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Rooftop solar PV to be energy game-changer in Australia

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The Australian Energy Market Operator has produced a landmark report that, for the first time, recognises rooftop solar PV as a significant source of energy in the National Electricity Market, and includes forecasts that could have a profound impact on the way electricity is consumed and produced – and talked about – in this country.

In a report entitled Rooftop PV Information Paper, AEMO says that up to 18,000MW of solar PV could be installed on Australian rooftops by 2031 – under its high growth scenario – when it could potentially account for around 10 per cent of the electricity produced in the country. Even its medium scenario predicts 12,000MW of rooftop PV.

The forecast by AEMO is the first formal recognition by an Australian energy authority of the potential of rooftop solar in Australia – something that had remained the province of the solar industry itself, as well as a handful of consultants, the Greens, advocacy groups, and web sites such as this.

The report is in marked contrast to the Draft Energy White Paper produced for, and released by, federal energy minister Martin Ferguson last December, which predicted that solar – in all forms, including utility-scale solar PV and solar thermal – would account for less than 3 per cent of Australia’s electricity capacity  by 2030, or 2,000MW in all forms.

AEMO has not produced its own percentage estimates, but its top-end forecast suggests that rooftop PV could generate 28,000 gigawatt hours (GWh) of electricity in 2031. That is potentially around 10 per cent of the forecast for the entire eastern Australia grid by that year. In 2011, solar PV accounted for just 0.6 per cent of 196,440GWh produced. (It should be noted that the AEMO forecast is for the National Electricity Market only, so it excludes WA, the Northern Territory, and separate grid areas such as Mt Isa).

And while the Draft Energy White Paper suggested (to the amazement of many) that installations from rooftop PV would effectively cease after the renewable energy target ends in 2030, AEMO says the economics would be so compelling that by 2020 consumers could be getting a 3-4 year payback on solar PV and a 1-2 year payback by 2025. Based on its numbers, if the market does slow down around 2030 it would only be because it had become saturated!

The significance of the AEMO report is several-fold. From a technical point of view, it means that rooftop PV will now be included in its demand forecasts, and in its statement of opportunities – the energy bible that is used as a guide to what opportunities exist for developers who are thinking of building new gas or other generation assets. AEMO will update its demand forecasts by the end of June, and then issue a separate Statement of Opportunities.

Another significant aspect is the potential changes this makes to generation assets. A deployment of the scale being contemplated by AEMO suggests a “merit order” impact on existing generators of some significance. In Germany, where 25GW of solar PV accounts for just 3-4 per cent of the annul electricity production (although more than a third of production on some recent sunny days), the merit order impact is already having an effect to the point where the profits of established generators are being erased and major utilities such as RWE and E.ON are refusing to build new gas-fired generation.

The third impact is on the way energy is consumed at the household level. AEMO’s high forecasts suggest nearly half the households in the country with an available rooftop could be taking up solar PV, and a lot more thinking about it.

This has two implications – it means that households have an option to hedge against what appears to be an inevitable increase in electricity costs (and a sharp one at that), and it could change the political discourse around clean energy and the cost of living, particularly in light of the polemics around the carbon price and green energy schemes in this country. But will any politician be able to seize the moment?

AEMO says there are some physical constraints of networks that could limit the uptake, and this may require extra investment to deal with, and household electricity storage could also play a role.

It is important to note that these forecasts do not include very large commercial-scale rooftop PV installations of more than 100kW, or ground mounted or utility scale plants.

In detail, AEMO expects a modest growth in rooftop PV over the next five years as the industry adjusts to the removal of incentive schemes such as feed-in tariffs. It predicts 320MW a year until 2017.

From 2018 to 2025, however, economic payback is expected to improve strongly, with innovative financing reducing the problem of up-front payment, and commercial buildings joining the trend.

“The moderate uptake scenario sees this accelerate, averaging 620 MW per year, while the rapid uptake scenario forecasts new installations to average 1,130 MW per year. The slow uptake scenario misses out on this phase, suppressed by relatively poor payback,” the report says.

