Over the last few months, I have had the pleasure of presenting to hundreds of solar industry delegates at the EcoGeneration Master Classes held around Australia.
Inevitably, the most interesting part for me was the conversations with so many who are at the ‘coal face’; working day in, day out to sell the virtues of solar photovoltaic (PV) against rising coal-fired energy prices.
I met installers who told me that they could feel the attitude of the mass market changing, describing how the economic proposition was so compelling that conversion rates were rising, despite the declining levels of government support.
I met wholesalers who were astounded at the rate of demand from dealers, at the pull-through from the market, and that it is flowing well beyond 30 June – when the Small-scale Technology Certificate (STC) multiplier will be reduced. They are talking about short-term supply shortages, would you believe.
I met new entrants with bold new ideas about how to sell solar to new markets, and invest money into building businesses. Their imagination and vision is not bound by the way things used to be done, they clearly have a clean slate (well, an iPad in fact).
One of the most popular slides in my presentation was one that showed a snapshot of where the local market could be by 2030. This slide stems from analysis I helped produce for the Australian Energy Market Operator (AEMO) who – as a result – effectively lifted the expectations for solar PV from less than 2 gigawatts (GW) in 2030 to a potential of 18 GW. And that’s only the rooftop installations; the ‘behind-the-meter’ demand. But since the last Master Class, several fascinating events have occurred that got me thinking about how this revised projection fits into the wider context of predicting solar uptake.
Firstly, we have seen Minister for Resources and Energy, Martin Ferguson, Origin Chief Executive Officer Grant King and others say that energy demand is not growing as fast as expected and that solar and other measures are having a material impact on both generation and declining wholesale electricity costs. Mr King said that he doesn’t expect to see any new generation built until after 2020.
The Merit Order Effect is apparently, alive and kicking.
Secondly, despite increasingly desperate attempts by some media outlets to mislead the public and blame the carbon price and green schemes for most of the electricity price increases; an increasing amount of people are simply not buying this – the argument is too transparent. The real story seems to be far more interesting, if the media interviews I have done and read are anything to go by.
All of the major media outlets have run stories about what electricity costs are made up of; but what is fascinating is that many are inexorably drawn into looking at what the major components of the costs are (network and distribution costs). In doing so, relentlessly targeting minority costs such as green schemes just doesn’t seem to resonate as strongly with the public as stories about state governments expanding profits at the consumer’s expense.
Thirdly, new data is emerging about the unexpectedly strong uptake of solar in Australia and some other countries, despite falling levels of government support. This year in Australia, for example – despite our most bullish attempts to project demand – it looks exceedingly likely that we will once again see more solar installed than we projected.
These observations prompted me to dig out some historical forecasts from the late 1980s and 90s and do my own analysis – the likely results are nothing short of astonishing.
On average, across ten different long-range forecasts (typically ten years forward) for wind and solar PV around the world, the predictions for uptake have been consistently underestimated by a factor of ten. That’s right, demand has been ten times higher than predicted. Looking at solar PV alone, the uptake has been even higher at 11.7 times the annual demand than even the wildest optimists could imagine.
So I went back to my long-range forecasts for Australia’s solar market to 2030 and took another look. As a forecaster, I’m inherently conservative (although we always produce a range of scenarios) but I decided to go out on a limb this time and use the historical error to drive up my calculations.
A few important considerations quickly came up.
Firstly, data is now much more widely available, computed much faster and we have more historical trends to go by.
Secondly, the Australian industry has been growing from a base of close to zero, so large growth was inevitable in the early days and a slowing of that rate is equally inevitable as the market grows.
Thirdly, there is the issue of penetration both in terms of building stock and also grid penetration rates.
All these factors should reduce the quantum of variation in future forecasts, barring the completely unforseen. So for the sake of the argument, let’s not predict that we will all be out by a factor of ten times. Instead, let’s be ultra-conservative and simply predict that demand will be twice what we reasonably expect.
AEMO have accepted a high range of 18 GW of cumulative rooftop PV by 2030, and their caveats around this high range are already emerging. So potentially, using historical error as the basis, this could become 36 GW, and in all probability more, once non-rooftop solar is included too. So we’ll round up to 40 GW.
Is this conceivable?
It represents a peak of 2.9 GW installed per annum. Based on the fact that the industry installed 0.840 GW in residential solar alone in 2011, this will be snap in 18 years’ time. Tick.
In terms of annual energy demand, our 40 GW represents just under 20 per cent of annual energy requirements by 2030; 20 per cent by 2030 from PV alone anyone? Another tick. There are some outcomes however, that will be very challenging.
We do start to see housing penetration issues by 2020; under this scenario we would be approaching complete saturation of the housing stock if system sizes don’t increase on average, (although they already are) or if housing growth slows.
However, we will have a replacement-and-upgrade market operating by then, and the currently unexploited commercial and ground-mount PV markets will add significant chunks to this demand by then. Cautious tick.
The 40 GW projection also represents just over 70 per cent of the expected standing generation capacity in Australia and this will be a problem unless we radically reshape our energy markets, for a variety of reasons. The CSIRO’s recently-released report into solar intermittency concluded that 40 per cent penetration was reasonable – this equates to roughly 24 GW; above AEMO’s prediction but below our 40 GW hypothetical.
It is of course highly unlikely that all 40 GW will be producing maximum power, right across the nation at any instances in time, but this does highlight the need for further studies into the issue of intermittency and the need for more advanced modelling.
It does look conceivable if we consider the prospect of exporting energy however. With growing energy demand and inferior solar conditions in neighbouring countries, the possibility of exporting a value-added commodity in the form of green electrons seems to be worthy of continued consideration. No tick for now on this one however.
40 GW by 2030 does start to look conceivable, but is not without its issues.
It won’t be plain sailing; we need major overhauls of our regulatory environment, an entirely new way of thinking about energy and – dare I say it – a little change in the vested interests and revenue streams that are feeling threatened today. Just quietly in their board rooms, they are undoubtedly considering a future where their market for terawatt hours could be halved, by the time their kids finish school.
This exercise highlights that we are getting closer with the quantum of forecasting accuracy and that although the growth rates remain strong, they can’t go on for ever at the levels they have been at. All of these scenarios assume a great many things, not least of which is a continuation in the downward trend in PV cost, which faces the same issue too; PV costs cannot continue to fall at the same rates that we have recently witnessed.
These are the very types of reasons that have driven historical conservatism in forecasting, however. Assuming price declines continue, grid penetration is clearly one of the biggest barriers we face in the longer term, but if there is a lesson to be learned from the past, it’s that solar is inevitable, despite the barriers.
And it’s likely to be inevitable in a way that even I fail to imagine.
This story was first published at Solar Business Services. Reproduced with permission.
