Solar PV's survival test
The Australian solar industry couldn't quite believe the take-up of solar power in 2010. A combination of plunging module prices, the gain in the Australian dollar, and generous government incentives – and the prospect that these would soon end – resulted in 383MW of solar photovoltaic power being installed in the country in 2010.
This was a near five-fold increase from the previous year. Most analysts thought it would be difficult to better that number in 2011, but as the various state and territory governments are finding, to their surprise, demand is still increasing. It’s estimated that more than 350MW of rooftop PV has already been installed in the first five months of the year. Australia is now one of the world’s top 10 rooftop PV markets. The question is – what happens next?
Muriel Watt, chair of the Australian PV Association, last night presented some interesting predictions at the release of the APVA annual report. If the build-out continues at around the current rate, this would mean there would be more than 4.5GW of solar PV installed in the country by 2020 – the equivalent of the Latrobe Valley brown coal generators, and producing just as much – at least when the sun shines and when the load is at, or near, its peak.
The chances are, though, that this is a conservative estimate, particularly with module costs expected to fall further, retail electricity prices expected to rise, and with separate predictions that suggest large-scale solar PV utilities could provide nearly that much capacity on their own once they become cost-competitive with wind.
The costs of rooftop solar PV were little moved for nearly two decades, but the introduction of incentives in European countries and elsewhere, the rising costs of fossil fuels, and the emerging dominance of Chinese manufacturers has caused a dramatic slump in costs in the last few years.
The APVA and most Australian energy utilities now believe rooftop solar PV will reach “grid parity” – where the levelised cost of solar PV equals the average retail price – by 2014 or 2015, at least for the larger units of around 10kW. From there, prices will continue to fall to around 15c/KWh, while retail energy costs are expected to rise to 45c/kWh and beyond. That difference is expected to be accentuated by the widespread introduction of peak rates.
“What we don’t really know is what will happen when we get to grid parity,” says Watt. “Australians invest all their money in their homes, and it’s very hard to find someone who is not aware of energy prices, and not aware of solar PV.” Still, she suggests, PV is still perceived as a high cost, low abatement source of energy.
The two big unresolved issues for the industry are what happens to feed-in tariffs as the various states fill their target quotas – NSW, WA and ACT are already there, and South Australia and Victoria are not far off. And what can be done to accelerate the uptake in the commercial market, which is considered to be the great untapped resource, as well as utility-style installations.
The key issue for the solar industry is to how to navigate the next few years without a damaging boom/bust cycle – and bridging that gap between the price difference that exists now – and grid parity in three to four years. The APVA wants, as a minimum, a 1:1 net tariff to be used as a default system, as the ACT has done this week after ending its gross FiT.
This allows system owners to use the power they generate to offset retail prices and get the same rate if they export back into the grid. But some states are showing reluctance to go even that far, with energy retailers resisting a 1:1 tariff, although their opposition seems based on how the network charges are currently regulated, rather than a dispute over the value of the electrons.
The commercial sector currently consumes just over one fifth of the country’s energy, and many have large roof areas. Watt says commercial PV is attractive because the systems are better matched to loads, and generate real volume.
But it also seems to be less attractive to politicians. So far, only the ACT has introduced a FiT (32.7c/kWh) for commercial-scale installations, although Queensland and WA are thought to be considering doing the same. The situation is now unclear in NSW and Victoria after enthusiastic Labor regimes were dumped and replaced by Conservative governments.
But other factors are also at play. Interestingly, Lend Lease, which has all but abandoned the residential solar PV market and will now concentrate on the commercial and large-scale markets, says that solar PV is already making sense for the developers of premium office space.
Lend Lease Solar recently installed a 140kW solar PV array on the roof of the ANZ Centre in Melbourne. It accounts for just 4 per cent of the building’s base energy demand, but that is significant when rating the green credentials of a building.
“Solar PV is the most flexible and cost effective means of improving that rating,” says Paulo Bevilacqua, business development manager at Lend Lease Solar. So much so, that solar PV arrays are now being preferred to co-generation plants because, on a dollar/green points ratio, solar PV is often the most viable option.
That trend is likely to continue as solar PV prices fall and utility prices increase. Yields for office space are significantly higher in 6-star green buildings than they are elsewhere.
Finally, there is large-scale solar. The industry is waiting, with interest, for the winners of the first stage of the Solar Flagships to be announced. One of four 150MW solar PV installations will be chosen, although the second round of the flagship program will likely have more winners, but with smaller installations, and so will test more technologies and more locations.
The PV industry is confident that large-scale solar PV will match costs with wind by around 2016, and Bloomberg New Energy Finance predicted last month that up to 4.3GW of large-scale solar could be built under the renewable energy target by 2020 if it can succeed in displacing wind as the cheapest renewable energy source.
