Australia’s Road To Cheap Solar Power Also Leads The Way To Energy Storage

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Australians now have access to some of the cheapest electricity in the industrialized world — but not because grid electricity rates are low. In fact, Australians pay a lot for the electricity that they purchase from their utilities (and are generally quite unhappy about this). Instead, as Hugh Bromley of Bloomberg New Energy Finance pointed out in a talk at the Solar 2015 conference in Melbourne (discussed by Tristan Edis here), Australia’s cheap electricity is coming from rooftop solar. In a nutshell, this means that Australia is primed for residential energy storage in a way that few other nations are — and it may just be a matter of the introduction of the right technology to set off the energy storage boom that the industry has been waiting for.

Depending on their political leanings, many folks blame the electricity price rises on the carbon tax (RIP). Some still even think that government subsidies for solar are what is keeping solar system prices low and grid electricity prices high. But most folks are aware by now that over-investment in network infrastructure is the main culprit in ballooning retail prices. Once you’ve recognized and moved past this misconception, perhaps you can sit back and appreciate the unusual story behind the favorable economics of solar in “the Lucky Country” — and where things are headed. Chip in a few dollars a month to help support independent cleantech coverage that helps to accelerate the cleantech revolution!

How Did Australian Solar Get Like This?

Incentive-driven boom & bust moves over for an (almost) subsidy-free market

Australia has endured (or enjoyed?) years of erratically implemented solar incentives and associated solar market jitters. This is illustrated quite clearly in the graph below from the APVI, where every major peak is closely correlated with a deadline for some incentive. Even the country’s baseline solar support policy — the Renewable Energy Target — has seen a number of premature reductions and political setbacks, and is just now finally about to emerge from an antagonistic 15-month “review” that effectively forced the nation’s large-scale solar market into virtual hibernation.

APVI installation numbers

Meanwhile, state-based feed-in tariffs have all long dried up for new customers, so anyone looking to install a new system will find that the excess power they export to the grid is worth effectively nothing (or about AUD6-8¢/kWh vs the AUD20¢+/kWh that they pay their electricity retailer). But that hasn’t stopped Australia from steaming ahead: due to the almost comically (or tragically) high retail electricity rates, it still makes financial sense for homes and businesses to get a system as long as they can use the electricity it produces themselves. This is why 60–70MW of (mostly residential) new capacity is still being installed on a monthly basis — despite the fact that the heady days of strong (and in some cases badly thought out) incentives appear to be over.

A lot of the continuing interest is undoubtedly thanks to the Renewable Energy Target, which is the only real incentive left for solar PV in the country. Even in its weakened form, the small-scale segment of the RET still effectively shaves something around 30% off the cost of installing new systems under 100kW, while the large-scale segment provides ongoing incentives for larger systems. It became clear relatively early on in the RET review fiasco that incentives for small-scale solar would probably be safe, but until that certainty arose (towards the end of 2014), Australia’s solar industry benefited from a temporary surge in interest and urgency to go solar. Since then, there have been smaller surges in interest every three months — around the time that everyone’s quarterly electricity bills get delivered.

Low prices on mostly imported parts

Even without the strong incentives that once were, there is still demand for solar in Australia because people know that it is both affordable and commonplace. About one out of every ten homes has a system, and there are now about 4 GW of capacity installed across the country (again, mostly on roofs). Although the RET plays a big role in bringing prices down, being a prime market for cheap imported panels helps a lot, too.

You’ve probably heard about the anti-dumping cases against Chinese panel manufacturers in the USA and Europe. These trade cases came up because the US and Europe have panel manufacturers of their own to protect, and wanted to prevent artificially cheap Chinese panels from flooding in. Last year, apparently encouraged by these actions taken overseas, Australia’s only panel manufacturer, Tindo, pushed for an investigation into the dumping of Chinese panels into Australia as well — only for the Australian Anti-Dumping Commission to ultimately find no grounds to impose import tariffs. The Commission reached this determination not because they found that there was no dumping (in fact, they found that there was) — but rather because they reckoned that the cheap panels were not doing any harm to the industry. Most solar installers and renewable energy advocates opposed the anti-dumping case.

The low prices are definitely helping to keep people interested in solar, but it also means that Australians need to be a bit wary of what they’re buying. There are quite a few reports of systems being marketed for prices at or below $1/W — fully installed. As industry analyst Nigel Morris of Solar Business Services has pointed out, it’s hard to explain how any company could sell systems this cheap and still make a profit. Regardless, this provides a good indication of just how cheap solar is down under — especially compared to US solar installation prices (although they are certainly falling). Systems are so affordable in Australia that solar penetration has managed to get as high as it has without the need for rooftop solar leases or PPAs — which have been crucial in the growth of the US solar industry.

Primed for energy storage, waiting for the right solution

So what happens when you combine low system installation prices, high retail electricity rates, low solar export rates, and a populace disgruntled about their utilities? The logical next step is home energy storage. Lots of people are writing about it, and lots of people are asking about it (about 1 in every 3 Solar Choice customers expresses interest in batteries). It seems that almost everyone — industry players, customers, and renewables advocates alike — is looking for a solution that will make smart financial sense that will ignite the powder keg of Australia’s energy storage potential. And it’s worth noting that virtually no one is counting on the government to bring in incentives in support of batteries to accelerate the process.

But what will it be? Tesla’s Powerwall debuted with a big splash, but demand is apparently off the charts even before production has begun — so despite the estimated 6-year payback some analysts predict it could deliver here in Australia, no one is going to get their hands on one anytime soon. And meanwhile, there are plenty of other options readily available here (I’ve been keeping an admittedly incomplete list here). Maybe one of these will be the company to crack the code? 360Storage, one of the leading energy storage wholesalers in the country, claims that installers in their network already put in nearly 1,000 systems, which would mean they are quite possibly in the lead when it comes to making energy storage work. However, because it’s still early days, things can — and are likely to — change quickly.

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