“From 2026 to 2031, payback is expected to improve. Uptake is forecast to continue strongly for newly-built dwellings, and for upgrades or replacements of existing systems. Fresh installations on existing dwellings may start to slow, as the most suitable dwellings have already been taken by earlier installations.”

It notes that PV energy produced in 2011 is 1,200GWh, but by 2020 this could be the monthly generation, depending on where the capacity ends up, and by 2030 it could be double that.

The report’s three uptake scenarios are slow (driven by small electricity price increases and PV price reductions, and no government incentives); moderate (moderate electricity price increases and PV price reductions, and moderate government incentives); and rapid (large electricity price increases and PV price reductions, and significant government incentives).

But as this graph below suggests, the rapid uptake does not fall that far short of predictions made by the likes of Suntech, but is well above the references used by the Draft Energy White paper, many of which relied on prices from 2009/10. Solar PV prices have fallen by nearly half in the last year alone.

In NSW, its medium and high take-up scenarios suggest the amount of solar PV rising from 461MW at the end of February to 4,450MW or nearly 7,000MW by 2031; Queensland jumping from 427MW to 3,530MW or around 5,500MW; Victoria going from 288MW to 2350MW or nearly 4,000MW; and South Australia jumping from 267MW to 1,370MW or around 2,200MW.

Implications including the effect that increased rooftop PV penetration and any cross-subsidy arrangements might have on retail electricity prices have not been analysed.

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  • Rob

    “In detail, AEMO expects a modest growth in rooftop PV over the next five years as the industry adjusts to the removal of incentive schemes such as feed in tariffs. It predicts 320MW a year until 2017.”

    But hang on didn’t Warwick report yesterday that we did 795MW in 2011 alone? http://reneweconomy.com.au/2012/solar-insights-australia-big-in-small-solar-65337

    And 2012 is looking about the same or maybe more. How do we reconcile such a big difference between the AEMO report and the data to hand?

    Seems like the AEMO’s view will be blown out of the water. It’s also pretty clear we will run out rooftops especially in Qld, all because of government overstimulus. Better for the industry to have a smooth rollout with a longer term future than a feeding frenzy followed by a bust.

    Qld will do 400MW or more small rooftop this year, but they’ve probably only got around 2000MW of potential small rooftop business at most which will soon be half consumed.

    Its not logical to be making any long term investments if you are operating in that market. The rational thing is to prepare for the exit and making short term tactical moves in the interim. This is not good for those customers with their 25 year warranties. Nice outcome you government (Federal and State) policy guys!

  • http://www.dancass.com/blog Dan Cass (@DanJCass)

    Why does DRET undermine solar to the point of harming its own technical credibility?

    It is because DRET’s ‘audience’ is not the public, or the parliament, or the informed, or the concerned, but that tiny elite that Guy Pearse called the Greenhouse Mafia, who have a profit motive to see solar sabotaged?

  • http://www.sunwiz.com.au/index.php/resources/59-useful-data/222-solar-forecast-for-aemo.html Warwick Johnston

    To read the in-depth forecast prepared for AEMO by SunWiz and Solar Business Services, visit http://www.sunwiz.com.au/index.php/resources/59-useful-data/222-solar-forecast-for-aemo.html

    • Rob

      Hi Warwick

      Great report! One query, in the first paragraph you say: “Though PV rollout has recently been slowed by a cutback in government support levels, …”

      I don’t that’s really accurate any more. We had a brief one month spike in June 2011 where 66,000 systems were installed ahead of the reduction in the multiplier which is typical behaviour of the PV market globally, due its capacity for rapid a surge in roll out given short lead times and capacity for quick installations. So June 2011 is not a genuine indicator of rates, its a transient. That June 2011 month result aside current installation rates appear higher than any other month on record. And next month the indicators are that we could well even eclipse the June 2011 transient.

      The True Value solar interview implied a national rate of 93MW in May which if sustained would give over 1000MW in 2012 which is 25% more than 2011’s 795MW.

      That just doesn’t seem consistent with the notion of a slowdown. What is happening looks a lot more like acceleration. The weekly plot of STC registrations shows a steep upwards trendline with over 1 million STCs registered last week.

