A provision for a mandatory ‘retailer payment’ under South Australia Solar Feed-in Tariff scheme has come into effect as of 29 January 2012. The state’s Solar Feed-in Tariff scheme is now composed of two separate parts: A ‘base rate’ of 16c/kWh (for those signed up before 30 September 2011), plus a retailer payment of 7.1c/kWh until 30 June 2012. The base rate will remain unchanged until 2016, while the retailer payment will rise annually to reflect the ‘real value’ of solar electricity to the electricity grid. The retailer payment will also be paid to those whose solar PV systems are signed up on the State’s former 44c/kWh rate.

South Australia offering one of the best solar PV incentives in Australia

With a cumulative rate of  23c/kWh (and rising), South Australia offers one of the most generous buyback rates for solar power in the country. For example, Adelaide households where the occupants are not home during the day can expect annual savings of approximately (5.6 Sun Hours x 5kW x 23c x 0.5 =) $1,200 in the form of credit on electricity bills assuming a 50% export rate of the solar power to the grid. These savings will grow as the retailer payment component of the Solar Feed-in Tariff rises over the coming years.

Further savings from self-consumption of solar power

On top of returns from electricity exports, system owners can also count on savings from avoided purchase of electricity from the grid: each kWh of power used at home while the solar panels are producing energy means 1kWh fewer that will appear on the next bill. With the price of electricity set to rise sharply across the country (by 36% in SA) over the next 2 years and beyond, it will make increasingly more financial sense for solar-installed households to opt to time their use to favour self-consumption over export to the grid.

Returns on any solar system will of course vary depending on factors such as system size, ratio of self-consumption vs export to grid, and the weather patterns for the year. But with solar PV system prices hitting all-time lows, payback periods are relatively short at 4-7 years for most systems in South Australia.

© 2011 Solar Choice Pty Ltd

Resources and links:

South Australian Government: Solar Feed-in Scheme page, Retailer Payment

More Solar Choice articles about the South Australia Solar Feed-in Tariff and other SA-related solar issues

A future where Australia’s power needs are met by renewable energy sources will demand substantial alterations to the way that electricity is generated and distributed. This point was recently highlighted in an editorial in the Sydney Morning Herald by Matthew Wright, executive director of Melbourne-based thinktank Beyond Zero Emissions, who described how rooftop solar power could actually be a benefit to the electricity grid and, ultimately, the average electricity user.

Solar power’s place on the electrical grid

Residential solar PV system incentive policies have been given a bad rap, especially in NSW, where an overly ambitious Solar Bonus Feed-in Tariff Scheme and the drama surrounding its hasty and badly-planned implementation have left a bad taste in the mouths of many. However, as Solar Choice has pointed out previously, poor policy-making does not reflect the viability of the technology itself (which does have a good reputation amongst Australians). There are numerous examples of Solar Feed-in Tariffs being implemented effectively throughout the world–most notably in Germany, where a scaled and measured approach to subsidisation has enabled the country to become a solar world leader in spite of its sub-optimal climatic conditions. Solar power can be effectively integrated into the electricity grid, to its benefit.

Distributed generation: Solar PV everywhere

A major benefit of distributed generation such as rooftop PV (as opposed to centralised generation in the form of large-scale generation plants) is the reduction in the costs of peak energy demand. A phenomenon termed the ‘merit order effect‘, recently discussed in a research paper published by the University of Melbourne’s Energy Research Institute, explains how different forms of electricity generation should be prioritised to meet demand. Under the merit order effect, sources with the lowest marginal cost per kWh would be brought online first, followed by more expensive forms of generation. Where solar PV generation is concerned, this means during periods of peak demand–most notably late afternoons in the summer, when home air-conditioning units are at full throttle.

