Australia has long been lauded as a PV market with astounding potential. Drenched in sunshine, blessed with vast open space and with a history of world class solar innovation, it should be a leading country; so where is it up to?
We asked Australian industry analyst, Nigel Morris of SolarBusinessServices for a run down.
The SolarCoaster
Despite years of a declining global market position, Australia has experienced the ride of a lifetime in the past two years, growing from an annual installed capacity of 20 megawatts (MW) in 2009, to 360MW in 2010 to an anticipated 700MW in 2011.
This sometimes precarious ride to growth has put Australia back in the top 10 of global markets, and on a per capita basis it ranks amongst the world’s best, with a population of only 23M.
This growth has been driven by a convergence of events that no one expected. A highly favourable exchange rate for imports, rapidly rising electricity prices, declining product costs, ferocious competition and a range of state and federal incentive programmes aligned to make PV incredibly attractive in the last two years - and the market responded.
Australian consumers, with their penchant for independence and a growing concern for the environment, simply couldn’t resist the proposition. Intriguingly however, research has shown that a new breed of PV consumers were the major consumer group in this new rush. As has been demonstrated in so many other markets, when the financial proposition for PV becomes undeniable (try two years payback and 25 per cent return on investment in some cases) personal reward takes over as the market driver, way beyond environmental concerns.
The policy driver
Policy (or lack of it) is a major driver in Australia. But growth at this rate couldn’t continue, and the market is now confronting a plummeting ride down into the policy “valley of death” as it’s known. The incentives have largely been wound back, prices have risen and the fall-out from get-rich-quick industry entrants continues. Like many other markets, bankruptcies and downscaling is rife.
Those in the know can see the light at the end of tunnel however. The “pendulum of favour” will swing back; indeed there are signs it is starting to shift already with an impending Carbon Price and hundreds of thousands of proud new PV consumers bragging to their neighbours. The big question is how much damage will be done in the meantime.
And we have prospects for large scale PV at never seen before levels; 150MW at Morree, 10MW at Geraldton, 1MW at Alice Springs and 1.2MW projects in Brisbane are underway. Commercial markets, for the most part, lack policy incentives but raw economics are starting to drive this new emerging opportunity. The exception is the Carbon Price that is widely anticipated to change the sentiment of the market, although some uncertainty remains while the details are finalised.
We have penetrated around seven per cent of the available homes with PV; but not even scratched the surface of the massive commercial and industrial opportunity.
The future
While our leading scientists continue to innovate – and find powerful industry supporters – the industry at large is knuckling down to figure out what’s next. Only the intelligent, the strong and the innovative will survive and there are signs of this happening too. Innovative finance, intelligent economic analysis and new products are starting to emerge – as distinct from simply catching sales that fall from the sky in a bull market.
Even under optimistic scenarios it could take several years for the market to come close to 2011’s highpoint, but pundits - government and industry - are notoriously conservative. There’s every chance that sheer guts and determination will drive growth and if the “policy pendulum” swings in our favour too, we will see a new breed of survivors who have considered their position well and are ready to execute their plans.
Intrinsically, the majority of Australians love the concept of using PV to generate low cost, independent and clean energy, and our government is made up of those same people. On the back of the last few years, Australia will undoubtedly have a pivotal role in shaping the region’s energy mix.
It probably won’t be a merry go round for the next few years ride, but give me the thrills of the solar coaster any day.
Nigel Morris is a market analyst and director of SolarBusinessServices.
SolarBusinessServices have just released a 5 year forward industry forecast, describing in detail the assumptions drivers and forecasts for the Australian PV Market. For more information contact Nigel Morris at SolarBusinessServices at nigel.morris@solarbusiness.com.au
