Can the rooftop solar boom keep going?

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One-third through 2018 and we’ve chalked up 100MW+ new rooftop solar every single month. But how long can the solar boom last?

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We’ve now passed a third of the way through 2018 and have chalked up more than 100MW of rooftop solar PV installations in every single month so far, as detailed in this month’s Green Energy Markets Renewable Energy Index.

It comes on top of a run of 3 months at the end of last year that exceeded 100MW. So far the 2018 rate of capacity coming through the STC registry is 56% greater than 2017 over the same period.

This is really quite staggering compared to historical experience. Prior to the last few months there were just two months where we managed to exceed 100MW– June 2011 and June 2012 (based on STC creation date).

On both of these previous occasions the market was supercharged by a rush to get in before the government cut back rebates by close to a $1000. What also makes this 100MW per month run over 2018 quite exceptional is that it has come during period that has typically been a seasonal low for capacity creation.

If you look across the period below, January and February tend to be low points in the year and the first four months have averaged 18 per cent below the levels of the remaining parts of the year.

Kilowatts of solar PV capacity by month

Note this data is reported on the basis of the date that STCs related to a solar system were created, not the date that the solar system was installed. The date STCs are created will typically lag the date of installation by several weeks and sometimes by months.
Source: Green Energy Markets Solar Report

 

If we just maintained the current monthly average of kilowatts of capacity for the remainder of the year, then by the end of the year we’ll achieve a new record of 1360MW of capacity. However, given the latter two-thirds of the year tend to have higher levels of creation than the first four months, 1400MW to 1500MW appear quite likely.

To put this rate of solar installations into the context of the broader energy market and policy debate, let’s consider what this rate of installations could deliver within the five-year time period it would take to build a new coal power station – an idea being promoted by our former Prime Minister and Deputy Prime Minister.

As illustrated in the figure below, we’d have a collective amount of capacity two and a half times larger than our biggest coal-fired power station – Eraring.

Rooftop solar capacity built in five years at current installation rates compared to top 5 coal plants

Source: Green Energy Markets Renewable Energy Index – April 2018

Now, yes, it won’t be generating power all the time, but if you’re concerned about reliability then you need to be focused on what you can expect when system demand is at its highest – hot days when the sun is out.

As detailed in my article – Did renewable energy laze about over summer – solar PV delivered a large chunk of its power last summer when power demand was at its greatest.

Plus, imagine if you were an investor. Would you want to sink a few billion into a big chunk of inflexible coal plant capacity that by the time it was built would face the prospect of dealing with this amount of extra generating capacity coming into the system in the middle of the day with zero operating cost?  Not to mention all the solar farm capacity also coming online.

Sorry Tony and Barnaby but I think I’ll pass on funding that new coal power plant you want.

This, of course, brings me to thinking about whether consumer demand will support such a huge build out of rooftop solar capacity. The solar industry has clearly demonstrated an ability to scale-up solar capacity in line with some of the most ambitious emission reduction scenarios our politicians have been prepared to contemplate.

But just because we can, doesn’t mean we will.

There is a mistaken popular belief, often heavily promoted by some in the environmental movement, that solar’s story is one of just an inevitable march onwards and upwards with continuous exponential growth. But as we can see in the first chart above, rooftop solar has faced a roller-coaster of sales rather than an exponential curve.

The boom we’re presently experiencing was preceded by what was a three-year decline in monthly capacity installed between mid 2013 and mid 2016. If we look at the number of systems installed we can see an even more stark decline that began in mid 2012 but has been hidden by the steadily increasing kilowatt size of systems.

Number of solar PV systems by month creating STCs

Source: Green Energy Markets Solar Report

So what turned things around in mid 2016?

In an article in April last year – Rooftop solar enjoys second boom as fossil fuel scare campaign backfires – I put forward three reasons:

Number one was the doubling in wholesale electricity prices.

In addition, the excitement about batteries, I postulated, was driving the emergence of a new market segment – technophiles. Most of these people were ultimately baulking at buying batteries once they saw the price, but the interest was driving consumer enquiries that were converting to purchasing a solar system.

The third driver I put forward was an unusual one – a PR scare campaign about renewables driven by fossil fuel interests which I entitled the Daily Terrorgraph effect.