Marginal cost of energy: fossil fuels vs solar power

Such high-demand events have a disproportionate influence on the average cost of electricity–up to 30% of the cost of power as shown on your bill at home is attributable to a handful of these extreme peak periods across the course of a single year. This is primarily due to the fact that, conventionally, the sources of electricity that meet this peak demand, such as gas-fired power plants, have a high marginal cost–as much as $12.50/kWh. This is partly because energy retailers can use their position in the market to charge higher rates to put their plants online when needed most. As Wright comments, “The reason customers were getting an average price under the state (feed-in tariff) programs is because it’s too difficult for ordinary home owners to set up a trading desk and participate in the national electricity market.” Instead, Feed-in Tariffs simplify the matter by setting a flat rate for solar, making it easier for owners of small-scale generators to understand and rely on.

In addition to the cost of generation, there are also additional infrastructure costs associated with the construction of ‘peak’ plants and maintenance and upgrades of the network infrastructure (‘poles and wires’) required to deliver this power over long distances. In contrast, a Solar Feed-in Tariff guarantees a price for power that, once implemented, does not increase as time goes on; 1kWh of solar energy fed into the grid on a 44c/kWh Solar Feed-in Tariff will never cost more than that.

Solar power: modular generation distributed across the grid

Solar PV systems, once reaching a high level of grid penetration, have the ability to confront the electricity price issue on several fronts: They are a modular, scalable, and proven electricity generation source that can be deployed gradually over time (as opposed to in a one-off investment in a centralised plant); they reduce the need for transmission of electricity over long distances (electricity from solar systems connected to the grid is generally used by homes and buildings nearby); and if connected to the grid on a net feed-in tariff, they reduce overall demand by becoming a home’s primary electricity source (electricity is drawn from the grid only when consumption exceeds production).

Realising the benefits of solar requires vision and willpower

The take-home point made by Wright in his SMH editorial is therefore that, with a bit of holistic vision, drive, and willingness to change the status quo, the Australian state and Federal Governments could protect electricity users against the spectre of rising electricity prices whilst simultaneously smoothing a transition to a clean energy economy. The advantage of a Solar Feed-in Tariff as a policy instrument for achieving these goals is precisely what has given it such a bad reputation in NSW–its cost. While electricity purchased from conventional fossil fuel sources in order to generate 10kWh of energy can cost in the order of $120, an equivalent amount sources from rooftop solar PV on a feed-in tariff rate of, for example, 50c/kWh (lower than NSW’s now defunct scheme but higher than Queensland’s existing one), would cost only $5. According to the University of Melbourne’s findings, the projected savings would be enough to cover cost of the NSW government’s electricity price support scheme for low-income households.

Reaching the level where this benefit could be realised would require rooftop solar PV on a broad scale, however. Although PV prices are reaching all-time lows, attractive Feed-in Tariffs for solar such as those in Queensland, South Australia and Victoria would provide a significant incentive for households to go solar.

© 2011 Solar Choice Pty Ltd

Solar Choice is running a Solar Community around Kununurra, in the East Kimberley region of Western Australia. In addition to Kununurra, the community also encompasses Lake Argyle and Wyndham, WA. Residents of the region are encouraged to take advantage of a special bulk discount rate on solar power systems by putting forward the local community’s collective bargaining power.

Solar Choice is experienced in managing Solar Communities for other regional areas throughout Australia–most notably in Broome WA, and Bundaberg, Townsville, and Mackay, Queensland. As Australia’s nation-wide Solar Brokerage service, the Solar Choice team is able to negotiate with a range of local, regional, and national installers to broker the best possible deal for members of the local community. Inquire about getting solar power and how to become part of the Kununurra Solar Community today.

Kununurra Region: Prime Ground for Solar Power

The Ord River Dam (Image via lakeargyle.com.au)

The local areas of Kununurra, Wyndham, and Lake Argyle receive a significant portion of their electrical power from the 30-megawatt Ord River Dam hydropower station. Solar power, however, is an ideal supplement to this large, centralised power source. Solar capacity can be incrementally increased unit-by-unit, expanding the total capacity of electrical generation connected to the grid and mitigating the need for construction larger-scale plants in the future. Solar power is a generation source well-matched to Kununurra for a number of other reasons as well, most of which are of direct benefit to residents who install a system.

