Australian solar's race to the edge
Hot on the heels of unprecedented growth, Australian solar installations will reach a cumulative 1GW by the end of July 2011. Installations in 2011 alone are on track to exceed 1GW, with monthly installation rates increasing four-fold within the first half of the year. Concerningly, the growth is unsustainable, indicative of a race-to-the-cliff, as severe wind-back of incentives has recently occurred. But a promising glow is developing on the horizon, with the government’s recently announced suite of long-term clean energy policies presenting a transformative opportunity for the Australian solar sector, if it can survive the next twelve months.
A steep-cliff’d valley
The Australian solar industry rejoined the ranks of the top 10 solar nations of 2010, with its 383 MW, placing eighth along with Spain. By mid-2011, Australia had already installed and declared 390 MW, with the 30-45-MW delay between system installation and registration, meaning that over 500 MW is certain to have been installed to date this year. This brings Australia’s cumulative installed capacity to 1070 GW. With the installation rate growing four-fold from the start of 2011, Australia is on track to be a GW market this year, which could make it a top-5 solar nation.
A severe reduction in government support at both federal and state levels means such trends are unlikely to continue. Australian installations receive an upfront discount though SRES, a certificate scheme for small-scale renewables with a multiplier for the first 1.5kW of PV capacity. Government has underestimated the consumer demand for PV, which has resulted in a massive oversupply of certificates. Annual requirements are met within the first six months of the year. The government has reacted by reducing the solar multiplier by 40 per cent on July 1st, but not before the market price of the certificates dived. As a consequence, the combined value of the certificates has dropped by as much as 70 per cent, with the price of an entry-level small solar power system doubling as a result.
At the same time, most Australian states have also wound back their feed-in tariffs, with only one state (Queensland) expected to be offering a premium feed-in tariff by year’s end. A revolt by system owners forced one state government (NSW) to back-down upon a proposal to retrospectively reduce a feed-in tariff for existing owners – one side-benefit of having a strong residential solar sector. In spite of this, the local solar industry is now fighting to receive anything greater than the wholesale electricity rate (~A$0.06/kWh) for power that is not consumed on site.
The simultaneous removal of federal and state subsidies has carved a valley through the playing field, and the lack of guaranteed fair value for solar generation has raised the 'grid-parity goal posts'. A cool-off is certain. Recent installation figures have had as much to do with consumers rushing to take advantage of the fore-warned reduction in subsidy levels, as it did with the subsidies in their own right. Though the rapid withdrawal of subsidies has created an industry-wide valley of death, what lies on the other side may be worth dying for.
A Bridge?
The Australian solar industry has taken heart from the federal government’s recent announcement of a suite of reinvestments of revenue from a carbon tax into clean energy initiatives. Detailed modelling released today predicts the renewable energy sector (excluding hydro) will be 18 times as large in 2050 as it is today. A newly created Clean Energy Finance Corporation will have $10 billion to leverage private sector financing for commercialisation and deployment for renewable energy and clean technology projects, half of which are exclusively earmarked for renewable energy.
The newly created Australian Renewable Energy Agency will put towards $3.2 billion of funding towards research and development and the administration of a consolidation of existing programs such as Solar Flagships, and will include a Renewable Energy Venture Capital Fund. Importantly, both will be independent from government, removing the politicisation of funding announcements and hopefully delivering greater outcomes more rapidly than before. Coupled with an announced 2050 emissions reduction target of 80 per cent and a request that the Australian Energy Market Operator start to plan for the time when the grid operates with 100 per cent renewable energy, the future looks bright.
These announcements hold out hope for the solar sector. It appears as if the government is addressing the solar sector’s concerns about barriers to deployment and about the one-off, long-winded nature of grants such as Solar Flagships (announced to create the world’s largest solar plants but set to deliver one 150MW PV project by 2015). However, there are a few obstacles to clear first.
1. Parliament: The minority government has decreased in popularity since the last election, and though those holding the balance of power have guaranteed passage of carbon pricing legislation, the government must survive in office long enough to legislate.