The thing was that while wholesale power prices, particularly in the futures market, had gone up in the period preceding the turnaround in solar sales, this was yet to flow through to prices charged to end-consumers.

However, the Minerals Council and the Australian Energy Council had been waging a campaign stirring up media and political concern that extra renewables was going to undermine energy reliability and drive-up power prices.

The campaign hit its straps, generating widespread media coverage in June, when there was a large spike in wholesale electricity prices, particularly in SA. This was due to a combination of: the interconnector being down for upgrade works; a sudden cold snap driving up electricity demand; and very tight gas supplies with the gas price skyrocketing on the spot market as generators scrambled for supplies.

From that point forward the media coverage about an energy crisis was constant, and mixed in with concerns about electricity supplies was also the spike in gas contract prices due to the start-up of LNG exports.

It leaked out that Hazelwood was going to close, with Engie after some delay eventually confirming the closure could occur – in a matter of months, no less. And then the big daddy – the South Australian system black.

All the time the media coverage was fanned by a range of Liberal-National politicians who sought to get political mileage out of power price rises and blackouts by linking them to the renewable energy policies of the Labor Party.

Yet even though much of the media reportage was mistakenly blaming renewable energy for power price rises and reliability issues, it acted as free advertising for solar.

In January 2017, the rise in wholesale power prices started flowing through in earnest to the prices faced by consumers. Victorian residential consumers saw further big rises in July. Critically, east coast residential consumers also saw big rises in the feed-in tariffs retailers were prepared to pay for exported generation.

Meanwhile, the WA government, with its budget under pressure, committed to unwinding its electricity subsidies.

Another fundamentally important factor driving booming solar sales was that module prices dropped like a stone over the second half of 2016 in response to a major supply glut. Prices below 30 US cents per watt were even being reported.

Unfortunately for the solar industry (although not necessarily electricity consumers) these tail winds look to be abating.

The three charts below illustrate that prices have been declining for wholesale electricity contracts. What’s interesting is that these are for 2019, but a large proportion of the renewables capacity coming through won’t fully hit supply until 2020.

Prices for 2019 baseload forward electricity contracts across Queensland, Victoria and NSW

Source: ASX Energy

In many respects these declines are a sign that the renewables sector is about to become a victim of its own success.

Power prices spiked as a result of skyrocketing gas prices and the withdrawal of Northern and Hazelwood Power stations with very little notice. Since then we’ve seen around 9000MW of renewable capacity construction or contracting commitments in large scale.

On top of that we then have over a gigawatt of rooftop solar installed last year and the prospect of potentially 1500MW this year.

If renewables really drove up prices, as some media commentators and politicians constantly claim, you have to wonder why futures prices aren’t skyrocketing now – and to the contrary are going down.

Now some of you may reassure yourselves that retailers have an array of pricing tricks that act to confuse consumers so they can avoid passing on reductions in wholesale power prices.

But this ignores something – the vast majority of electricity generated by residential solar systems is exported. Feed-in tariffs are fundamental to pay-back times and retailers will readily reduce these in response to reductions in wholesale prices.

In terms of the free media advertising, this, too, is likely to abate. While Tony Abbott may not have got the memo, it appears the leadership of the Turnbull government have come to realise that trying to blame high power prices on Labor when you’ve been in power for six years is not all that good a strategy for re-election.

Minister Frydenberg is talking much less about how renewable energy is driving up power prices, and instead trying to reassure households and businesses that power prices are going to come down. Also we’ve managed to steer through this summer without a major power shortfall, and next summer supply will be less tight.

These should all probably lead to waning media interest and they’ll probably move their “cost of living editors” onto beating up on the banks.

Lastly, the incredible glut of modules turned around in the back half of 2017 to a shortage. Consequently prices rose noticeably. They will resume a decline but it won’t be like what happened over 2016.

These factors will take some time to play out and flow through to changing consumer behaviour, so we still expect 2018 will be a break-out year. But don’t expect 2019 to be bigger and better.

Tristan Edis is Director – Analysis & Advisory with Green Energy Markets. Green Energy Markets assists clients make informed investment, trading and policy decisions in the areas of clean energy and carbon abatement.