-Solar PV systems in Kununurra can expect to receive plenty of sun. The area, near Australia’s northernmost tip, is one of the sunniest in the world. Furthermore, its location in the tropics means that, unlike non-tropical regions, the sun is sometimes to the north of and other times to the south of any given building–changing the dynamic of solar panel tilt angle and orientation that most Australian solar installers are accustomed to dealing with. In fact, thanks to its location (but rather counterintuitively for seasoned solar PV installers in most of Australia), a solar-equipped south-facing roof in Kununurra will receive more sun than a north-facing roof in Perth. This translates into higher system yields and increased savings on power bills.

-Thanks to the abundance of sunshine, the Federal government offers significant rebates on solar power systems in the Kununurra region. The Solar Credits Rebate available to those who go solar in the region are among the highest in the country. Kununurra is located in REC Zone 2, which means that 23 RECs will be are generated for each kilowatt of eligible solar power installed and connected to the local grid. REC prices fluctuate with supply and demand, but at the time of writing are hovering around $30 each–meaning a base rebate of approximately $700 per kilowatt. After the Solar Credit multiplier is applied, however, even more significant benefits are to be had. And thanks to the nature of the electrical grid in the region, residents of the Kununurra region are eligible for especially large up-front discounts on solar PV systems. This is one of the main reasons that solar power is a wise financial investment for local residents.

Kununurra is located about halfway between Broome and Darwin (Image via Google Maps)

-Horizon Energy’s Renewable Energy Buyback Scheme (REBS)–Get paid to export your solar power to the grid. Horizon Power currently offers a 1-to-1 net tariff for solar feeders-in. Under this setup, solar customers get paid the same rate for each kilowatt-hour of electricity that their solar systems export as they themselves pay for electricity. This means that, in addition to the savings afforded by using their solar power directly, solar customers will received credits on their power bills for exported electricity. A 1-to-1 tariff is a generous offering; in contrast to Horizon’s offerings, Synergy customers on Perth’s electrical grid receive only 7c for each kilowatt-hour that they feed into the grid.

Now is the time to go solar in Kununurra

Take advantage of bulk discounts on solar through the Kununurra Solar Community

Residents of Kununurra may utilise their bulk buying power via the Solar Community facilitated by Solar Choice. Solar Choice, utilising its network of over 70 installers nationwide, has negotiated and secured competitive solar PV installation pricing with a number of local, regional, and national solar power installers.

Solar communities are not always a readily available option for regional areas, which have a much lower penetration of solar energy system installers than more densely-populated urban centers tend to do. Some Western Australia solar installers may charge travel fees when called out for one-off installations, and prices may be higher due to the lack of competition between installers. With the establishment of a Solar Community, however, these hurdles will be overcome as greater numbers make it more worthwhile for solar installers to travel the distance.

Benefits include:

-Leading quality, fully accredited solar installations with 25-year performance warranties and German inverters

-Payback of less than 3 years with an expected return over 30 years

-Protection against electricity prices which are expected to increase by over 30%

-Potential to reduce electricity bills by up to 100%

-Deposits of only $100 to secure interest on the limited availability for solar capacity on the Horizon East Kimberley grid

The price of solar PV systems nationally has never been lower

Due to a combination of global, national, and regional factors, the price of solar power has recently struck unprecedented lows. Low solar system prices means that return on investment and payback times have never been as attractive as now. Prices are projected to being rising again in the latter half of 2012.

Solar Power incentives in Kununurra will not be around indefinitely

The flipside of the factors that make Kununarra one of the most financially lucrative places to install solar power in Australia also mean that there is a limitation on the amount of solar that can be connected to the grid. The Federal incentives are likely to be scaled back in the coming years, especially with the introduction of a carbon price and speculation that the Government will withdraw some of its direct support for renewable energy sources.

