Why Warburton wants to set solar industry back a decade

Last Tuesday, in the second floor bar of the not-so-flash Occidental Hotel in central Sydney, the mood was not so good. Several dozen solar industry executives had gathered for a monthly drinks gathering that the group has dubbed the “Sundowners.”

It was supposed to refer to the time of the day rather than the state of the industry, but given the recommendations of the Abbott government’s RET Review panel delivered on Thursday, it could be sadly prophetic.

The stories these executives had to tell were remarkably familiar. All were working on residential and commercial-scale solar that will help revolutionise Australia’s energy system. And many are working on a range of mid-sized to large solar projects – from 3MW to 300MW – that could help transform the nature of the centralised generation from dirty coal to clean solar and wind.

These were the projects that leading analysts such as Bloomberg New Energy Finance had predicted could contribute up to 5,000MW of large-scale solar in Australia by 2020 – assuming its renewable energy target remained intact.

Those projects would have helped Australia accelerate the closure of its dirty, coal-fired power stations. But if the government accepts either of the RET Review panel’s principal proposals – for the RET to be effectively scrapped or massively scaled down – then those coal-fired power stations will continue to generate with impunity –and the solar projects will have to be put on hold – possibly for a decade, until those coal generators are ready to retire.

The same outcome is possible for the small-scale target as well. If the RET Review panel has its way, the small-scale target will be scrapped, or massively scaled back. The incentives will be removed for commercial-scale market, bringing the fastest moving market in Australia to an effective halt

Judging by anecdotal evidence from solar installers, the phones are already ringing hot from customers keen to sign on before the last of the subsidies are removed. That, as RenewEconomy predicted a fortnight go, is likely to lead to another boom/but scenario.

In the long term, it seems that the solar market in Australia – which could be leading the world – will be set back a decade.

That seems to be the clear and deliberate intention of the RET review panel, which says that large-scale solar farms are not needed, and not desirable. It expects its recommendations on the small-scale solar sector to set the market back by around 10 years.

Yingli Green Energy, the world’s biggest solar module manufacturer, warned that if these recommendations are adopted, Australia will be left behind in a world that is embracing renewable energy as a tangible player in the global energy mix.

“Australia’s extremely high levels of solar radiation mean that solar PV technology is particularly efficient in producing energy outputs,” Yingli’s Australian head Daman Cole said in a statement.

“This country can lead in the adoption, investment and innovation in solar energy. Academically, our universities lead the world in solar photovoltaic innovation, but regretfully the political uncertainty is hurting Australia’s solar industry.

“While we remain stranded in uncertainty around Australia’s clean energy future, the solar industry is experiencing strong growth in many other markets such as China, Japan, South East Asia and the Americas.

The problem with solar is that it is being adopted at a rate unforeseen and unimagined by the fossil fuel industry. Australia leads the world in residential rooftop solar, with more than one in five houses having solar systems, or 1.3 million homes, with a total of 3.3GW installed – even if it does trail in large scale installations. (The first utility-scale solar farm to be connected to the National Electricity Market will be formally opened this week).

Various official studies, such as those done by the market operator in WA, have predicted that installation rates could treble – reaching three-quarters of residential homes, and 90 per cent of businesses. New financial models would allow rental homes and apartments to become part of the market.

This is causing massive problems for generators, such as those owned by the Queensland government and recently sold by the NSW government, because it is eating away at demand, and revenue, at what used to be the most profitable time of the day.

The RET review variously describes rooftop solar as causing cross-subsidies, an assessment repeated by the AEMC in its analysis of network costs and tariffs, but rarely are the benefits brought to the front. Last week, the South Australian network operator said that the 565MW of rooftop solar in that state – it has the highest penetration – had delivered clear benefits in moving and reducing the peak, and for grid stability.

The RET Review panel found that scrapping the small-scale target will move the payback for rooftop solar systems back around three years to 10 years for homes, and nine years for commercial systems.

It believes that this will cause installations to drop by around one-third before recovering to current levels by the early 2020s. The solar industry fears it could be worse than that, and could cause demand to drop by one half and take longer to recover.

A new report by the REC Agents Association on Monday warned that 1,000 small and medium-sized businesses could collapse if the RET Review recommendations were implemented.

It says that the solar industry currently comprises more than 3,800 businesses, with annual retail sales of more than $2.5 billion.

“Should the Government axe or significantly reduce the Renewable Energy Target, we would see a 40-50 per cent reduction in demand for solar and the closure of at least a thousand small businesses,” it says.

It says the absolute majority (96%) of the 3,800 solar businesses in Australia are SME sized businesses, and more than 93 per cent of the roughly 21,000 Australians who work in the Australian solar industry work in SME’s.

“It has been one of Australia’s fastest growing employment and business sectors, having grown twenty fold in the last decade. In less than ten years, the industry has created more than $17 billion of direct retail sales and tens of billions of flow on expenditure on in-direct support services.”