Figure 1: Rebated Australian Grid Connected Solar Power Installations (kW/year). Source: Solar Homes and Communities Program statistics.

The short answer would be ‘no’. Chances are that 2010 may see a fall in Australian Solar PV installations. A fair share of last years’ growth was assisted by an A$8/Watt federal government rebate which was capped at $8,000. When this rebate was combined with Renewable Energy Certificates (RECs) it meant zero-cost 1 kW solar power systems could be offered by solar installation companies. Since then though the amount of initial support from the government has dropped by more than 50% with the rebate being replaced by the Solar Credits scheme. So what does this mean? Simply put it means Photovoltaic (PV) solar is no longer free and as a result sales have declined considerably.

2010 now shapes up to be a potentially bumpy ride for the Australian PV industry. Having the ability to sell free systems and make a reasonable profit drew many new industry entrants around the end of 2008. This enabled a rapid increase in the amount of solar energy systems being installed during the first half of 2009 until the government’s abrupt ending of the rebate. This snap decision by the government not only sent shock waves through the industry but infuriated many home owners throughout Australia hoping to take advantage of the rebate.

While legislation was being passed on Solar Credits, the solar industry got to work installing the 63 MW of solar systems issued under the pre-approval for the rebate. The solar industry then took a further setback when the REC’s value plunged from $50 to $30 which meant the value of Solar Credits (in effect a REC multiplier for the first 1.5kW of a solar system being installed) plummeted from $5150 to $3090 for a 1 kW system (from $7750 to $4650 for a 1.5 kW system). Then as a geared-up industry started installing 8 MW a month, sales volumes fell through the floor.

Figure 2: Grid-connected solar power installations, 2009. Source: Source: Solar Homes and Communities Program statistics.

Setbacks aside the Australian PV industry marched on and installed another 4,600 solar credit systems adding another 12 MW to the total of already installed solar systems in Australia. Naturally though, those states with a Feed-in Tariff (FIT) have been far more successful when it comes to selling systems under the solar credits scheme. With New South Wales announcing a Gross Feed-in Tariff of 60c/kWh, it is expected demand will continue throughout 2010.

What this tells us is that even though affordability has been reduced, demand for PV solar systems remains strong, especially in states with a Feed-in Tariff. At present all states are offering a Feed-in Tariff with the exception of Western Australia who will commence a Feed-in Tariff in July of 2010. So just how much will get installed in 2010? Well there is no real way to tell however approximately 28 MW of the pre-approved rebates from 2009 remain to be installed. As for how successful Solar Credits will be, well this comes down to just how well the industry copes with any further setbacks along with the individual performances of salespeople within the solar energy industry.

Figure 3: Percentage of 2009’s Australian solar power installations receiving Solar Credits. Source: Compiled from data on the REC Registry.

Sadly though, the evidence on hand highlights the potential immaturity of the solar industry in this country. A large number of recent industry entrants are still selling on price alone which means they are either unaware of prior setbacks or have simply ignored them all together. During the back end of 2008 Australian solar panel prices sky rocketed on the back of a weakened Australian dollar which coincided with Spain’s infamous PV demand. These events pretty much left low-margin operators stranded and unable to compete in the market place. Having said that these factors are currently in reverse and our industry may well pay the price when demand catches up with supply during 2010.

Additionally, many companies entered the market during a time when lowest prices, driven by rebates, brought greater market share. As a result, very few companies are informing their customers of the value in larger solar energy systems. Even though the average size of systems being installed has increased with solar credits, this is largely due to the fact a majority of sales are now 1.5kW not 1 kW. Meanwhile the installation of 2 – 4 kW systems are now in decline and have become less common than they were under the rebate out shown in Figure 4. Unfortunately, what customers are not aware of is the fact that over a 10 year period a 1.5kW systems creates barely enough revenue to replace an inverter meaning their investment may well be wasted.

Figure 4: Proportion of PV Systems of 2-4 kW in size under each government support mechanism. Source: Compiled from data on the REC Registry.

Using more innovative sales techniques may improve the outcome for both solar businesses and their customers. Regardless of the 1.5-kW Solar Credit sweet spot, a larger solar power system offers a more favourable long-term financial and environmental benefit. Even in those states with a net FIT, a larger system will earn a substantially higher premium revenue because they feed more power in to the grid, dramatically reducing payback (Figure 5). Even states with a gross FIT, a larger system will provide stronger insulation from rises in the price of electricity, which may be as much as 68% over the next three years.

All that aside, the fact remains, larger inverters are more efficient and also cost less when proportionally measured. Solar companies able to convince customers to upgrade their system size and incorporate energy efficient technologies may well produce better outcomes for both customers and the industry overall. This would strengthen customer relations with a benefit from greater gross profit and diversified income streams that are less dependent upon government support.

Figure 5: Likely System Payback under a net Feed-in Tariff, as varying with system size and household power consumption levels.