Kununurra Lookout - Hidden Valley National Park (Image via Wikipedia)

Limits to the solar capacity that can be connected to the Kununurra grid

In addition to the possibility of incentive reductions is the fact that there is an absolute physical limit to the amount of solar power that may be connected to the region’s electrical grid without potentially causing service disturbances. Once this prescribed limit is reached, homes and businesses will not be allowed to connect to the grid or benefit Horizon Energy’s Renewable Energy Buyback Scheme.

Register your interest:

Information Session

Meet Kununurra Solar Community manager Iain McGregor for personal discussion on your solar project

Date: 31 January 2012

Time: 12pm – 6:30pm

Location: Kimberley Grande PKG Bare & Grille (20 Victoria Hwy)

Contact the Solar Choice Kununurra Solar Community Team

The Kununurra Solar Community team are available for further information, questions, and clarifications.

To arrange a personal visit to your home or business in Kununurra, Wyndham, or Lake Argyle, call, email, or request a Solar Quote Comparison by filling out the form to the right of the page

Contact details:

Rob Burnett -

Mobile: 0410 154 410

Email:  rob@solarchoice.net.au

Justine O’Neill

Mobile: 0406 525 507

Email: justine@solarchoice.net.au

Solar Choice-

Phone: 1300 78 72 73

Email: sales@solarchoice.net.au

Iain McGregor

Justine O'Neill

Rob Burnett

Further reading:

Read more articles about Solar Power in Western Australia

© 2012 Solar Choice Pty Ltd

(Top image via http://expressway.paulrands.com/)

The incentive for the Federal Government’s Solar Credits rebate program is set to drop from 1 July 2012. The impact of the impending reduction will have the biggest impact on those who are planning to install solar PV systems around 1.5kW in capacity. Under the 3x multiplier that is currently in place, those who install their systems before the deadline will receive additional STCs (a type of REC) for the first 1.5kW of installed capacity of their system, providing an effective up-front subsidy to their solar systems.

How much will the Federal Solar Credits rebate drop?

According to the Department of Climate Change and Energy Efficiency, the Solar Credit multiplier, which multiplies the number of STCs issued for the first 1.5kW of a solar power system, is to drop from 3x to 2x after the 1 July 2012 deadline. The annual reductions are a planned part of the Government’s incentive scheme for small-scale solar power under the eRET, which was designed so that subsidies would be strategically wound back as solar PV systems become more affordable.

Last year’s premature reduction, the new Carbon Price may mean greater drop this year

However, if last year’s reduction is indicative of what is to come, there is a possibility that the STC multiplier may be reduced to 1x–meaning that, although the standard (non-multiplied) STC rebate will still be applicable, no ‘bonus’ for new solar PV system owners. There is also speculation that the Federal Government, having passed its Carbon Price legislation (scheduled to enter into effect in July as well, and intended to indirectly buoy renewable energy industries), will withdraw some support for the eRET.

What does the Solar Credit rebate reduction mean in monetary terms?

REC Zones

What do Solar Credits amount to in terms of the savings on the cost of a solar power system? This depends firstly on in which ‘REC Zone‘ your property is located. Some areas of Australia tend to have more sunshine than others, as a result of latitude and climatic factors. REC zones take these differences into account, and provide a greater subsidy for systems that can be expected to attain a higher energy yield over the course of their functional lifespans, which are officially ‘deemed’ at 15 years (but ordinarily expected to be 30+).

(You can check which REC zone you are in and the according number of STCs you may be eligible for with the ORER STC Calculator.)

RECs are a tradable commodity, and as such the REC price is prone to fluctuation. For the last few months (the latter half of 2011), the price has hovered at approximately $28, but has since its introduction seen fluctuations from as low as $16 to over $40. Depending on where the REC price sits when you install your system, your Solar Credit rebate will vary. (Some solar installers will also guarantee a higher REC price in order to entice customers with lower up-front system costs, taking the liability of price fluctuations on for themselves.)

Multiplier vs no multiplier scenarios: The difference in Solar System prices

The STC allotments for a 1.5kW system and the applicable ‘Solar Rebate’ for each Zone, under different REC multiplier scenarios are detailed in the chart below. (Prices are based on an assumed REC price of $30–actual rebates may be higher or lower.)

