Australia Reopens Solar Funds Bid as BP Fails

The government invited the companies to update their applications seeking grants to build solar-power projects, Energy Minister Martin Ferguson said in a statement today. London-based BP, Fotowatio Renewable Ventures and Pacific Hydro Pty were awarded A$306.5 million ($330.3 million) in funds last year to build the Moree solar farm in New South Wales state.

"The government is committed to the deployment of large- scale renewable energy technologies in Australia,” Ferguson said in the e-mailed statement. “However, we must also ensure that taxpayer money is spent prudently.”

The solar industry is facing declining costs of products, as Chinese manufacturers increased production last year, leading to excess capacity after European governments cut back on subsidies. The price declines have led some companies including Trina Solar Ltd. to predict that solar technology is nearing parity with fossil fuels to supply power to national electric grids at a competitive price.

Suntech and its partner, Infigen Energy (IFN), had lost in the first round of the competition. AGL and CLP Holdings Ltd. unit TRUenergy had also sought government solar grants last year.

BP’s withdrawal from the solar business and a drop in prices of solar photovoltaic panels in the past year are “pretty good reasons to go back and retest the market on this,” John Grimes, chief executive officer of the Australian Solar Energy Society, said by phone today.

"By going back to the market we’ll reap the savings of that reduced cost of solar PV,” said Grimes, whose Sydney-based group represents solar-power companies. "We’d like to see the funding maintained and for bigger plants to be built, so that you will actually get more bang for your buck.”

Supply Agreements

BP, Europe’s second-largest oil company, and its partners in the proposed A$923 million photovoltaic plant haven’t signed power-supply agreements needed to advance with the project and failed to meet a Dec. 15 deadline for reaching a financial close, it said in December. The company said at the time that it would stick with the planned 150-megawatt solar project after deciding to exit the business globally amid a glut.

The Moree venture will be eligible to bid for the funds and have a chance to show that it “is still the most meritorious project,” Ferguson said. The government expects a decision in the second quarter, he said.
The venture hasn’t met its obligations under the funding agreement and has proposed “substantial changes” to the plant, according to the statement.

'More Time’

"We remain confident that if granted a little more time financial close will be achieved,” Moree partner Pacific Hydro said in an e-mailed statement today. Discussions with retailers “hold very strong prospect for completion” of a power-supply agreement, while a group of lenders are committed to the project’s development, according to the statement.

"Large infrastructure projects are difficult to finance globally, and it is appropriate that they are given additional time to put in place the finance arrangements they need to make these viable,” the Solar Energy Society’s Grimes said. “But this money has to be well-spent and spent soon. We need to maintain urgency on these projects.”

Australia, which has set a target of generating 20 percent of its power from renewable energy sources by the end of the decade, also said last June it would provide A$464 million to a solar project in Queensland led by a unit of Paris-based Areva SA. That venture proposed a 250-megawatt solar-thermal and gas hybrid power plant, according to the government.

The government has given that project, Solar Dawn, until June 30 to reach a financial close, Ferguson said. “Solar Dawn remained the best value solar thermal project,” Ferguson said.