farm Feasibility Study

The result of combining the raster layers using the logic and equations is a total cost, expressed as millions of dollars.

Results
The resulting raster maps were then presented for printing at A3 size. They are also provided in Appendix A Preferred Areas for a 1 MW solar farm and Appendix B Preferred Areas for a 10 MW solar farm. The A3 maps are supplied. The connection cost is a key variable component of the overall cost of solar farm. For the 10 MW solar farm, a 1 km connection to a 33 kV substation represents about 12% of the total capital cost. As the length of the connection increases, proportional cost of the grid connection increases and so does the LCOE, making the cost value gap for a solar farm project larger. The preferred area maps show the exclusion zones as transparent and the possible areas shaded with a graduated range of colour. The graduated colour is based on the total cost of developing the solar farm and shows the cost increasing with distance from the grid connection point. The quality of the solar resource indicates that the preference is for areas toward the north of the district. The maps indicate that the preferred locations for a 10 MW solar farm are in the immediate vicinity of the Murraytown and Baroota substations and the line connecting Murraytown to Baroota and then to Bungama. For the 1 MW solar farm the grid does not present the same limitation as the 10 MW solar farm. In this case, the preferred areas follow the 33 kV and 11 kV lines and centre on the substations. As the cost of connecting to substation is lower than breaking in to a line, a solar farm can be developed further from a substation at the same cost. It should be noted that this analysis did not consider all possible variables influencing development decision. The cost of land access not considered as a variable across the District, although it is generally known that the areas of higher and more reliable rainfall are more valuable. Further investigations could incorporate rainfall information as a proxy for land value.

Investigation improving the grid

A what if investigation of the impact on the areas preferred for development of a 10 MW solar farm of improving the grid in the District was carried out. The preferred areas for 10 MW solar farms were reassessed using the assumption that all of the 33 kV distribution lines, 33 kV substations and 11 kV substations have the capacity to accept a 10 MW solar farm. In this case, as expected, the preferred areas follow the lines, with a focus on the area near the Wilmington substation. The results, a third preferred areas map was produced and is presented in Appendix C. Further explanation of this investigation follows.

26

ITP/A0121 November 2013

Solar Farm Feasibility Study

The preferred area maps highlight the attraction of solar farms to proximity to the electricity network and in particular the substations. At substations, it is possible to add extra equipment and connect, minimising costs. Connection to a power line requires additional equipment compared to a substation connection thereby increasing costs. Any connection to the electricity distribution system in the District will require the approval of SA Power Networks. The SA Power Networks Electricity System Development Plan 2012 [5] provides details of the lines and substations in their network. In the District the network consists primarily of 33 kV distribution lines. The transmission connection point at Baroota supplies lines to Murraytown and Bungama. The line to the Murraytown non-zone substation transformer has a capacity of 10 MVA. This transformer supplies lines to: Melrose (5.6 MVA) then Wilmington (7.6 MVA) Booleroo Centre then Orroroo (7 MVA) Gladstone (5.6 MVA)

The substations at Melrose, Booleroo and Wilmington all have transformers rated at 1 MVA. What this means is that in the District the 10 MW solar farm can only be connected to the Baroota or Murraytown substations or the line from Bungama to Murrarytown without requiring extensive and expensive upgrades to the existing lines and substations.

ITP/A0121 November 2013

27

Solar Farm Feasibility Study

5. OPTIONS PAPER FOR COUNCIL ACTIONS

The options for a local government in Australia to take action to attract and support investment in renewable energy in their area of governance are limited. This limitation is a result of the jurisdictional responsibilities delegated from the Government of Australia to the State Governments and then to Local Governments. The delegation of powers varies from State to State. In South Australia, Local Government is responsible for the provision of local services and regulation of activities at a regional level. The use of a feed-in-tariff or portfolio standard for example are outside the powers of Local Governments in South Australia. In the areas of economic development and renewable energy, the Council has limited areas under its direct control where it can take action and influence the economics. While both Commonwealth and State governments have the power to levy taxes and duties, Local government does not. Councils also have limited budgets with their income generated primarily from rates. Increasing their rates to provide support for commercial projects may not be welcomed by their constituents. To identify options that are available to Local Governments literature on the experience and practices used in other countries and jurisdictions were reviewed to prepare a separate Council Options Paper. To increase the applicability of this research, a range of options were identified and assessed. As expected, some are not well suited to utilisation by all councils. The literature review was open to all types of support mechanism and then filtered to produce a list of the options suitable to the policy and regulatory powers of Local Government. The literature reviewed includes, but is not limited to: Compendium of Best Practices, Sharing Local and State Successes in Energy Efficiency and Renewable Energy from the United States [6] Deploying Renewables 2011: Best and Future Policy Practice [7] Deploying Renewables: Principles for Effective Policies [8] The Database of State Incentives for Renewables and Efficiency [9]

The current economics of solar farms is the main barrier to their deployment. As the modelling in Section 2 of this report shows there is a significant gap between the value of energy from solar farms and the cost of energy from solar farms. To assess the benefits of implementing the action, its impact on the economics of solar farm development was considered qualitatively. Council Options Paper identifies two broad groups of potential actions, Financial Actions and Facilitation Actions. The Financial based incentives or actions provide direct financial support or savings to the solar farm. Facilitation based incentives may indirectly reduce the cost of

