Australia’s renewable energy sector has ridden through the Covid-19 pandemic largely unscathed, and the rooftop solar market may even emerge stronger, as Australians take the opportunity to renovate their homes and working-from-home arrangements and become more conscious of their day time energy needs, according to the latest quarterly Carbon Markets Report published by the Clean Energy Regulator.
Chair of the Clean Energy Regulator, David Parker, said that despite all of the interruptions caused by the Covid-19 pandemic, demand for rooftop solar installations had remained strong, with 2020 on track to set a new record for new capacity installed.
“Rooftop solar continues to grow despite installation restrictions in Melbourne for much of the quarter. We are still on track to hit a new high of 2.9 gigawatts (GW) capacity for small-scale systems for 2020, up 34% from the previous record of 2.2 GW installed in 2019,” Parker said.
The regulator said that it expects that demand for rooftop solar installations will continue to remain strong, with the amount of small-scale solar capacity additions potentially outpacing the amount of generation capacity being added in the form of large-scale solar and wind projects.
The regulator said that it had commissioned modelling that suggests that an additional 13GW of rooftop solar capacity could be added over the next four years, representing a more than doubling of currently installed rooftop solar capacity, reflecting the falling cost of solar and shrinking payback periods which see solar installations pay themselves off in as little as four years.
“The outlook for rooftop solar remains strong with new modelling commissioned by the Clean Energy Regulator indicating behind the meter installed capacity may double over the next four years to 26GW,” Parker said.
The Clean Energy Regulator’s executive general manager, Mark Williamson, also told RenewEconomy that it was likely that interest in rooftop solar installations had increased as a result of a shift to working-from-home for many Australians. The output from rooftop solar systems is well aligned with day time load, making the addition of solar onto a home a more attractive option.
Adding to the strong demand was the incentives being offered in virtually every state and territory for the installation of rooftop solar or battery storage, with a range of rebates and zero interest loans of offer.
Investment in large-scale renewable energy projects had also been in line with the regulator’s expectations, with 2.5 GW of large-scale capacity financed in 2020, which is set to flow through to construction activity in 2021.
The regulator observed that there had been a notable pause in large-scale wind and solar commitments in the second quarter of 2020, which was in the midst of the initial outbreak of Covid-19 in Australia. However, the report suggests that project developers and investors had quickly returned to the market later in the year, with Q3 2020 recording the highest amount of new capacity commitments since late 2018.
“An additional 1.1 GW of capacity reached financial close in the quarter and a further 0.5 GW has since been committed, surpassing 2.3 GW of capacity financed in 2019,” Parker said. “There is plenty of installed capacity to meet the 2020 Large-scale Renewable Energy Target of 33,000 gigawatt hours.”
While investment in large-scale wind and solar projects appears to have stabilised, investment is still comparatively subdued from previous years, particularly 2018 which saw 5.1GW of new projects constructed and 6.3GW built in 2019. However, the regulator remained optimistic that additional project commitments could be announced, and that total new capacity commitments could top 3GW before the end of the year.
Growing interest for corporate power purchase agreements, and a flurry of announcements from state governments that have outlined ambitious plans for renewable energy zones across New South Wales, Queensland and Victoria, suggest that the future for investment in large-scale wind and solar projects should remain strong, even with the 2020 renewable energy target having been met.
The Clean Energy Regulator said that there had also been continued interest in voluntary carbon markets, with both corporate and government commitments driving demand for the voluntary surrender of both renewable energy certificates and carbon permits, but noted that carbon offsets sourced from international markets still remained the preferred option due to their lower cost.
“Certificate and unit surrenders by private, state and territory governments also continue to increase, accounting for 16% of the total carbon market in 2019, up from 12% in 2018. International units dominate with 85% of market share, which is likely due to low prices,” Parker said.
The regulator is currently undertaking the development of an exchange platform to facilitate the trading of carbon permits.