Snowy 2.0, new Tasmanian connector to deliver fresh opportunities for solar

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The ‘duck curve’ is well understood in electricity markets with growing solar PV generation. Behind the meter solar depresses electricity demand during the middle of the day, while large scale PV achieves peak generation at the same time. It depresses mid-day wholesale electricity, and can push them into negative territory.

With Aussie rooftop solar installations continuing to take place at record levels in 2019, building on a record-breaking 2018, and a large scale project pipeline showing few signs of slowing, the duck curve is set to undermine the business case for new PV capacity additions.

Unless, of course, daytime demand increases, or coal generation retirements take place earlier than originally anticipated.

New interconnection projects and expanded pumped hydro capacity on the National Electricity Market (NEM) could alleviate the duck curve quandary facing large scale PV developers – and both have received a boost from the federal government today.

“Over the long term its good news for solar,” says Tristan Edis from Green Energy Markets.

Prime Minister Scott Morrison, not environment minister Melissa Price, announced today that the government has committed $1.38 billion for the Snowy 2.0 pumped hydro expansion, in the form of a project equity investment. The government says the project will create an additional 2 GW of pumped hydro capacity, or 175 hours of storage capacity.

The Snowy 2.0 plan would create 800 MW of ‘uphill’ pumping capacity – potential demand for New South Wales and Victoria solar farms.

The government is also supporting a second 600 MW high voltage interconnection between Tasmania, and its hydro resources, to the mainland – as a part of the state’s Battery of the Nation program. While the $56 million in support is small change on a project ARENA anticipates will cost between $1.3 – $1.7 billion, the Marinus Link’s business case is predicated on early coal generation retirements – which itself would deliver a considerable boost to large scale solar opportunities.

It is unlikely that Snowy 2.0 and the Marinus Link both go ahead, as they are competitive projects rather than complementary – but both point to a brighter future for PV.

Green Energy Markets’ Edis believes that the continued rapid growth of Australian large scale solar only makes financial sense in the event of three scenarios: Snowy 2.0 comes online creating additional daytime demand, existing coal generators exit the market sooner than expected, or that rapid cost reductions occur in large scale battery storage – below prices around $500/kWh, which are being currently reported in the market.

“Without one of these taking place it’s pretty “gutsy” for equity investors to continue to back large scale solar projects,” Edis told pv magazine Australia.

“Both the Snowy expansion and Hydro Tas. interconnector should create substantial additional demand in the middle of the day which will help relieve depressed electricity prices at those times.”

The business case for the second Tasmanian interconnector, as assessed by the ARENA-backed study, pencils out in the 2020s in light of not only some early coal generation closures, but a massive 7 GW of generation exiting the market, Edis notes.

“That’s almost all of NSW coal generating capacity once you take out Liddell [2 GW power station],” Edis observes.

In announcing support for the Snowy 2.0 project, Prime Minister Morrison said: “It is absolutely fair dinkum power. It doesn’t get more fair dinkum than this. This is fair dinkum! 100 per cent!”

Just don’t ask existing coal generators.