Who’s missing out on Australia’s rooftop solar boom?

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Report identifies four key markets that have so far been overlooked in Australia’s rooftop solar boom – a 7GW gap that could be worth nearly $9bn to the (so far) very small number of canny start-ups that are working to find their way around the barriers.

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As Australian homes and small businesses continue to install solar at a record-breaking and world-leading rate, some major gaps in the market remain.

A new report, to be published next week by EnergyLab, has identified four key markets where solar uptake is lagging the rest of Australia – and that are ripe for the picking for canny start-ups and installers prepared to use a little innovation and entrepreneurial spirit.

And the report estimates that if these gaps were to be filled, Australia’s rooftop solar capacity could double, adding somewhere in the order of 7GW of installed PV, and generating close to $9 billion in investment.

So what are these overlooked markets? The first two, which make up the most glaring gaps, are those notoriously hard to reach rental properties and apartments – an issue we touched on in this story last year.

As you can see in the chart below, those two areas alone are estimated by EnergyLab to be worth around $6 billion to the residential PV market, and stand to add another 4.6GW of installed PV capacity (3.2GW for rentals, 1.4GW for apartments), according to the report.

What the chart below also reveals, however, is the disappointingly low number of start-ups currently working to address these market gaps, even despite the very real promise of a potential new solar goldmine.

Rooftop solar

But more than just a missed opportunity for the market, the lack of access to the benefits of PV for renters and apartment dwellers has been a growing socio-economic concern, that threatens to divide the country between solar haves and have nots, as we reported last year.

Feeling this divide most keenly are the nations renters. The EnergyLab report notes that renting is cited as one of the main barriers to installing rooftop solar – second only to cost, according to one recent Australia-wide study.

 

The key reason for this, it says, is that renters who install solar are unlikely to get a good return on investment, particularly given the vast majority of lease periods are shorter than the average four-to-five year payback period for a PV system.

Interestingly, the report finds “surprisingly little” connection between household income and solar uptake.

“While households in the lowest 20 per cent of incomes do have significantly less solar than the rest of the population,” it says, “the second, third and fourth quintile have almost identical solar uptake (Figure 16).

“The reason for low uptake in the lowest quintile could be that such households are more likely to rent or that they have lower credit ratings and are therefore less able to finance a solar installation,” the report continues.

“While it is undoubtedly important that income isn’t a barrier to enjoying the benefits of solar, the 3-7 percentage-point variance between income quartiles wasn’t deemed to be a significant enough opportunity to focus on in this paper.”

On the landlord side of the equation, the report says the barrier most often cited is the “split incentive problem,” which lands the owner with installation and maintenance costs, while delivering the main benefits of cheaper power to the tenant.

For apartments and semi-detached dwellings, there is some overlap with rental properties, as a great deal of apartments are leased.

Otherwise, the main culprit preventing solar installation on apartments is the strata title – the often complex legal arrangement between the individually owned units and the collectively owned common property.

As the report notes, rooftops are typically considered common property, so any decision to install PV would require approval from the body corporate, through which every individual property owner usually has one vote.

But there are initiatives underway already to bridge this solar gap, thanks to technology and software-based solutions from start-ups we have reported on in both RE and One Step, including Prepaid Solar, Matter, SunTenants, and the recently launched SunYield scheme, by Stoddart Group and Powershop.

Electricity gen-tailer AGL Energy has also made efforts to extend the benefits of solar to people who can’t – or don’t want to – install it themselves.

And outside of the industry, governments and councils are also working to boost rental and public housing market uptake of solar, with the offer of incentives, no up-front cost repayment deals, and other policy mechanisms.

The second two areas where solar uptake is lagging are less obvious, but could be almost as lucrative to canny installers and entrepreneurs: first home buyers and commercial and industrial properties.

On first home buyers, the report found that people living in the first property they had purchased were a good deal less likely to have rooftop solar than other owner-occupiers.

Only 11 per cent of first home buyers have solar, compared to the national average of 21 per cent and 30 per cent for other homeowners (Figure 5).

Why? EnergyLab conceded that it struggled to find any real research explaining why this group were less likely to install solar, but has offered a couple of its own theories.

