The international drop in the price of photovoltaic modules is not enough for Australia to produce solar electricity below USD 20 x MWh , given that the costs associated with construction, capital and integration into the electrical system keep the budgets of large-scale projects high.
The Australian Renewable Energy Agency (ARENA) indicates that the average installed cost in the country is 152 US cents per watt , compared to 95 cents in China. This represents a difference of approximately 60% .
But this gap compromises the organization's 30-30-30 vision: to achieve modules with 30% efficiency , reduce the installed cost to 30 cents per watt by 2030 , and bring photovoltaic generation below USD 20/MWh .
“Australia needs a shift in focus towards how solar projects are executed, not just what is installed. If we don’t change our approach to how large-scale solar installations are built, financed, and integrated, we risk missing the opportunity to reduce costs quickly enough,” warns Darren Miller, ARENA’s chief executive , in a press release.
“We risk missing the opportunity to reduce costs quickly enough to support the next phase of the energy transition,” warns the chief executive.
The diagnosis is part of an update to the White Paper on Ultra-Low Cost Solar Energy. The document concludes that the next structural reduction will no longer depend primarily on the cost of the panels , but rather on a transformation of construction, financing, and integration methods.
ARENA published the first version of the report in August 2023. In it, it presented a roadmap for using cheaper renewable electricity as a platform for decarbonization and the development of new industrial activities.
Since then, global photovoltaic deployment has accelerated and modules have continued to become cheaper , while Australia's portfolio of ultra-low-cost solar systems has progressed from initial concepts to large-scale demonstrations and test benches.
However, total project costs did not decline at the same rate. The average installed cost in Australia rose from 150 US cents per watt in 2022 to 165 cents in 2023 , before adjusting to the 152 cents reported in the update.
The indicator remains far from the 30 cents per watt projected for the end of the decade . Consequently, the country would have to reduce its current level by more than 80% to meet that part of the vision promoted by ARENA.
The main obstacle lies in the so-called Balance of System , which brings together the structures, foundations, cabling, auxiliary equipment, civil works, logistics, engineering and assembly activities necessary to deliver an operational plant.
These components represent a dominant proportion of the budget, since, unlike the modules, local implementation costs show strong resistance to downward pressure and depend on specific Australian market conditions.
The problem is exacerbated in isolated regions, where a significant portion of solar farms are concentrated. The shortage of qualified personnel increases recruitment, relocation, and accommodation costs , and also restricts the ability to execute multiple projects simultaneously.
Inflationary pressures and the rising cost of capital also erode some of the technological savings. Meanwhile, longer construction timelines increase interest rates and expose developers to fluctuations in materials, services, and contracts.
ARENA also identifies network connection restrictions as one of the most significant obstacles .
Closing the gap between 152 and 95 cents per watt will require shifting tasks from the field to factory settings, reducing manual intervention, and implementing replicable designs. And the portfolio supported by ARENA is moving in that direction.
The projects are testing modular systems, autonomous pile driving, adaptable trackers, and robots capable of placing panels directly onto structures. These solutions aim to replace manual processes with faster, safer, and standardized methods , requiring fewer personnel in the field.
The ultimate goal is not only to deploy panels more quickly, but to reduce the cost of each megawatt actually connected and delivered to the system .
Solar electricity below USD 20/MWh could support energy-intensive activities, such as the production of green fuels and lower-emission metals. Therefore, achieving the 30-30-30 targets has implications that extend beyond the electricity market and reach the country's industrial strategy.
“The next few years will be crucial to turning this potential into reality,” concludes the ARENA CEO.
Lower module costs are a necessary but not sufficient condition . Without prefabrication, automation, lower capital costs, and a more efficient grid connection, Australia will remain far from producing solar energy below USD 20/MWh.