28

ITP/A0121 November 2013

Solar Farm Feasibility Study

developing the solar farm or make the process of obtaining approval for the solar farm more streamlined or certain. The two groups of options identified in the Council Options Paper are ranked by their impact on project viability in the following tables. The first table shows the Financial based actions. Financial Action A1 Council power purchasing A2 Soft loans A3 Grant funding A4 Access to land or roof space A5 Application fee reductions Evaluation of impact Medium to High Medium to High Low to High Low to Medium Low to Medium Suitability for the District Low Suitable Low Low Possible

Table 12 Financial actions for supporting solar farm development, ranked by impact

Facilitation Actions B1 Fast track planning and environmental approvals Re-zoning rural to renewable energy solar farm Council initiated development Development Plan principles Support for grant applications Community consultation and project support Introduction service between solar developers and key stakeholders

Evaluation of impact Medium

Suitability for the District Suitable

B2

Medium

Suitable

B7 B3 B4 B5

Medium Low Low Low

Possible Suitable Suitable Suitable

B6

Low

Suitable

Table 13 Facilitation actions for DCMR to support solar farm development, ranked by impact

The Council Options Paper is a separate document to this report. The Council Options Paper presents a brief description and discussion of the options suitable for adoption by other Councils and provides specific recommendations for the District Council of Mt Remarkable.

ITP/A0121 November 2013

29

Solar Farm Feasibility Study

6. DISCUSSION
The cost value gap for large scale solar farms in the District of Mount Remarkable is sufficient to make action by the Council unlikely to remove it entirely. Action by the Council would instead set out to make the District more attractive for developers than other regions. The DCMR has a competitive solar resource; land is suitable and accessible, making it as prospective for solar farm development as many other areas of the State and Australia. By implementing one or more actions, DCMR could increase its attractiveness for investment and promoting them to the solar farm industry. The recommended Council Actions for DCMR are: Action A2 Soft loans B1 Fast track planning and environmental approvals B2 Re-zoning rural to renewable energy solar farm
Table 14 Recommend actions for DCMR

Evaluation of impact Medium to High Medium

Suitability for the District Suitable Suitable

Medium

Suitable

Action A1 Council power purchasing is not recommended for the DCMR due to the size of the demand from Council operations and the extensive use of solar power. When considered together, the cost value gap and the preferred areas for solar farm it is clear that the attractiveness of the District for 10 MW solar farms in the District is limited. When considering 1 MW solar farms, there are more siting options however the economics are less favourable.

Recommendations for further investigations

The review of the electricity network in the District identified limited opportunities to connect a 10 MW solar farm at competitive cost. At the 1 MW scale, the opportunity for cost effective connection is greater, however the economics are less favourable. Investigation of an intermediate size solar farm of around 5 MW could be undertaken to understand the cost value gap at this scale and the impacts of the grid network.

30

ITP/A0121 November 2013

Solar Farm Feasibility Study

The solar resource information used is based on a 5 km grid that introduces some artefacts into the preferred area maps. It is recommended that higher resolution solar data is obtained and used in the mapping to avoid artefacts. It is noted that this analysis did not consider all possible variables influencing development decision. The cost of land access not considered as a variable across the District, although it is generally known that the areas of higher and more reliable rainfall are more valuable. Further investigations could incorporate rainfall information as a proxy for land value.

ITP/A0121 November 2013

31

Solar Farm Feasibility Study

7. REFERENCES
[1] Geoscience Australia and ABARE, Australian Energy Resource Assessment, Canberra, 2010. [2] Bureau of Resources and Energy Economics, Australian Energy Technology Assessment, Canberra, 2012. [3] J. Rutovitz and S. Harris, Calculating global energy sector jobs: 2012 methodology, Prepared for Greenpeace International by the Institute for Sustainable Futures, University of New South Wales, Sydney, 2012. [4] G. Parkinson, ACT Solar Auction won by Elementus, Zhenfa Solar, 19 August 2013. [Online]. Available: http://reneweconomy.com.au/2013/act-solar-auction-won-by-elementuszhenfa-solar-67633. [Accessed 27 August 2013]. [5] ETSA Utilities, Electricity System Development Plan, Adelaide, 2012. [6] Renewable Energy and Energy Efficiency Partnership (REEEP), Alliance to Save Energy, American Council On Renewable Energy, Compendium of Best Practices, SHaring Local and State Successes in Energy Efficiency and Renewable Energy from the United States, 2010. [7] International Energy Agency, Deploying Renewables 2011: Best and Future Policy Practice, Paris, 2011. [8] International Energy Agency, Deploying Renewables: Principles for Effective Policies, Paris, 2008. [9] North Carolina State University, under NREL Subcontract No. XEU-0-99515-01, Database of State Incentives for Renewables and Efficiency, [Online]. Available: http://www.dsireusa.org. [Accessed 19 August 2013]. [10] State Electoral Office, An introduction to Local Government, 2006. [11] G. Parkinson, FRV to build 20MW solar PV plant after winningACT auction, 5 September 2012. [Online]. Available: http://reneweconomy.com.au/2012/frv-to-build-20mw-solar-pvplant-after-winning-act-auction-50595. [Accessed 27 August 2013].

32

ITP/A0121 November 2013

Solar Farm Feasibility Study

APPENDIX A. PREFERRED AREAS FOR A 1 MW SOLAR FARM

ITP/A0121 November 2013

33

Solar Farm Feasibility Study

APPENDIX B. PREFERRED AREAS FOR A 10 MW SOLAR FARM

34

ITP/A0121 November 2013

Solar Farm Feasibility Study

APPENDIX C. 10 MW PREFERRED AREA FOR AN IMPROVED GRID

ITP/A0121 November 2013

35

ITP/A0121 November 2013