The savings on solar PV systems available under the 3x multiplier are significant. For example, at the moment, the price of a 1.5kW solar PV system in a REC Zone 3 area of NSW can be as low as $2000. In the absence of Solar Credit support (i.e. no REC multiplier), the same system would cost as much as $5000. Solar system prices currently sit at an all-time low, due primarily to a global glut of supply of components, and are not expected to sink much further. These factors, in combination with the projected electricity price rises across the country, mean that for Australians considering having a system installed as an investment, now is arguably the best time to do so.

For updates on the state of affairs with the Solar Credits Scheme, follow us on Twitter.

© 2011 Solar Choice Pty Ltd

The Victorian government has announced that “in the context of the implementation of a national carbon price“, an inquiry will be carried out with regard to the state’s Feed-in Tariff incentive schemes. The Victorian Competition and Efficiency Commission (VCEC), the state’s consumer watchdog body, will conduct the investigation, and will ultimately make recommendations about “the most appropriate arrangements to encourage Victorian households, community organisations, and small businesses to generate renewable energy”.

Government efforts to ‘improve’ Victorian Feed-in Tariff incentives, remove barriers to distributed generation

The review will not be restricted to the State’s Transitional Feed-in Tariff (TFiT), which is for small-scale solar PV generation systems of 5kW or smaller, or the Standard Feed-in Tariff, which applies to all forms of renewable energy generation, including solar PV systems of 5kW or greater. Instead, the inquiry is being conducted to take holistic look at the state of renewable energy initiatives in the State in order to determine how to obtain the most environmental and financial benefit from them. This could result in alterations to current incentive schemes, but at the moment it is entirely unclear as to what form these alterations might take.

According to the DPI website, the inquiry’s terms of reference (as set by the State Treasurer’s office) require VCEC to:

-Consider how efficient and effective feed-in tariffs are as a greenhouse gas reduction program;

-Provide a recommendation as to whether feed-in tariffs should be continued, changed, or phased out; and

-Identify barriers to a network of distributed renewable and low emission generation in Victoria, including co-generation and tri-generation

What this inquiry is: A proactive attempt on the part of the government to streamline its renewable energy incentives to make them more effective. It seems to be an attempt by the government to learn and improve its approach to renewables policy.

What it is not is a reactive, retrospective, and critical attack on a failed or bungled policy initiative, much as the inquiries into the NSW and WA Solar Bonus Feed-in Tariff schemes were.

An issues paper on the inquiry is expected to be released ‘in the near future’. The issues paper will describe the inquiry’s scope, the information the Commission is seeking, and an outline of the process and timetable for the inquiry.

Current Feed-in Tariff recipients not to be affected

It is important to note, as the DPI has, that outcomes of the inquiry “will not be applied retrospectively to any customers on existing feed-in tariffs, and potential customers wishing to sign up to the current Transitional Feed-in Tariff scheme will not be affected”.

Resources and Links

Victoria Department of Primary Industries: “Government inquiry into Solar Feed-in Tariffs”

VCEC: Feed-in Tariff Inquiry Terms of Reference (pdf)

For updates on the state of affairs with the Victoria Feed-in Tariff, follow us on Twitter.

© 2011 Solar Choice Pty Ltd

Thinking about making an investment in a solar power system? While you’re at it, it might make sense to insulate your house and get rid of some of your old energy-guzzling white goods. If you’re a Victoria resident, the government has a scheme to help you mitigate some of the up-front cost of cutting down your carbon emissions and your energy bills.

Victoria has a reputation for being one of the most progressive and environmentally-minded states in Australia. The state offers one of the most generous Solar Feed-in Tariffs in the country–25c per kWh. Victoria’s state government’s incentives take a holistic, well-rounded approach to sustainability, providing support not only for renewable energy generation, but also for the implementation of energy efficiency measures that reduce a home or business’s carbon footprint. Victoria Energy Efficiency Certificates (VEECs) are the state’s energy efficiency version of Renewable Energy Certificates (RECs), which are offered by the Federal government as an effective upfront subsidy for renewable energy installations, including solar PV systems.

