CarbonSignal

There is a high likelihood that Western Australia, the State with the best solar resource in the nation, will completely miss the boat on the Commonwealth’s $1.6 billion Solar Flagships Program.  The goal of the program is to build 1000 MW of solar generation capacity, across four projects.  The first round of the program opened on December 11.  The Government is seeking two projects for the first round, one PV and one solar thermal, providing a combined generation capacity of 400 MW.  The second round will be held around 2013-14.

To be eligible for Solar Flagships the project must supply power to the NEM or the SWIS.  There are several barriers which project developers must overcome, and many of these are particularly troublesome for project developers in Western Australia, including:

• Network connection uncertainty. The project developer cannot connect 150 MW of solar generation capacity to the SWIS without going through Western Power’s lengthy queuing process, and there is a real risk that the grid may not be able to cope, at least without significant network upgrades.
• Land access. Project developers must secure land access agreements, and may need to negotiate through complications such as mining tenements or pastoral leases.
• Income uncertainty. Synergy has issued an EOI to purchase power at commercial rates, but this does not do much for solar project developers, who need to cover expensive upfront capital costs and high risk premiums.  Policy mechanisms that could close the commercial gap, ie. the Renewable Energy Target and the Carbon Pollution Reduction Scheme, are ineffective at this stage.  The price of Renewable Energy Certificates (RECs) is depressed and volatile, and the emissions trading scheme is still being debated.  It is highly unlikely that large-scale solar projects could offer commercially-competitive rates, and in addition, the Synergy EOI does not guarantee power purchase for the life of the project.
• Environmental planning approvals. Solar plants require a large area. Impacts on flora and fauna could pose a significant environmental approval risk.

Other jurisdictions have made large-scale solar a government priority to entice project developers.  If the Western Australian State Government is genuinely concerned about the State missing out on Solar Flagships then some aggressive action is required.  What’s at stake is not just the Flagships projects, but the industrial foundations of Australia’s large-scale solar industry.

The State Government needs to make WA an attactive location for a proponent to deploy their development resources.  Pre-selection of project locations with suitable environmental and planning conditions, and nodal access to the grid, would significantly simplify the process.  Long-term bilateral contracts would provide the revenue security that financiers require to bank a project.

Round one of Solar Flagships closes on February 15, 2010.  Time is running.

While climate change policy attention has been focused on the fate of the mandatory carbon market via the Carbon Pollution Reduction Scheme (CPRS), the past fortnight has seen some significant developments in the voluntary market.

The National Carbon Offset Standard (NCOS), which will replace the well-known Greenhouse Friendly offset credit and carbon neutral accreditation schemes, was released on 24 November 2009. The NCOS will come into effect on 1 July 2010, at which time Greenhouse Friendly program will cease.

The existing Australian voluntary carbon market, which comprises project developers, retailers and brokers (for a full list see http://www.carbonoffsetguide.com.au/) is almost entirely comprised of entities creating, buying and selling offset credits in sectors that will be ‘covered’, or that can ‘opt-in’ under the proposed CPRS (for example, capturing methane from landfills (waste sector) and renewable energy (energy sector) are in covered sectors and reforestation (forestry sector can opt-in). With the exception of forestry activities, this means they will no longer be able to create offset credits.

The NCOS clarifies what activities will be eligible to create offsets in the voluntary market. While the Voluntary Carbon Markets Association (VCMA) points out that the NCOS is silent on the treatment of Greenpower as a voluntary carbon offset, the Standard provides confirmation that the following units will be recognised:

• “Carbon pollution permits, known as Australian Emissions Units, including those from forestry projects opting into the CPRS (and any other offsets allowed under the CPRS);
• Kyoto units recognised and accepted under the CPRS;
• Credits issued under the internationally recognised [Clean Development Mechanism] Gold Standard and Voluntary Carbon Standard (where these meet specific standards); and
• Credits issued by domestic offset projects that reduce emissions from sources currently not counted towards Australia’s Kyoto Protocol target.” (Source: Department of Climate Change 2009)

The recognition of CDM Gold Standard and Voluntary Carbon Standard is a good move, and enables Australia to leverage off the enormous work that global NGOs and other institutions have put in over recent years into developing credible, robust voluntary offset standards.

It will be interesting to see what non-Kyoto/ non-CPRS activities will have sufficient information to have methodologies accredited under NCOS. With the right research support from Governments, the voluntary market may be able to make projects that deliver multiple environmental objectives, such as de-stocking Western Australian rangelands, and improving soil management, financially viable.