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37 Comments
  1. Ken Dyer 7 months ago

    Coal is old, dirty and expensive, renewable energy is new, clean and cheap. That should be everybody’s catch cry.
    If Council building regulation across the country were changed to make solar panels compulsory, just as sewerage and septic is compulsory, then there plenty of roofs yet that are just going begging for solar panels.
    Write your local councils asking them to change their building regulations to make solar power compulsory on all new build roofs.

    • Nick Kemp 7 months ago

      While I see your point I’d be more happy to see proper energy design in the structure (alignment, insulation, windows etc) than solar PV because solar PV is the only thing easily retrofitted whereas a energy gobbling building is pretty much stuck once constructed.

      • Ken Dyer 7 months ago

        I absolutely agree. All buildings should be 6 star standard. The point is solar is not considered in that mix, and should be.

        • Hettie 7 months ago

          6 star is not good enough. The most important thing of all is orientation. Then *internal* thermal mass and double glazing with thermal break frames.
          Just about everything else can be retrofitted, although getting it right from the beginning is always better.

          • Ken Dyer 7 months ago

            Exactly. My house is orientated to due North and has 3 metre covered verandahs. It is heavily insulated and windows and doors are placed to take advantage of any breeze. Ceiling fans keep it cool.

            Most suburban blocks are usually 400 square metres or less, and are orientated in whatever direction the developers choose, to take advantage of as many building blocks in the subdivision as possible. The houses are then just plonked on them in whatever orientation allows a concrete driveway and a 2 car garage.

            For example, a new development on the Sunshine Coast has put houses 2 metres apart on small blocks literally with a road four metres from their back walls, and all face west.

          • Hettie 6 months ago

            What are the council planning departments thinking of!

    • MaxG 7 months ago

      Most people will go with the flow; hence, no writing to pollies, no care about secondary effects of coal on water and air quality. The leadership is no better than the people who vote for them.

  2. RobertO 7 months ago

    Hi All, And then there are some whom use all their own production so they get $0.00 from the Retailers. As with any spend you need to make sure you understand what you’re getting and how that fits with your ROI, and lots of people think the FIT is part of the solar subsidies but it not, it just what the State Gov is prepared to order the Retailers to pay for you excess. It can be adjusted at any time that suits them.

    • Greg Hudson 7 months ago

      1 July 2018 sees the Vic FIT go from 11.3c to 29c (supposedly). I wonder if it will actually happen !

      • Hettie 7 months ago

        Lucky buggers!
        In NSW, ours is set to fall by 3c.
        It is, of course only a guide. Voluntary. They don’t have to pay anything.. but would be mad not to. Most people still have fairly small ssystem (even though new installs are creeping towards 10kW), and so will be buying in more than the export.
        Seems to me that any retailer which does not reduce their price per kWh by at least as much as they reduce their FiT, is asking for mass defection to a mob with the best FiT.

        • JWW 7 months ago

          I somehow can’t imagine that retailers like Powershop will drop their 12.8ct FIT, when they claim to be so supportive of RE. It would be very bad PR.

          • Hettie 7 months ago

            I do hope you’re right.
            I really like my 12.8 c feed in from Powershop.

      • palmz 7 months ago

        That is if your on the time varying feed-in tariff see the following link page 11 tables 3.1 3.2 and 3.3 https://www.esc.vic.gov.au/wp-content/uploads/2018/02/minimum-electricity-feed-in-tariffs-to-apply-from-1-July-2018-final-decision-20180227.html

        Rates 7.1c Kwh (off peak) 10.3c Kwh (Shoulder) 29.0c Kwh (Peak)

        Period Weekday Weekend

        Off-peak 10pm-7am 10pm-7am
        Shoulder 7am-3pm, 9pm-10pm 7am-10pm
        Peak 3pm-9pm n/a

        The flat rate it 9.9c Kwh

        I hope that helps you understand the changes by the way your retailer gets to choose witch one.
        “Commencement Retailers must offer at least one of the tariffs – that is, the time-varying tariff set out in Table 3.1, or the single-rate tariff set out in Table 3.3 – from 1 July 2018.”