What’s a VEEC? Certificates issues through the VEET

The Victoria Energy Efficiency Target (VEET) is the scheme which sets up the rules for the creation and sale of VEECs. There are 10 categories of activities which, if undertaken, can result in the creation of VEECs and the associated discount which is passed on to energy users. 1 VEEC represents 1 tonne of CO2-e abatement, calculated by comparing the difference between the energy use of the new product (e.g. an air conditioner), and the ‘baseline’ energy use (essentially, the amount of energy that would have been used if the new high-efficiency product had not been installed.) There are free VEEC calculators available on the Essential Services Commission (ESC) website.

The price of VEECs vary according to supply and demand (at the time of writing, the value of 1 VEEC is approximately $33). The greater the energy efficiency gain of the upgraded product, the more VEECs are issued. This value comes through to the end customer in the form of a discount, which is recouped by whoever provides the product/service (see below).

Some of these categories are applicable only to households, some only to businesses, and some to both. 1The categories into with VEEC-generating activities fall are:

Water heating
Space heating and cooling
Space conditioning
Lighting
Shower roses
Refrigerators/freezers
Televisions
Clothes dryers
Pool pumps
Standby Power Controllers

Who can issue VEECs?

VEECs can only be created by ‘Accredited Persons’. Businesses and sole traders can be deemed ‘Accredited Persons’ after being certified by the Essential Services Commission (ECS). Some examples of accredited bodies are sole traders, appliance stores, and electricity retailers. Unlike the Federal Solar Credit scheme, individuals cannot ordinarily hold on to their certificates in order to trade them at a later date to get better value.

Who buys the VEECs?

Much like under the Federal Solar Credit scheme, ‘Relevant Entities’ (usually big polluters and carbon-intensive industries) are required to ‘surrender’ a set number of certificates on the 30 April to cover their liability for the previous year. Not surrendering the requisite number of certificates results in a penalty. Although ESC does not provide a trading floor for VEECs, all ‘transfers’ (as sales are known) must pass through a VEET account to be registered.

Dual benefit: Upfront discount and electricity bill savings over time

VEECs offer a benefit to households and businesses by lowering the initial capital expenditure of energy efficiency improvements. On top of this comes the benefit of money saved on electricity bills as time goes on, especially important considering the electricity price rises that are expected across the country. As with installing a solar PV system, energy efficiency measures taken by a household mitigate these impact of these price increases, acting as an investment whose value increases as time goes on, with an ROI greater than the interest rate on many savings accounts.

Reducing your energy use makes sense when going solar

It is also worthwhile to note that energy efficiency and solar power investments can work hand-in-hand to reduce the need for further fossil fuel-based electricity generation sources–with the caveat, of course, that they are utilised strategically. Installing a solar system for a home, for example, makes little sense financially or environmentally if that home proceeds to consume even more electricity during peak tariff rate times.

Queensland is famous for its sunny weather, and Mackay is no exception, with an average of 5.5 peak sun hours across the year, making it an great location for installing solar power. In addition to the state’s natural blessing of abundant sunshine (or possibly in recognition of this), the Queensland government offers the most generous support for solar power in the country, at 44c per kilowatt-hour (kWh) on a net feed-in tariff. Mackay is home to a Solar Choice Solar Community.

Solar Choice Solar PV system Quote Comparison for Mackay

The link at the bottom of this article is an example of a Solar Choice Solar Quote Comparison for the Mackay area. For the sake of confidentiality and to maintain our commitment of impartiality with regard to our installers, key details–such as the the names of the accredited solar installers and the total cost of the systems on offer–have been removed. However, by filling out the Quote Comparison Request form to the right of this page, it is possible to instantly receive a full, unedited, and up-to-date version of the document.