One is that first home buyers were less likely to have the finance to install solar, on top of the huge cost involved in buying a first home. Another is that, with many first home-buyers being DINKS (double income, no kids) they would not be home enough to warrant investment in .

As for commercial and industrial buildings, the report says that this sector – which makes up about 16 per cent of the nation’s total roof space – has remained relatively neglected. Although recent industry reports suggest that could be changing rather quickly.

As many Australian SMEs appear to be discovering, the large, flat rooftops that typically come with C&I buildings are well suited to solar PV, as are the hours of business.

But, as with apartments and rental properties, problems of strata title and split incentives can get in the way. As can the “slender” roofs of many industrial buildings that are unable to bear the weight of solar panels.

And then there are the economics, which – despite continually falling system prices – have been slower to reach the “no-brainer” point for business than they have been for the residential solar market.

The report notes that while the payback period for C&I solar currently stands at around 3.5 years, a recent survey has shown that about 50 per cent of businesses are looking for a ROI of less than three years.

But this time-frame is rapidly decreasing, the report notes, and coupled with solutions for negotiating strata titles and lease agreements – and finding lightweight solar solutions for those slender rooftops – could unlock another 3GW of installations, and $3.5 billion of investment.

Finally, for those first home buyers that have been overlooked, the report notes that entrepreneurs might be able to capture this market through specially tailored financial products – offered at the point of purchase.

A successful bid to win over this market segment could yield another 70,000 rooftop solar installs, the report said, worth around $400 million of investment: not a goldmine in itself, but enough to provide “a foothold from which a startup could expand to other products or customers segments.”

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23 Comments
  1. john 6 months ago

    If you live in a high rise building then with no spare space to put PV on you have a problem.
    It is possible to put panels on north and west of the building.
    Or yes and on top of the small foot print of the building.

    If the building owner has some car parking area put PV all over that as well.
    The only other idea for you people in a high rise is to make a PPA with some identity who has land enough to put in RE.

    • Laikathespacedog 6 months ago

      I have never understood why solar panels have to be on peoples houses. Wouldn’t it make more sense for people living in apartments, high rise buildings or renting to pool their resources and build an array on on some farmers land out on the fringes of the city, pay the farmer some fair rate so they’re happy and people get their solar power.

      Better still, why doesn’t someone build a solar farm out in the country and sell shares in the solar power produced. That way people renting could just buy could just buy as much solar power as they can afford. Wouldn’t the economies of scale make this the cheapest option. Or am I missing something?

      • Marcus Whitley 6 months ago

        I think you will definitley start seeing these kinds of arrangements in the future, a blockchain based PPA agreement between a household and a solar farm.

        Issues are generally related to transmission, had a few family friends with large acreages enquiring about putting solar on part of the farm. In general the transmission in the area is too poor for large scale generation and the losses across low voltage lines would make alot of these arrangements far less attractive.

        Would still be a fair network charge attached to the arrangement, covering polls and wire costs.

      • Ian 6 months ago

        It makes better investment to install behind the meter….around half the bill is network costs.
        Greater savings still- are had when rooftop PV powers heat pumps for HWS or space heating with RCAC

      • john 6 months ago

        Exactly you have nailed it and that is going on community solar is being built not on houses but on other land.

        • Laikathespacedog 6 months ago

          Thanks for that guys. I see the problem now.

      • Ian 6 months ago

        These sorts of people without access to solar on their building could still benefit from renewables in other ways, as you say having investments in solar farms elsewhere. Solar or wind cooperatives or community developments would be a good idea. As others have mentioned like Ian below, transmission costs spoil the advantage of solar installations, but when you think about, the cost of the infrastructure remains the same whether a dwelling exports a little solar or imports part of its needs or all its needs of electricity. The real expense is the administration and profit margins of the retailers.

      • disqus_wI5wSvyZlm 6 months ago

        Is buying in to a solar farm on the outskirts better? A port-side wind farm in Perth billed itself as “community” but it became obvious you needed quite a lot of money to buy-in, then an offtake guarantee. Presumably that would only be arrived at if the price of solar electricity were ultimately cheaper, but would it be after operating costs? Isn’t it still there still an issue of transmission losses if the farm is actually away on a farm somewhere? Not sure how this would benefit renters, in particular.