  • michael r james

    I am a bit sceptical of this but pretty remarkable even if a twofold exaggeration:

    http://www.smartplanet.com/blog/intelligent-energy/solar-electricity-world-record-germany-cranks-half-its-power-with-pv/16354?tag=nl.e660
    Solar electricity world record: Germany cranks half its power with PV
    By Mark Halper | May 29, 2012

    Some people believe that Germany’s walk away from nuclear power will lead it down a path to more fossil fuel plants and all the CO2 emissions that come with them.
    But for a day or two last week, the country was cranking solar electricity like it or no nation ever has, according to the International Economic Platform for Renewable Energies in Muenster. The group said in a press release last Saturday that photovoltaic operations in Germany were producing at 22 gigawatts for a cloudless stretch beginning at around noon on Friday, May 25.
    As the institute pointed out, that was the equivalent of about 20 nuclear power plants.
    “There are currently no other countries on earth producing solar plants with a capacity of 20,000 megawatts (20 gigawatts),” director Norbert Allnoch said in the release, translated roughly into English by Google.
    Reuters followed that announcement with a story the next day saying the 22 gigawatts furnished nearly 50 percent of Germany’s electricity at the time. A version of the Reuters story in the Chicago Tribune suggested that German solar was running at 22 gigawatts per hour from around noon on Friday through Saturday afternoon.
    I’ve asked the Muenster group to clarify their gigawatts from their gigawatt hours and their gigawatts per hour — a clarification that energy engineers will appreciate. I haven’t heard back yet.

    • Concerned
      • michael r james

        And I wonder if you believe the best “fair and balanced” view on renewable energy comes from a private website with “oil” in its name!

        As I stated, one wonders if the claims are correct, especially the 50% of total grid power but the original article (as cited in my extract above) is from The Chicago Tribune, generally a reputable paper, and the article was sourced from Reuters). That 50% was at peak though:

        “..the nation was able to meet a third of its electricity needs on a work day, Friday, and nearly half on Saturday when factories and offices were closed.”

        In any case, as I also said, even if there is some kind of inaccuracy or exaggeration, it is still impressive and tends to put the naysayers back to their calculators: the grid did not appear to meltdown (as that oildrum article suggests it would).

  • http://www.energyinachangingclimate.info Martin Nicholson

    Giles, AEMO does not directly suggesting that solar PV will have a “merit order” effect as you perhaps imply. In fact AEMO explicitly states in the Executive Summary that “Implications including the effect that increased rooftop PV penetration and any cross-subsidy arrangements might have on retail electricity prices have not been analysed.”

    Having said that, it is good to see that AEMO is watching the trends in rooftop solar PV. There clearly will be some impact on the NEM as the installations grow. AEMO does point out that peak time on the NEM is late afternoon when solar PV is at about a third of its midday peak.

    In 3.2 AEMO estimate that the energy generated from 12 GW of panels will be 15,400 GWh/y (14.6% capacity factor) in 2031 – perhaps 8% of total. So 18 GW (if achieved) would be 23,100 GWh/y not 28,000 GWh/y as you suggest. Sorry to seem to be nit picking.

    • Giles Parkinson

      Gee Martin, you didn’t look very far . Here’s the second paragraph of the report …

      “PV energy produced in 2011 is estimated at 1,200 GWh, or 0.6% of annual energy. This means it is already at an ‘observable’ level in the NEM, and while there has been no significant operational impact on the wholesale market, this has the potential to occur if capacity starts to impact investments in the network and/or large scale generation.”

      No, they haven’t “analysed” it yet, but the implications of 18GW of solar capacity at peak times – as they observe elsewhere – should be obvious to all.

    • Paul Wittwer

      Martin, your figure of 14.6% capacity factor is true only for Hobart. The average cf for Australia will obviously be well north of that figure, around the 17.5% without any population weighting. Giles figure of 28,000 could even be conservative.
      http://www.solarchoice.net.au/blog/how-much-energy-will-my-solar-cells-produce/

      • http://www.energyinachangingclimate.info Martin Nicholson

        Paul the 14.6% figure isn’t mine it came from the AEMO report as explained above and it relates to the entire NEM not just Tasmania.