In 2009, 80 MW of grid-connected solar power was installed in Australia. This is over four times the 19.7 MW installed in 2008, which itself was 3.6x the 5.4 MW installed in 2007 (Figure 1). Can Australia continue this trajectory and install 326 MW in 2010?
Unfortunately, the short answer is ‘no’. It’s quite possible that 2010 may actually see a fall in Australian solar PV installations. Much of the past years’ growth was driven by an A$8/W Federal Government rebate (capped at A$8000), which when combined with Renewable Energy Certificates (RECs) meant that zero-cost 1 kW solar power systems were being offered by a number of companies.
The value of upfront government support measures has more than halved since the government rebate was replaced by Solar Credits, a point-of-sale discount based upon the market value of a multiplied number of RECs. Put simply, solar PV is no longer free, so white-hot sales have cooled considerably.
A bumpy ride
At the start of 2010, it appeared that the Australian solar PV industry may face a bumpy ride. The ability to sell free systems at a reasonable profit attracted a large number of new market entrants towards the end of 2008, which saw installations quickly ramp up in the first half of 2009, before the government’s snap decision to end the rebate stunned the industry.
While Solar Credits legislation was being passed, the industry got to work installing the backlog of 63 MW of solar PV systems that had been issued pre-approval for the rebate.
The industry’s ability to sell solar power took a further setback when the price of RECs plunged from A$50 to A$30, meaning the value of Solar Credits (in effect a REC multiplier for the first 1.5 kW of installed capacity) dived from A$5150 to A$3090 for a 1 kW solar PV system (from A$7750 to A$4650 for a 1.5 kW solar PV system). At the same time as a geared-up industry started installing 8 MW a month, sales volumes plummeted.
Even since the plunge in federal government support, the Australian solar PV industry demonstrated its ingenuity over the last four months of 2009, installing 6400 Solar Credit systems totalling 12 MW.
Those states with feed-in tariffs (FiTs) have been more successful at selling systems with Solar Credits, and the announcement of Australia’s most generous feed-in tariff of A$0.60/kWh on gross solar generation by Australia’s largest state means fair demand is likely to continue through 2010.
This suggests that, although diminished somewhat due to reduced affordability, public appetite for PV continues to be strong, particularly in states with feed-in tariffs – Queensland, Victoria, South Australia, the Australian Capital Territory, and in 2010 New South Wales and Western Australia (Figure 3).
How much will be installed in 2010 is anyone’s guess, but as of January approximately 28 MW of 2009’s rebate pre-approved sales remain to be installed. The amount sold with Solar Credits depends upon the performance of salespeople, and how well the industry handles any setbacks.
Industry immaturity
Unfortunately, evidence suggests that the Australian solar industry does not yet possess the wisdom of maturity. The plethora of new market entrants still seem focussed on selling on price alone, ignoring the lessons learned from setbacks in previous years.
In the latter half of 2008, Australia’s solar PV panel prices went skyward on the back a weak Australian dollar coinciding with the peak of Spain’s infamous solar PV demand, almost stranding low-margin operators. With a reversal of this situation presently acting in Australia’s favour, the nascent Australian PV industry may suffer should global demand catch up with supply in 2010.
Splitting the renewable energy target
Balancing this, the Australian Government recently announced its intention to split the Renewable Energy Target into a two parts at the start of 2011: a slightly reduced target with variable REC price for large-scale systems, and an unlimited demand fixed REC price for small scale systems, fixed at A$40/REC.
Although this is yet to pass parliament and there are some indications that it may be blocked by the senate, this announcement alone sent the REC price above A$40, once again making it easy to sell low priced small solar PV systems. When combined with the backlog of rebated systems, this means that 2010 Australian installed capacity looks set to grow by 50% upon 2009 installations.
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