Solar energy: a bright future that is unwritten?

The RET review may have cast a cloud of insecurity over the viability, investment options and future of the renewable energy industry, but Daman Cole*, Yingli Solar, believes that solar energy has a bright future. Read on to find out why.

It is impossible to write about the solar energy sector in Australia without acknowledging the current levels of political uncertainty in the market. Many pundits are waiting for a review of the Renewable Energy Target (RET) to be completed which would determine the state and future of Australia’s clean energy industry. While this has cast doubts over the future of the industry, we believe that solar energy still has a pivotal role to play in Australia for many years to come.

Australia has seen a significant uptake in the renewables market in the last few years. According to the Climate Council, over one million rooftops (representing over 2.6 million Australians or 10% of the population) now contribute solar power towards residential and commercial use. This is a staggering jump from the 8000 rooftops which had a solar photovoltaic (PV) system just five years ago. In addition, according to solar energy consultant SunWiz, there has been a growing shift to commercial PV with 17% of recently installed capacity falling into the 10-100 kW range as businesses wake up to the power of solar PV to reduce their operating costs and mitigate business risk. All these statistics challenge critics who attempt to position solar energy as an unreliable energy source for Australians.

The RET was designed to deliver the equivalent of 20% of Australia’s electricity from renewable sources by 2020 and it comprises schemes for businesses and home owners to support an increase in renewable energy generation. The RET has certainly created a positive impact for Australia’s renewables industry, providing a level of certainty in the marketplace for investors and developers to place a value on their investment in renewable energy technologies such as solar PV systems.

But solar’s growth has been driven by many other factors as well as government support. Retail electricity prices have been rising steadily over the last five years, and according to the Australian Energy Market Commission, retail electricity rises will increase by an average of 1.2% a year between 2012/2013 and 2015/2016. However, in some states like Queensland, prices are tipped to go up by as much as 8.6%. This has forced consumers and businesses to think about how they can protect themselves from these increases.

According to two separate studies, bill shock and individual and corporate environmental impacts are key contributors towards the uptake of solar PV. Recent Roy Morgan Research found that the proportion of Australians with solar panels has more than doubled in the past three years, with nearly one in six Australians having installed solar panels in their homes. With nearly all government feed-in tariffs (FiTs) having been phased out for new residential solar PV systems over the last few years, Roy Morgan’s findings suggest that households are turning to solar to realise cost savings. On the other hand, a study by the Alternative Technology Association has shown the motivations behind Australians purchasing solar power systems go beyond cost savings. Nearly half of those surveyed said they wanted to increase renewable energy generation in Australia, while only 19% installed solar power or solar hot water systems to reduce their electricity bills. Together these findings indicate that solar PV ownership is likely to weather the storm of the RET uncertainty.

Over the past few years, increasing consumer demand, technology efficiencies and market competition have all played a part in reducing the price of solar PV technology. The Australian Photovoltaic Association (APVA) revealed the cost of installing a solar PV system is less than a quarter of what it cost 12 years ago. This has made Australia one of the few countries in the world well positioned to achieve grid parity in the near future - where the cost of electricity generated by rooftop solar is equal to the retail cost of power generated from the grid.

We are already seeing the next wave of demand coming through Australia’s commercial sector. According to the Clean Energy Regulator, the demand for solar PV from the commercial sector has expanded rapidly over the last five years to offset peak demand and it now contributes almost 15 times the electricity generated since 2007.

Businesses that have heavy electricity usage during peak daytime periods are increasingly considering an investment in solar as they realise how much more affordable it is to generate their own electricity instead of purchasing this from retail providers.

Solar power is now viewed as a ‘de-risking’ strategy that protects businesses from unpredictable short-term power prices and buffers increases in the future. This has established a base of confidence for the investment in solar PV for the years ahead. Many customers we speak to, whether they are small, medium or large businesses, have expressed their endorsement for solar PV as it offers a solid return on investment, with low operational and maintenance costs. For example, Exquisine, a dessert manufacturer in Thornbury, Victoria, relies on solar power from its rooftop installation to provide 300 kW hours per day of electricity. The company’s investment in solar PV is expected to provide an ROI of between 20 and 25% per annum. An APCO service station in Albury, New South Wales, has recently claimed to have the world’s largest solar PV installation on a rooftop and it expects its investment in solar to be paid off in less than four years.

The annualised return on investment for solar PV installations can be up to 25% for businesses and this makes solar an attractive option. The availability of financing such as leasing models, power purchase agreements (PPAs) and environmental upgrade agreements (EUAs) means businesses and commercial property owners can finance environmental improvements, such as energy reduction or efficiency programs, to their buildings with a greatly reduced upfront cost. This will expand in future as more players enter the market to offer a wide range of commercial leasing options to help businesses overcome the financing barriers associated with solar PV investments.

The network infrastructure for electricity distribution continues to play a significant role in determining electricity pricing. According to the Clean Energy Council, as much as 50% of the cost for retail electricity goes towards meeting the cost of Australia’s network delivery infrastructure. The distance between energy generators, homes and businesses often means it is costly to build and maintain the infrastructure. CSIRO’s Future Grid Forum has painted scenarios in the future where it would be possible for communities to go off the grid. In the future, off-grid communities will present new opportunities for the electrical industry looking to pitch their expertise to potential customers by incorporating a combination of technologies to meet the peak and off-peak energy requirements of these communities.

Many of these scenarios will drive a perfect storm for the rise of solar - the rising cost of delivering electricity through a network infrastructure, a future where the price of fossil fuels and gas required to run generators will escalate and improvements to battery storage technology will increase the viability and demand for off-grid solar PV systems. A recent Morgan Stanley report has suggested that the falling cost of both solar modules and battery storage presents a potential tipping point that will encourage huge numbers of home owners and businesses in the US to go off-grid. This is likely to have a flow-on effect for Australia.

While the government has made some inroads in encouraging the adoption of Australia’s solar PV industry, we agree that there is still much to be done. It is clear that solar PV has a strategic role now and into the future in tackling climate change. The rapid uptake of solar PV by Australian consumers and businesses has already made a significant impact on households, business returns and reducing the country’s greenhouse gas emissions.  It is also playing a major role in increasing awareness of optimal electricity usage, and the possibility for efficiency gains.

The challenge is to enhance recognition of Australia’s enormous renewable energy potential and convert it into acceptance that investment in renewable technologies, such as solar power, is a great long-term investment. To use that ever-present solar industry cliché, the future is bright despite the shadow of uncertainty we are facing right now.

*Daman Cole is the Managing Director for Yingli Solar in Australia, New Zealand and the Pacific. He is responsible for establishing the Yingli Solar brand and business in the Oceania region, as well as selecting and supporting industry partners and projects to increase the company’s market share and profitability in the region. Cole brings a wealth of experience to this role, with previous roles including national sales and commercial manager in the energy, technology and construction industries. His skills include end-to-end contract management, project management in complex tenders, strategic development, identifying new product opportunities and relationship building for business. He started at Yingli in October 2012, fuelling his passion for solar design, energy-efficient products and renewable energy systems. Cole is passionate about Yingli Solar’s innovative products and an attitude that he believes sets the company apart from its competitors.