Solar Choice is Australia’s free, nation-wide Solar Brokering and Solar System Installation Quote Comparison service. Solar Choice specialises in impartially comparing and assessing solar power system prices and installers throughout Australia,  advising our customers and assisting them in determining what size system and which type of components will best suit their needs. Our customers’ receiving an automated Solar Quote Comparison is usually the first step in this process, providing a snapshot of the solar market in their area. (Read more: An overview of Solar Choice’s personalised brokering service.)

What information does the Mackay Solar Quote Comparison contain?

-Mackay Solar Installer names and website details. Up to 7 installers may be included.

-Prices for 1.5kW, 2kW, 3kW, 4kW, and 5kW systems from Mackay solar installers in our network (if offered–some installers do not install larger systems, or may only quote on request)

-Solar panel information: number and capacity (usually in the format e.g. “8 x 190 watts”), brand, technology (monocrystalline, polycrystalline, or thin-film), country of manufacture, applicable solar warranties, and (if not part of a package deal) the price.

-Solar inverter information: Rated capacity, brand, country of origin, applicable warranties, and cost (if not part of a package deal)

-The amount of your Solar Choice discount–this discount is available exclusively through Solar Choice, and guarantees a better deal than going direct to the installer

-The value of the federal Solar Credits applicable for the system, and therefore what discount you are entitled to through the federal Enhanced Renewable Energy Target Scheme

-Each installer’s required deposit amount

-A range of possible extra charges or options: oversized inverter option, possible additional costs for tile roofs, 2-story homes, tilt-frames, electrical cabling, meter installation, travel fees, or ground-mounting solar arrays

Download a sample Mackay Solar Power System Quote Comparison

Click to download a sample of a Solar Quote Comparison for Mackay (pdf)

(Top image via Wikipedia)

Solar PV system prices have hit all-time lows in Australia, according to Solar Choice’s team of Solar Energy Brokers. These solar price declines are due to a perfect storm of factors, including the strong Australian dollar, increased competition amongst installers and manufacturers due to withdrawn subsidies, and a flood of cheap solar system components from China, resulting in a global glut of solar PV system component supply. The price of solar systems has most likely ‘bottomed out’, and is expected to begin rising again over the next 3-6 months, as Chinese panel manufacturers close factories and global supply catches up with demand.

Falling solar price trend over in latter half of 2011

Solar Choice, as Australia’s Solar Energy Brokerage service, manages a network of over 70 installers Australia-wide, representing a broad cross-section of the solar PV installer market. This puts the company in a unique position with a ‘bird’s eye view’ of the industry and and its trends, including which components are used regularly, which ones are in greatest demand, and the cost of completed installations after the Federal Solar Credits rebate. According to the Solar Choice team, prices for most systems have dropped significantly since around June of 2011. The price drop followed the announcement of a reduction of the Federal solar power incentive, as well as the total withdrawal of the NSW Solar Bonus scheme, the program which drove NSW to become the largest solar PV market in the country.

Solar subsidies knocked back across the country

A number of solar industry trends have made themselves evident over the past year or so. The most obvious set of changes has been the steady withdrawal of solar PV incentives, which have been slashed across the board, both on the Federal and State levels. Earlier in the year, New South Wales and Western Australia scrapped their subsidisation schemes for small-scale solar PV. Similarly, Victoria and South Australia have recently reduced their small-scale solar subsidies significantly. The ACT has switched to a one-for-one tariff from a set rate. This makes Queensland the only state that still offers its original solar feed-in tariff rate. In addition to State-level cuts, Federal incentives have taken two major knocks–a sharp drop in the REC/STC price from $40 to as low as $16 (currently around $30) and a reduction of the REC multiplier, which incentivised small-scale solar systems.