  2. Rod 6 months ago

    I do wonder how many tenants have approached their landlord (or agent) and enquired about rooftop solar in exchange for a little more rent.
    I put this arrangement to a tenant with a payback for me of about 5 years.
    As they were not at home during the day and the house also has gas, water/heater/cooker, they were probably correct to turn down the offer as they may not have had any financial benefit.
    Might be another benefit of converting from gas to electric as plant needs replacing.

    • Steven Gannon 6 months ago

      My wonderful landlord put 5kWs on our roof last month and 5kW on his other rental, with no increase in rent. Negative gearing was his main reason, he said. The other was me niggling him for months.

      • Ian 6 months ago

        A good tenant is worth his weight in solar panels!

      • Rod 6 months ago

        He/she is more wonderful than I am then.
        I’ve had a look at the suntenants and matter offerings but too much effort.
        Yes, I really should just bite the bullet and do it.
        The other reason is to take advantage of STCs while they are available.

        • Steven Gannon 6 months ago

          It’s win-win really.

  3. riley222 6 months ago

    Interesting question.
    I have the space, a bit north of Sydney, and I would welcome proposals. I’m guessing there would be plenty more.
    The future?

  4. Carl Raymond S 6 months ago

    It could be a nice little earner/sideline for strata managers. They arrange the solar system. The power is used for the common area (which is significant, my strata power bill is 16 times my unit power bill, in a block of 14 units) with surplus fed to the grid to contribute to the strata balance sheet. A strata manager offering such a service would easily pick up new work – word gets around.

  5. George Darroch 6 months ago

    Have these people seen the price of houses?

    First home buyers are paying huge amounts, and while they may be able to get bank finance for a home it’s much less likely that they are also getting funding for panels and improvements. Paying back the loan is an immediate priority, not taking on more debt.

    • Mike Dill 6 months ago

      IF the PV system can be wrapped into the mortgage, the difference is much less than they will be saving on grid electricity.

  6. Michel Syna Rahme 6 months ago

    The fundamental issue with Apartment buildings is that they are usually concrete roofs.
    Who will take the liability for leaks from chemset anchors if the sealing fails? yes there are companies offering 10 years warranty on the sealing, but many building owners are unwilling and installers hesitant.
    Anybody recently got quotes for ballast? Astronomical! especially for sites within some coastal wind regions.
    The person or company that comes up with a workable solution for concrete roofs will be cashing in!

    • Mike Westerman 6 months ago

      Very definitely better addressed at the design phase – typically for air-conditioning and other similar roof top items the standard way of avoiding the issue is to cast in plinths and cove the waterproofing around them. Otherwise the safe way to avoid the issue is for the panels to be mounted on a false roof built over the concrete roof.

  7. TweedCAN 6 months ago

    Commercial landlords are missing the point. Its not about sharing returns with tenants its about rent. The resale value of commercial property is a multiple of its rental income.
    Adding solar allows rental increases that tenants could not otherwise afford. The higher rent means higher income and higher resale value giving a total return of 11 to 1.

  8. Phil 6 months ago

    I wonder what the limits are with the current grid design to support solar contributions versus actual demand ?
    Is it 25%/ 50%/ 75%?

    It’s likely either the grid volts keeps rising so the inverters start to reduce output or disconnect leading to stranded energy

    Battery storage and Microgrids have to be the only reliable answer surely

    Like stranded assets i predict stranded energy will be the next big issue

  9. DiggyTheDog 6 months ago

    A few people here are mentioning community solar. Is there a website listing what community solar is available?

    I live in an inner-city house with complete shading of the roof, by a tree that is protected by council rules, but would love to be part of the solar transition. As far as I can find, our only option is to be energy efficient (already 11 kWh/day for a four person household) and pay more for green energy (which we do). Any other options?

  10. Cameron Quin 5 months ago

    There definitely is an underrepresentation of startups in the space, although the great opportunity is the financial innovation. I agree with @tweedcan:disqus. We’re currently working with a lot of landlords and offering them high value roof rentals so we can also benefit their tenants. It is a no brainer.

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