What's in store for solar?

A major review of the Renewable Energy Target (RET) is currently underway by the federal government. Headed by former Reserve Bank board member Dick Warburton, the reviewers will report back to the federal government by the middle of the year. So what could this mean for the future of renewables, in particular solar?

The Renewable Energy Target (RET) scheme was originally established to ensure that 20% of Australia’s electricity comes from renewable sources by 2020. Since January 2011 the RET scheme has operated in two parts - the Small-scale Renewable Energy Scheme (SRES) and the Large-scale Renewable Energy Target (LRET).

Both create a financial incentive, using certificates managed by the Clean Energy Regulator, for the establishment or expansion of renewable energy - either in large-scale power stations, such as wind and solar farms and hydro-electric power stations, or small-scale rooftop systems.

John Grimes, the CEO of Australian Solar Council (ASC), believes any changes in the RET could have a devastating effect on the industry and many jobs could be lost if the scheme is axed. Fearing the worst, the ASC has launched a ‘save solar’ campaign and has already raised a fighting fund, which is expected to help the association craft out key media messages to help save the industry.

Lessons from the US

The federal government is reported to be split on what to do about the mandatory RET and one senator has commented that we should learn lessons from the US, which has power prices over three times cheaper than ours.

Paul Nahi, CEO of Enphase Energy, whose company has recently established in Australia, was here on a recent visit, so Sustainability Matters asked him to comment on solar.

Nahi says this phenomenon (of axing subsidies) has been seen over and over again in multiple countries all over the world.

“I do truly believe that the incentives/subsidies structure needs to be a catalyst not a crutch. We should be looking at moving towards a self-sustaining industry over time,” he says.

“Having said that, we have to recognise that all energy is subsidised and frankly, solar energy is far less subsidised than current fossil fuel energy. So, if we are talking about reducing or eliminating subsidies, we should be talking about it across all energy, worldwide, which I am a big proponent of.

“I’d love to see the market perform in its natural state sending the appropriate prices and allowing the public to respond. This will allow innovation and technology to create a better and cleaner form of energy on a level playing field.

Although, Nahi points out, he doesn’t have a thorough knowledge of politics in Australia, he believes that sudden swings or lack of predictability in policy could be very detrimental to the development of this industry. “A lot of the amazing work that has established the solar industry in Australia could be really affected by this,” he says.

“If a self-sustaining industry is desired, it is important to have a predictable long-term path towards elimination of subsidies.

“Speaking from the US point of view, what has worked in the past to influence government is providing them with a deeper understanding of the local jobs you’re creating and the ability you’re giving to the consumer to lower their electricity bills.

“Part of what is incumbent on the solar industry is to work closely with the utilities, and they need a willing participant, of course, for this to work. A business model that allows the utilities and the solar industry to thrive needs to be developed.

“Here’s the bigger challenge,” he says. “The dynamic that is making solar a threat to the utility is that solar is only going to get better over time. Independent of solar, the cost of fossil fuel is continuing to go up, the cost of solar is continuing to go down. We are still only in the early days of solar and it’s only going to get a lot less expensive over time, whereas fossil fuels have nowhere to go but up.

“If you fight that you are going to be on the wrong side of history.

“Eventually solar is going to take its rightful place and have a very meaningful part of the energy mix.”

Innovations in store for solar

Moving on from the stand-alone system focus, energy management innovation is on its way for solar. Consisting of three pillars: solar generation, local storage and load management, Nahi says all this is coming for solar and very much part of the Enphase vision.

It will also be vital to have the appropriate finance vehicles to support this innovation. “We are seeing the growth of these finance vehicles in the form of consumer loans becoming more prevalent.

“The consumer of the future will have the ability to be self-sufficient in terms of energy,” he says.

“I’m definitely not saying everyone go off-grid. Utilities play a purpose and they have been instrumental in societies across the world. We want a healthy utility industry but we cannot have an industry that is at odds with what is in the best interest of the consumers.

“We do need a business model that works to generate as much energy from clean sources as possible.”

Learning from the US experience, the Australian solar industry needs to ensure a close and cooperative relationship with the utilities and to educate the policymakers and general public about the cost and job benefits of increasing solar penetration. If this can be achieved with the ASC’s ‘save solar’ fund, the future of solar (and all renewables) could be a whole lot better off.

Paul Nahi President, Chief Executive Officer of Enphase Energy:
Based in San Francisco, Nahi has over 20 years’ experience in both entrepreneurial and multinational high-technology companies. Most recently, he was the CEO of Crimson Microsystems, a fabless semiconductor company specialising in large-scale SONET ICs for the telecommunications industry, with customers worldwide. Prior to Crimson, he was the CEO and co-founder of Accelerant Networks, a semiconductor company that designed and developed intelligent multigigabit transceivers. Accelerant was acquired by Synopsis, Inc (Nasdaq: SNPS).

Enphase Energy:
Founded in 2006, Enphase Energy developed what is claimed to be the first commercially available microinvertor, which converts DC output from a single solar module into an AC current. Today, the company has reportedly captured between 40-50% of the US market and, according to Nahi, the secret for its success has been the higher rate of return for owners, and the low-voltage installation creates a profitable business model for installers.