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Graph of the Day: Australia’s saturated solar markets

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Australia has experienced its own version of the “solar revolution” in the past two years, when some 2,000MW of rooftop solar PV was added to households – mostly as the result of generous feed-in tariffs and other incentives.

The fact that many of these tariffs have now been removed suggests a cooling-off in the solar market. But the costs of solar PV modules has fallen so far, the industry actually faces another problem – it could soon reach “saturation” point in many key markets.

The overall takeup of solar is estimated to be at nearly 10 per cent of dwellings across Australia, and close to 20 per cent in South Australia. In the owner-occupied housing market, the national average is already running at 20 per cent, and is at more than 35 per cent in many markets.

In one locality, Port Elliott in South Australia, the penetration rate on available owner-occupied housing has reached 90 per cent. According to solar industry forecasters Sunwiz and Solar Business Services, this “saturated” solar market could be repeated in many other localities around Australia.

“Under our High scenario by 2017 rooftop penetration will hit 90 per cent (of detached owner-occupied homes) in some states, with massive consequences,” the authors write in their report.

This will be driven by high rates of return. The authors say the average IRR of a 3kW PV systems are expected to be in the range of 20-35 per cent by 2015, and returns like this are already available at the low-price end of the market.

“Although not like the heady days of 2011 and 2012 (when state governments were offering attractive feed-in tariffs), payback on a 3kW system is expected to be between 2.8 and 5 years in the near future.”

saturated solarSo what does a saturated solar market look like? This graph below gives some idea. It’s not Port Elliott, but an area of nearby locality of Victor Harbour, and the data actually dates back to 2011. But it clearly shows how much solar has been taken up by the residents.

The Sunwiz and Solar Business Services report says these penetration rates are a serious concern, because it will reshape the dynamics of   the market, and force the industry to service previously ignored market segments – such as the rental and apartment markets.

The Sunwiz and Solar Business Services report says these penetration rates are a serious concern, because it will reshape the dynamics of the market, and force the industry to service previously ignored market segments – such as the rental and apartment markets. And it could force some solar businesses to relocate.

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  • Alastair Leith

    Please link to full sized images or publish source links, Giles. Great work :-)

  • Dave Smith

    I find it hard to believe that, without a generous regulated feed-in tariff, IRR of 20-35% on 3kW solar PV are possible for a majority of households. To get this return, grid exports would have to be minimal, meaning there must be at least 3kW of household electricity consumption over the midday peak.

    How many households have this sort of consumption profile? Certainly not 90%.

    • colin

      a 1 watt system turns out 1.3KWHr per annum or assuming a 100% feed in and a FIT of 8C/KWHR maybe 10C per annum. If you make the Feed in 25 % the return is about 18C. Will the cost of a 3KW system drop to 50C/watt or $1500 installed?

    • Geoff Bragg

      Hi Dave,
      I would be pretty confident that Sunwiz have done the IRR calculations for a 3kWp system correctly , considering typical load profiles etc – Warwick is the developer of PVSell – a sophisticated PV financial analysis tool.

  • http://www.dudawills.com.au Ray Wills

    With 1 million homes now with solar PV as at end of February 2013 and 8 million homes in Australia, average is 12.5% of homes now with solar PV on rooftops across the nation.

  • http://bigpond Ian Franklin

    And, what is IRR? I waste a lot of time trying to infer the meaning of undefined acronyms.

    • Sophie Vorrath

      Ian, I believe in this case it stands for Internal Rate of Return – the rate of return at which the Net Present Value from an investment will become zero.

  • Michael Adams

    Much as I would like to believe the 90% figure for Port Elliot here in SA, I have my doubts. I walk my dog there daily and there is no visible evidence to substantiate such such a Solar Panel density. There is a large complex of retirement homes in the town with a surprising No of installations, which could add up to 90%, but the town as a whole, I doubt it. Victor Harbor up the road at 25% is realistic. There are lots of non residential holiday homes in the area with panels, the owners I suspect are getting a good return on their investment with little use & good returns from the FIT, particularly if they got in early before the FIT was reduced. With the cost of Solar dropping, some bright spark is going to twig that if he finds enough sites on which to mount panels,it might prove possible to float his own Power company.

  • cindy

    have to agree with Alistair. Would be nice to be able to actually SEE the “graph of the day”. With him also on the “great work” bit.

  • Beat Odermatt

    I assume that our politicians realise that many Australians support renewable energy. I hope that politicians realise that many people with solar PV installations are capable of voting. Handing over Billions of Dollars from the carbon tax to coal producers instead of helping ordinary Australians to produce clean energy may not be the wisest idea.

  • steve

    not a good advert for the two gurus of solar predictions
    90% of owner occupied is doable considering the number of rental properties and holiday hpmes in the area
    but the 25%-30%IRR is a joke unless your talking about the dodgy $2 systems that are being offered in the market place
    I wouldn’t have thought Warrick and Nigel would put there name to such a claim considering how they advocate that Only Quality Tier One systems should be installed due to the high failure and degredation rates of the cheaper ones

    just a thought