    • Hettie 7 months ago

      Robert, I can’t let this go any longer. Time and again, you write “whom,” where “who” is correct. The way to check is to take out the first part of the sentence.
      In this case, “there are some” and start with he or they. Here, you would say, “They use all ….” So “who” is right.
      If the sentence was ” I hit them ” then, “There are some whom I hit” would be right.
      Clear as mud?

      • RobertO 7 months ago

        Hi Hettie, No! But I will add it to my understanding of English (even though I still do not understand English). Thank you Hettie.

      • Nick Kemp 7 months ago

        Thank Hettie. If you see anything similar in my commentary please don’t hold back. I’m no English Guru even though I come from there so any help is appreciated.

        • Hettie 7 months ago

          Oh heck! Serves me right. I know this is supposed to be about renewables, not an English grammar tutorial, but sometimes I can’t help myself. As long as you know it’s kindly intended.
          The biggest stumbling blocks for those who were never taught are
          There = in that place
          Their = belonging to them
          They’re = they are.
          Also
          Your = belonging to you
          You’re = you are
          Yore = olden times.
          Now I’ll shut up.

          • Ren Stimpy 7 months ago

            I suggest two new words for the English language, thare and yoor, as substitutes for any of the above while the meaning stays intact. Disrupting English grammar with more efficient and cost-effective new words….

            Thare goes Barnaby and Tony again.
            Thare views are only political.
            Thare a pack of idiots.

            Yoor idiocy is clear.
            Yoor a climate change denier.
            Yoor views are from the Days of Yoor.

          • MaxG 7 months ago

            I find the lack of proper grammar and spelling astounding; which is a clear indicator of the efficacy of the education system. I see the same lack of proficiency in all facets of life, trades, services, skills… a real shame.

          • Hettie 7 months ago

            In fairness, Max, several regular contributors to the comments are not native English speakers. Given that, their standard is remarkable.
            There are also about 45 years worth of Australians who were deliberately not taught grammar at school. Many of those would have parents who left school at 14.
            It is not reasonable to blame students for poor teaching. The so-called educators were at best ill advised, at worst carried away with the idea of whole language learning.
            The pendulum swung way too far, as pendulums do, and is now swinging back, but is impeded by the fact that today’s teachers are the product of that poor system, and that reading well written books seems not to be part of 21st century curricula.
            Language changes, too, although I shall never accept decimated as a substitute for devastated, or the tautological addition of adverbs to verbs which already include that meaning (continue on, repeat again etc).
            So , from time to time I offer a little English lesson, but always kindly meant, not in anger.

    • Hettie 7 months ago

      When houses are so tightly packed, it would make more sense to have them terraced. Far more energy efficient.
      Of course the common walls would need to be soundproofed, but sideways that are only 1 or 1.5 metres wide are useless.
      Another option would be to have the garage wall of one house be the common wall with the next house, giving one side yard ofreasonable width for each.

      When so many new suburbs are built by developers with little or no purchaser input, it is imperative that building regs require better land subdivision and sustainable design and construction of the houses. With no black roofs allowed!

  3. Robin_Harrison 7 months ago

    Excellent analysis of the 12-16 slide, that short term delay must have cost the fossil fools a bundle. The overall shape since 16, particularly with price parity now, looks suspiciously like the start of a steep S curve. That’ll be fun to watch.

  4. Peter F 7 months ago

    I spoke to a woman the other day who is just so proud of the 28 solar panels on her roof. No real interest in saving the earth but very pleased to be sticking it to the energy companies. Solar is now a fashion statement, like a flash car or Swiss watch so hopefully even if the economics are not quite as compelling as they were 6 months ago the motivation will still be there.
    From a long career in industrial sales and marketing I can tell you saving money is a very poor motivation for purchasing. Keeping up with the competitors/neighbours is the winner

    • RobertO 7 months ago

      Hi Peter F I believe that 90% (plus) install solar because it saves them money (and it might be helping save the Planet but they are not sure on this point. Few of these will add batteries unless they have security issues until adding batteries becomes cheaper than grid supply costing) and after the system has paid for it’s self the electricity is free. The unknowns are how long the system will last, what parts will need to be replaced?
      A very small % install solar because it provides more reliable supply, and lots of these ones will (or plan to) add batteries.
      An even smaller % (less than 1%) do install Solar to help save the Planet.

