A silver lining remains for Australia's solar industry

While the federal government’s recent plans to review the Renewable Energy Target (RET) are steeped in controversy, the reduction or complete removal of the RET will not spell the end of Australia’s clean energy sector. Despite the negativity and doubt that surround Australia’s renewables industry, the reality is this country has all the ingredients it needs to foster the development of a strong renewable energy sector.

There is no denying that cuts or the complete removal of the RET - a legislated scheme that was put in place in 2001 to source 20% of Australia’s power from renewable resources by 2020 - will put a handbrake on the industry in the short term. Taking away the financial incentives for the installation of renewable energy with the displacement of the RET will leave home and business owners thinking twice about investing in clean energy.

The Australian Solar Council has predicted that this has the potential to destabilise the renewables industry with the potential for 8000 job losses. While it would specifically impact on the solar PV dedicated industry, these repercussions from changes to the RET will only be temporary and would potentially only last for months.

Australia can lean on the experiences of Europe where many government incentives have been progressively phased out as various markets move towards grid parity for electricity prices. Europe’s once highly incentivised solar energy markets undertook a natural transformation as solar PV systems became more affordable. Despite the initial turmoil, Europe’s renewable energy sector is learning that it can stand on its own two feet and will eventually emerge stronger than before. After the initial period of uncertainty passes with the RET review, we believe that solar PV companies who have been able to withstand the shake-up of the market will also come out on top. This is when the Australian solar PV industry realises it doesn’t need financial incentives to be successful.

While Australia is a relatively young renewable energy market, it is perfectly poised to become a global industry leader. It’s an often cited fact that Australia receives more sunshine than any other developed country. Even Victoria, which receives significantly less sun than most areas of Australia, still has the ability to produce more solar power than Germany - one of the world leaders in solar PV systems.

The initial growth in demand for solar PV in Australia was largely driven by the residential market as environmentally savvy consumers opted for a renewable energy alternative to reduce their carbon footprint and energy bills. A study by the Bureau of Resources and Energy Economics found that in 2010-2011, over 90% of solar energy generated was used in the residential sector, with the remaining 10% used in the commercial sector.

Despite the initial slow uptake, Australia’s commercial sector is showing significant promise in the first few months of 2014 and will likely follow in the footsteps of the residential solar power market. The Clean Energy Regulator reports that Australia’s commercial solar PV market has exploded over the last five years to generate 15 more times the electricity generated in 2007. Businesses are switching to renewable energy sources as they realise the benefits solar PV systems offer in delivering significant economic benefits to their bottom lines. Some sectors have more to gain than others with the mining and agricultural companies amongst those that may benefit most from PV power supply.

Of course, this is not an argument to support the drastic reduction to the RET and a gradual and foreseeable reduction to this incentive program will always be preferable to a sudden elimination in order to smooth out the peaks and troughs that the PV industry has always had to contend with. However, there is much more Australian regulators can do to promote the growth of Australia’s renewable energy sector. This includes planning, standardising and making technical improvements to reduce the barriers towards increasing the penetration of solar PV into the energy grid.

Instead of focusing on the current gloom and doom around the renewable energy sector, with the right political and legislative foresight the future does remain bright.

*Derek Durham is the Region Manager East - SolarMax and has over 15 years’ experience working in the global solar photovoltaic industry. He has gained extensive knowledge in technical, commercial and market developments from managing activities in 30 countries covering primary, secondary and developing markets for both grid-connected and off-grid sectors. Durham has been involved in different aspects of the solar industry from the design and installation of off-grid electrification projects in rural Africa to utility-scale project development in the Philippines.