Australian rooftop solar power: down but not out

Residential solar PV will be around as long as the sun shines, but long-term growth could be constrained by the limits of the electricity network. That’s the conclusion of energy research specialist Energeia, which recently found that the the residential solar PV market is falling 56% in 2012, after growing 58% in 2011.

“This roller-coaster was a direct response to government incentives that encouraged rapid uptake before they were unexpectedly wound back,” said Managing Director Ezra Beeman.

With the collapse of the solar PV market, about one-quarter of the industry players have either left voluntarily (such as BP Solar) or gone into receivership (including national retailer Solar Shop and Queensland-based Beyond Building Energy).

“We expect the decline to continue through 2013, when the market should recover in response to fundamentals,” said Beeman.

The key drivers of demand are electricity prices and the cost to buy and install solar PV systems. System prices continue to fall and electricity prices, in particular peak prices, continue to rise. Energeia expects growth in the number of solar PV installations to average around 6% per year from 2014.

This is one of the implications of Energeia’s recent modelling and analysis published in ‘Pushing Limits: Australia’s Residential Solar PV Market to 2021’. This report expands on Energeia’s earlier work on the solar PV market in 2010.

Despite the tough market conditions now, Energeia has revised upwards its long-term outlook. “We expect total installations of around 1.5 million units and installed capacity of 2700 MW by 2021,” said Beeman. “This represents more than 20% of the residential electricity market - big enough to have an impact on the electricity market and midday prices.”

This outlook - tough in the near term, but strong in the longer term - is pushing the financial limits of industry players. “It’s no longer enough to put out your shingle and start selling,” said Beeman. “Survivors will be those with a long-term view, a balance sheet to match and a well-timed product and marketing strategy.”

Energeia expects the growth in solar PV to push the limits of the electricity distribution networks as well. As early as 2016 in South Australia, the network will reach its conventional capacity to accept additional residential solar PV connections.

“This will be a bigger dilemma for the industry than the current downturn,” said Beeman. “It raises the prospect of network operators telling consumers and their solar PV suppliers that they cannot connect to the network. Network operators need to start working on this issue now to avoid significant political pressure in the next couple of years.

At the same time, a technical solution may become commercially viable - residential energy storage. This is the topic for Energeia’s report ‘Game Changer: The Australian Residential Energy Storage Market to 2021’, recently released to strategic research clients.