      • Hettie 7 months ago

        I think that rather more than 1% would have climate change as a motive alongside the savings, Robert. These are people who would have loved to so solar some years ago but could not justify the expense, but then the combination of rising power prices and falling panel prices changed the equation, and they, like me, jumped in.

    • Clem Stanyon 7 months ago

      Plenty of studies show that conservatives are motivated by greed; progressives by principal: the woman you describe is probably the former, not the latter. However, you are absolutely right about neighbours; the main predictor of where more PV is installed is how much is already in the area: humans imitate other humans, being the socially normative primates we are.

  5. George Darroch 7 months ago

    The increase in average size is very encouraging. It’s already creeping towards 7kw, and with a commercial boom it might be above 10kw soon.

    • Ren Stimpy 7 months ago

      I see a lot of roofs that have solar panels with plenty of room for more and think jeez why didn’t put double that number on while the installer was there in the first place – even with a 13 cent FiT they could have been making more money.

      • Hettie 7 months ago

        Oh, come on, Ren!
        It’s only been a very few years since panels cost a great deal more than they now do. Most systems were 1, 1.5, 2kW.
        If you missed the relatively short window for premium Tarrifs, FiTs were about 6c.
        If you put up 2 kWs on premium tarrif, adding more panels lost you the premium. 60c gross down to 6c time of use. Not even net.
        No benefit.
        FiT went up to 13c only July 2017.
        2 neighbours of mine who put up 6 or 8 panels 3 years ago upgraded to 20 late last year.
        And please remember that not everyone has a lazy $5k lying around, or the borrowing capacity to finance the investment, or a lending institution that will give a green loan.
        Nor are most people exposed to the information about falling panel prices.
        So there are lots of reasons for small systems.

        • Ren Stimpy 7 months ago

          Hettie> “If you put up 2 kWs on premium tariff, adding more panels lost you the premium.”

          All the more reason to have put up 5kW when the premium tariff was available.

          The main reason though is the doubling of “soft costs” such as installation. Australian rooftop solar has the advantage of low soft costs compared to others say in the US, but if two separate installs are needed for one single rooftop, the soft costs double and that advantage is gonski.

          That 6 cent FiT was a spanner in the works I agree.

          • Hettie 7 months ago

            Ren, what was the price of panels in 2010?
            What was the cost of power?
            You are judging behaviour of 8 years ago with a 2018 set of information.
            Yes, of course those small system owners would be better off NOW with bigger systems, but THEN 2kW was a big system.
            It’s all very well to muse about the way things have changed, but to suggest people were foolish to make decisions which were perfectly reasonable at the time is just not fair.
            *Future* events showed they would have done better to go bigger.
            You make the best decisions you can with the information you have AT THE TIME.

          • ClimateWarriorMelb 6 months ago

            Yes Ren, Hettie. We put up 960W when building 14 years ago and that was $15k+ before rebates ($10k after if I recall correctly). And with FIT on Net only we got about 60c a year feedin. We knew we’d never even cover the interest costs, let alone capital. It was a moral/climate change reason.

          • Hettie 6 months ago

            What is there to say but “Well done you!”
            If only our appalling Gov’t would make a relatively similar investment in planet survival!
            Thank you.

      • Chris Drongers 6 months ago

        A bit harsh on roof owners. On top of the much higher cost of panels when they went on years ago to now, the recommendations from many installers not to put up more than would cover your daytime use there is the 5 kW export limit from domestic premises and the murky rules for export from larger commercial (10-100 kW) installations.
        Batteries are now changing export options, theoretically one could have 15 kW on the roof, export 5 kW continuously during the day, and store any over production to continue exports in the evening.
        But batteries will have to go through a similar price drop to that of solar panels for that to happen. And then Ren will be able to re-post, but then about battery size instead of solar system size.

        • Ren Stimpy 6 months ago

          Not quite, home/business batteries don’t have SRet or FiTs.

  6. Dean C 7 months ago

    Good article, Tristan. It would help my understanding if the scope of this data was clarified. I checked your source report and couldn’t see anything there. I presume it only covers all PV installations up to 100 kW(?).

  7. RobertO 7 months ago

    Hi All, Our schools 76 kW system has been confirmed as operational and testing has been completed. Next is the training on how to read the system reporting that it has, hopefully next week.

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