THE rooftop solar industry appears to be experiencing another of its many mini-booms, this time prompted by upcoming changes to the federal government’s solar credits multiplier, and by the increasingly compelling economic case for commercial-scale installations.
Rooftop solar installers are reporting huge solar demand installations and leading utilities such as Origin Energy and AGL Energy are also competing with letterbox campaigns offering attractive terms, such as $100 upfront for a $2000 system.
This comes as new entrants such as the US-based Sungevity enter the market with offers of solar “leases” that can deliver large rooftop systems for zero upfront cost but an instant reduction in wages. Sungevity has teamed up with local company Nickel Energy, and other domestic solar companies are expected to follow with their own offers.
Apart from zero, or minimal upfront payments, one of the key drivers of the latest mini-boom appears to be the government’s solar multiplier, which is scheduled to be cut from three certificates for every one megawatt hour generated to two certificates from July 1.
The last-minute interest from consumers is being enhanced by speculation that the multiplier may be cut to a single certificate from that date, 12 months ahead of schedule.
The government has refused to comment on that speculation.
Jeremy Rich, the managing director of solar installer Energy Matters, said the combination of the solar multiplier changes, rising grid costs and the carbon price were causing more households to consider solar.
“The rising cost of living, and the falling cost of solar . . . there has definitely been a spike in demand,” he said.
Industry analyst Nigel Morris of Solar Business Services said solar demand installations were running at the top end of forecasts, which predict about 200MW of rooftop solar PV (photovoltaic) in the first half of the year.
“The uptake rates of solar PV have been very strong in 2012,” Morris said. “Undoubtedly, the planned reduction in the multiplier has been a driving force.”
He said the government might well have added further fuel to demand by failing to publicly confirm that it would not be a greater reduction.
“The fear of the unexpected change in the PV industry and consumers’ minds continues to drive unnecessarily strong demand and the potential for boom-bust market conditions all over again,” he said.
This sentiment was echoed by Adrian Ferraretto, the head of the nation’s only solar panel manufacturer, Tindo Solar, who said he was happy for the multiplier to be reduced, and lamented the “rollercoaster” of demand caused by various rebate programs and generous state-based feed in tariffs.
“We need sustainable and consistent policy with a national approach to feed-in tariffs,” Ferraretto said. “Rebates only distort the value of what customers are buying. They make cheap stuff look cheaper and expensive stuff look more expensive, meaning Australia has become a massive market for Chinese panels.
“The reduction in the multiplier needs to happen, and it is a good thing, as the price of panels have reduced significantly in the past 12 months. After the multiplier has reduced down to two times, the
net price of a system will be the same or less than what it was 12 months ago.”
Taking off
ANOTHER of the big changes in the local solar industry is the emergence of the commercial market, defined as the 20kW to 100kW systems, that can sit atop warehouses, office buildings, shopping centres, municipal centres and university buildings.
Commercial-scale solar has long been the sleeper in the industry, but because its costs are now considered to be at or better than grid parity, meaning the cost of installing large rooftop systems is cheaper than paying for grid-based power, it is expected to surge.
Morris says it could account for nearly one third of the Australian solar PV market by the end of the year, up from about 7 per cent last year.
In a landmark global study released late last month, McKinsey produced research suggesting that commercial-scale solar was one of four key markets where grid parity was already achieved, particularly in solar-rich countries such as Australia.
It said the “economic demand” for solar PV across the globe could top 1000GW by 2020, but its deployment would depend on barriers to entry, including the reaction of incumbent utilities. It predicted up to 370GW of residential and commercial solar could be installed world-wide in by 2020.
In Los Angeles, where commercial-scale solar is deemed cheaper than grid power, a separate study released this week found that 5GW of solar PV could be installed on available rooftops in the city. And after taking off in areas such as California, Hawaii, Spain and Italy, the commercial market is now getting traction in Australia, where the economics are also compelling.
McKinsey estimates the average global cost of rooftop PV in solar-rich countries to be about 27c/kWh. Australian businesses are being charged 30c-40c/kWh for grid-connected energy, and because solar arrays can be arranged so there is no or little export of energy back to the grid (which is poorly compensated), the owners are seeing immediate savings.
Peter Newman, a former head of the Australian Photovoltaic Association and head of Quantic, an advisory firm, said he had sealed several key deals in recent weeks, including a 100kW system for a shopping centre in Port Macquarie, a 30kW system at a manufacturing firm also on the NSW mid-north coast, and that demand for systems in the 20kW-100kW range was strong.
Commercial landlords were also looking to install large arrays of solar on their buildings, and offer lower energy costs to tenants. One client was installing 10kW systems on three different premises, Newman said. The developer of a new commercial building had redesigned the rooftop so it could accommodate a 70kW system.
Newman says the payback times for investment is now down to five years. They are attractive to electricity users, tenants and on the valuation of buildings.
“Many more companies are choosing to put systems of 20-100kW on their roof expecting a five-year payback, which is pretty good economics for a system with a life cycle of 10-25 years (10 for inverter, 25 for warranty on panels),” Newman says. “Grid parity for private companies really sits now within normal commercial propositions. It’s pretty amazing.”
Listed solar company Solco is also focusing on the commercial market for future growth. A month ago, it announced it had won contracts to install a 50kW system on council buildings in Mildura and a 65kW system on an electrical and manufacturing premise in northwest Western Australia.
Two other listed companies, CBD Energy and Silex Systems, also predict strong growth in the commercial sector.
CBD last month said the commercial solar sector was relatively immature, but beginning to grow rapidly. It had this week finalised a proposed merger with US-based Westinghouse Solar and would begin to market its products in Australia.
Silex has recently resumed assembly of solar modules at its Homebush factory, based on an anticipated increase in the commercial and utility-scale solar PV, which it said was being driven by plummeting prices for solar panels, and rising electricity costs.
“In that context, these projects are starting to drive themselves,” Silex chief executive Michael Goldsworthy said at the time.
Rich, from Energy Matters, said there was a lot of interest in the commercial sector, and that he expected a spike in demand in the coming six to 12 months. “It is taking off,” he said.
He expects the solar market to be installing between 2GW and 3GW a year by the end of the decade: “Given the cost of electricity, that is where we should be.”
By comparison, the biggest market in the world last year was Italy, which installed more than 9GW, followed by Germany with 7GW.
Germany is expected to install 7GW again this year. China is expected to install between 4GW and 6GW this year. By 2020, it and India could be installing more than 20GW a year, according to a recent report by KPMG.