2. Time: The announced institutions take some time to establish, formulate programs, and release funding, and meanwhile carbon revenue will not start flowing until 1st July 2012. The solar industry will have to hold on for some time.
3. Capability: The Australian solar industry currently services a predominantly residential market. A combination of approaching market saturation (already 10 per cent of households own a PV system in three major states) and an uncertain future for solar power exported to the distribution network create medium-term challenges for the residential solar sector. Nothing in the recent announcements targeted residential solar, suggesting that the industry will need to rely upon residential grid parity for its future and existing schemes until then.
The transformation from cottage industry to residential mass rollout took less than three years. Largely as a result of populist federal government policy settings, 1-1.5kW systems dominate the Australian landscape, to the extent that in 2010 Australia installed more small systems (<10kW) than Germany. Recent policy announcements should unlock commercial and distributed utility-scale projects, but the current industry comprises mainly of electrical trademen and call-centre retailers. Many have the appetite but few have the experience to service the demands of commercial solar customers.
The challenge is made greater by the looming cliff that will cause significant industry contraction. With grid parity for residential solar expected as soon as two years, a sleeping Phoenix may need to be revived if nothing changes, with the historical industry development considered wasteful in such light. Regardless, the opportunity for Australian solar has been clearly spelled out: Those that can cross the valley of death will be well-placed to take advantage of a potentially massive, multi-gigawatt industry.
SunWiz is a solar consultancy servicing over 150 Australian PV distribution, integration, and installation companies.SunWiz provides market intelligence, nationally-awarded system engineering services, and bespoke consulting. Visit www.sunwiz.com.au for more information.
Comments on this article
I'll see your $4.6B and raise you....
Thanks Peter, Putting aside the fact that almost everything you argue has no basis in rational economic theory I'd like to point out that those aluminium smelters generating $4.6B in exports (not to be sneezed at) are dwarfed by our imports of crude oil, something north of $20B at today's prices.
Its obvious you don't care about rational aguments about long term economic sustainability. You are only interested in maintaining your way of life and beggar the consequences for the next guy. Go nuclear! Go shale gas!
You say, affordable energy is in "every single resident of this planets interest" and I agree but only if the REAL cost of that energy is calculated on this and future generations. Our current energy sources are unaffordable but we pass on the cost to those that will come after us - that's OK, at least you won't have to eat root vegetables.
There are other energy sources for which Australia has a huge competitive advantage such as Biomass (the other solar) and there are a number of new technologies that are already available that will allow us to transform that biomass into energy products at prices that are more than competitive with $100 oil. They represent an opportunity to generate a new industry that will make aluminium look like a rounding error.
If you factor in the REAL costs, nuclear and shale gas are both very expensive. New technologies will be developed to improve their competitiveness but right now they are out the money.
Response..
Six of the dirty horrible polluters (shame shame) are the six aluminium smelters currently earning Australia $4.6 bn in export value. Anyone care to advise how long it will take and which countries will buy that value of our currently non-existant indigenous renewable technology, how long will it take to build such a business and who might do it? It is all well and good looking forward to penalising and using emotive words, but have something real and substantial and achievable to hand when you are doing it.
The power that dare not speak its name is either shale gas or nukes. Sooner or later the penny will drop that the >2000 MW nuke isn't what is in the future, but much smaller. Anyone every hear of nuclear subs doing a Chernobyl? Men actual live and work metres from the things and its not a scandal neither a technology fallacy..it is real and proven since 1959 when Nautilus sailed under the Arctic.
The other is obviously shale gas (see Beach Petroleums announcement) and as much as Christine Milne smirks and gloats at the end of the fossil age, its not over yet by a long time. Perhaps long enough for something all peoples can afford since cheap energy is in every single resident of this planets interest. Cheaper energy has driven the industrial world. We can not let a bunch of green Mediaevalists turn society into a bunch of homespun yarn and root vegetable eaters.