Comments on this article
Could we not just plant
Could we not just plant forests! they are still disappearing into a vanishing point in the distance for paper plates and disposable chopsticks. So nice idea but 99% of the buildings that will be using energy in 2012 are already here, many of them have been for a very very long time, mostly the high rises could be described as glass convection ovens with refrigerating plant on the roof, and the real forests are being felled and burned at a murderous rate, so plant more trees, overhaul old buildings.CFA Level 1 practice Exam CFA Level 1 Mock Exam CFA Level 2 Mock ExamCFA Level 2 practice Exam ged software gmat software gre software cfa mock exam
More Information Is Better
Why can't articles like this be published in mainstream newspapers, where ordinary folk at cafe's like to peruse the news? The media is so often filled with the negatives of turning our environment in the right direction ie cost, however people who be a whole lot more willing when they have less biased information.
I would love to see even more incentive by industry and goverment to move our PV installation forward. Eg low interest goverment guaranteed loans for low income families, invesment scheme based on buying into $/Kw instead of $/share.
Keep it coming!
Feed-in tariffs and "parity"
Whatever the feed-in tariff is, it sounds like a good benchmark for determining what the target tax rate to price carbon should be.
ie if the feed-in tariff is 37.5 c/kWh, then a fossil carbon consumption tax should be set at such a rate that coal-fired power is fed in to the NEM at 37.5 c/kWh.
The revenue from this tax would then be applied to cutting other taxes, eg raising the tax-free margin on personal ncome tax, abolishing payroll tax, adjusting Social Security benefits.
It could also be applied to cutting company tax rates, but company tax cuts should be conditional on phasing out subsidies and rebates that encourage fossil fuel use.
Good stuff
I am glad you came to the event last night.
Thanks for lifting the standard of reporting on climate and energy in Australia.
ACT residential FIT remains GROSS
Net tariff is not available in ACT except by very special arrangement and approval. ActewAGL has reverted to 1:1 gross, as it was before the FiT was instituted in 2008. The 15 MW cap is reached for 'micro' generators (up to 30kW), but emphasis is now on commercial buildings and solar farms.
I love it
"...Muriel Watt, chair of the Australian PV Association..."
Wonder if she's any relation. Auspiciously initialled, too.
A few issues, Giles.
Grid parity is a phrase which means many things to different folk. This article takes the rose coloured glasses view.
Parity at 15 cents is not parity at all, when the NEM wholesale price of electricity averaged about 6 cents. Partit is not parity when the solar product does not include the cost of the grid, which is still required to achieve reliability. Parity is not parity if PV does not include in its costings the dollar and carbon cost of providing gas-fired backup which is necessary for the morning and evening peaks in winter, when the sun isn't shining.
The term "parity" has become meaningless on this site as well as more generally, because of claims that consider only the module cost, ie 40% of the total installed cost of PV, even before batteries or gas fired support or transmission or inverters or system losses.
Lastly and most importantly, what is this nonsense about PV being available at times of peak usage? That is perhaps true in the middle of summer but is 100% untrue for wintertime.
If PV was half as good as its spruikers claim, then there would be no need for the industry to advertise, let alone to plead for government handouts via FiT's, RET's, REC's, REC multipliers and capital grants.
I look forward to reading an article which fairly addresses these issues in the Australian context. Until that time, claims of parity are really only sales talk.
Solar costs fall 20% in 2011
With all the talk of Australian retail power prices doubling over the next five years due to grid upgrades, it is timely to consider the rapid deflation evident in solar costs. Solar module costs have fallen 10-20% in the second quarter of 2011 vs year-start levels. With the key input of polysilicon seeing price declines from over US$80/kg at the start of this year to US$50-55/kg now, we expect module costs to fall materially into 2012. Couple this with the continued strength of the AUD, and solar's competitiveness has made significant progress as a key distributed energy source. Professor Garnaut's tax cut resulting in a price on carbon with further boost solar's relative cost competitiveness. Germany and China have worked it out - wind and solar are the industries of the future. Good article Giles.
Compare apples with apples!
Rooftop solar power generates many more hidden benefits besides lowering overall CO2 emission. In most instances the full cost of coal based electricity is hidden or greatly underestimated. We have to consider the real environmental cost of losing all the land to coal mining and its associated infrastructure.
Coal mining also requires large amounts of water for its boilers and for its cooling needs. In many cases, acid mine drainage will continue for hundreds of years, causing ongoing water pollution. The true CO2 emission of coal mining is also greatly understated as we have no accurate figures for all ongoing spontaneous combustion occurring in coal seams and overburden dumps. In some coal mines such emission may be higher or as higher than the emission caused by burning coal. Gas fired electricity may also cause far more greenhouse gas emission then current estimates show.
Rooftop solar power generation and decentralised power generation using state of the art equipment such as Ceramic Fuel Cells not only reduce the overall CO2, but have considerable additional benefits in regards to other environmental issues. (Water use, land degradation, air quality, water quality, visual impact etc.)
energy company billing
It is now over 12 months since I signed a contract with my energy retailer and started feeding in energy to the grid from my modest domestic installation. They still haven't been able to produce an invoice or statement on what the balance in either energy or dollar terms is. It seems to me the energy company response to distributed generation is pathetic. The talk of business feed in tarrifs would seem little more than a joke if my experience is an indication.