Sobering solar PV contribution
If you have a look at the renewable energy figures for 2010 they're much more sobering than the ones given above. Roughly 0.2 per cent of our energy came from solar PV. That would make it equivalent to a 50MW power station, quite small when compared to the 1500MW snowy hydro capacity and nothing like the figures quoted above. See http://www.climatespectator.com.au/commentary/ret-hail-fellow-not-well-met for details. Until solar PV is grid independant rather than on parity with the grid it won't deliver what baseload renewables such as hydro can deliver. And there'll always be a gas fired backup lurking around the corner until it does. I'd be quite happy to see all these solar PVs go off-grid but I know it's a way off before that will happen. In the meantime the focus should be on baseload renewables until solar PV can go off-grid.
You are confused indeed
What is the cost-effective technology you speak of? The subsidies for renewables are a speck compared to the massive compensation taxpayers have been paying to non-renewables.
confused y r as r many others
what we do today is our future M Gandi, the waste from Nuclear will last longer than the Pyramids, we had water mills in europe in the 1700,s and while they were not that efficient they worked, and we still have tides every day in fact four times a day, the sun shines most places and the wind blows and technology is getting so much better all of the time. I am very pleased to look at the panels on my roof and to be a part of the 110,000 house holds who have done so, saving the building of a medium sized power station that no state government (NSW) has ever mentioned that we need due to over large demand. Get a grip we need to do this and more and I am so pleased to be in a position that we as a family could, renewable are the only thing that are here to stay thank nature.
Unfortunatly the State (NSW) have confused many and we will need to get back on track which I am sure we will, of course it is great to have schems to help but the industry will be stroung I am sure for years and I am very pleased to be a part of it
Regards
Out of Tiuch
Your thoughts Peter are a bit out of date. May have applied 10 years ago but less so today. I have a 2kW system, admitedly in Perth with high sunlight levels. Grid power here is currently around 23c/kWH, my system cost is around 20c/kWh if I remove all state and federal subsidies. Now these subsidies help for sure and reduce my cost to around 7c /kWH. I dont care how much it costs to generate electricity at some remote plant, all I am interested in is how much I get charged on my meter.
". . . the power that dares not speak its name."
That would be nuclear, the supposed mature technology which still can't operate without the taxpayer underwriting both the capital costs and the insurance risk because no commercial organisation would do so.
This has been the most heavily subsidised technology ever - for over 60 years and what is being suggested as the power of the future are not any currently operating power station technology, but '4th Generation' technologies such as Thorium reactors - the Holy Grail of 'cheap and endless power' promised in the 1940s and still not even close.
Sure 3rd G reactors are being built in China - a military autocracy and with government funds and god knows what environmental standards. Ah, he says, France & Finland are building - well yes and now 4-years behind schedule and 5x over the original budget, and by the way, still heavily taxpayer subsidised for capital and insurance risk.
So "the power that dares not speak its name." indeed - speak it loud and speak it often and tell me where your house is - we'll build several right next door.
Confused
Why is there glamour and breathless fawning over becoming 1GW solar? The shemes were massively over compensated. One person's subsidy is another's tax.
Where is the joy in that? Everything should wash its own face, its impossible to compensate renewables forever. If today was 2030 and renewables were everywhere, what would Australia's economy look like? Answer is - nobody knows. By then AGW should have fully expressed itself, the world needs to have all agreed. What will Australia look like with no coal mining, agriculture stuffed because of weather related conditions, resources boom over, and hugely exensive energy.
Will every other country's energy be similarly priced. Not if they have nukes. With high energy cost, so will food. International trade will be severly curtailed because of transport costs. Everything points to significant and forever reduction in living standards. Health technology will be unaffordable as well, unless the forever subsidisers want to subsidise that even more, dropping living standards further.
How to break this cycle? Stop beating the mindless renewable drum. Demand cost effective technology whatever it is. We are going to need it, and need it in a hurry..the power that dares not speak its name.
By the way, I have my own renewables technology driving my i-Pod. I have a copper coil on my head and as I move around the earth's magnetic field charges the battery.
I guess I can I expect my salivatingly sweet funds from the $10bn boondoggle and Government thuggery to mandate everyone wears my "Power Cap"?