1.5kW systems used to be the norm…

1kW and 1.5kW systems were once the staple installation sizes for residential customers. ”At one point in time, the average market price for a 1.5kW system was $2 -$3 thousand ($1.33 – $2.00/watt), after RECs [STCs],” said Henry Walcott, a member of Solar Choice brokerage the team. Following the cuts in the Solar Credits scheme and the drop in STC prices the cost of smaller solar systems jumped temporarily, to an average of $3 – $5 thousand. Prices have since recovered, however, with systems coming in at as low as $1700 [$1.30/watt].

…but the market has seen a shift in preferences towards 3kW – 5kW systems

There has been a general shift in preference towards larger systems, which generate more electricity and therefore offer better returns on investment and shorter payback periods, especially in light of rising electricity prices. ”After the REC multiplier was reduced, we started to see the price for 3kW-5kW systems crash,” said Tom Chapman, another Solar Choice Broker who has been with the company since mid-2010. “You couldn’t find a 5kW for much less than $17 thousand dollars (about $3.40/watt) a year ago–$16,500 at the lowest. Now the standard is about $10 to $12 thousand ($2.00 – $2.40/watt) for a system with good components–a European inverter and decent Chinese panels.”

Even systems as large as 10kW have become significantly more affordable, according to Walcott. “The average price for a 10kW system was $40 thousand [$4.00/watt] a year ago–minimum $30 thousand [$3.00/watt]. The prices were fairly consistent. Now we’re seeing a lot more variation in pricing among installers; highs are what they were before, but at the bottom of the range you can find 10kW systems for for as little as $20 to $25k [$2.00 - $2.50/watt].”

Full system price declines in line with solar panel price declines

The phenomenon of price decline observable even in unsubsidised solar PV prices. Solar Choice’s data are corroborated by research undertaken by Solar Business Services director Nigel Morris, who has been tracking solar panel factory gate prices since September 2009. According to his figures, the average cost per watt of solar panels (not including balance of system (BOS) components such as inverters and wiring) has fallen from about $2.75 to less than $1.00 since he began keeping records (see graph below).

Solar PV system factory gate price index. (Via Solar Business Services)

Why are solar system prices so low?

Competition among solar installers

The brokers attribute the drop in prices at least partially to the withdrawal of the subsidies that had been driving the industry and the stiff competition that ensued. “It’s turned into a buyer’s market. The market had been saturated with the subsidies in place, but once the work dried up, installers had to go looking for new customers,” said Chapman.

This competition has also resulted in a major shift in the components used by solar installers; installers who would at one point in time only offer high-end products have now also taken onboard less costly, lower-end components for their installations in order to remain competitive.

Cheap solar panels from China

Thanks to substantial Chinese government subsidisation (which has recently been the flashpoint in a trade row between US and Chinese solar PV manufacturers), a flood of cheap Chinese-made panels has also made its way onto the Australian market, bringing down the average price of systems significantly. Recharge Magazine recently estimated that global capacity for solar panels is currently approximately 41GW per year, whereas demand is only 28GW–a massive difference of 13GW.

There are literally hundreds of solar PV panel manufacturers in China, most of which are expected to fold in the next 5 years, and 50% of whom have reportedly already ceased production, according to a recent report from Digitimes Research, which quotes the Chinese-language Guanzhou Daily.  (Competition from Chinese installers was one of the reasons cited when Australia’s only solar panel manufacturer Silex Solar announced that it would close its Sydney assembly plant.) Once the Chinese manufacturer market slims down–and as China’s domestic demand for solar increases–decreased competition and elimination of the lower quality panels from the Australian market could mean a rise in the average cost per watt.

A glut of solar panel stock in Australia

The supply of as-of-yet uninstalled solar panel stock globally was approximately 10 gigawatts (GW) at the beginning of the year, according to Morris of Solar Business Services. This glut, like the increased competition, has arisen at least partially due to the withdrawal support schemes abroad. A drop in global demand has resulted in manufacturers selling components at slim margins or at losses, and often to Australia, just to keep inventory and cash flowing. Calculations by Morris estimate that the excess stock now sits at around 6GW. This number is still significant enough to drive down prices. The situation is temporary, however, and Morris expects that Australian prices have either already levelled out, will level out, or will begin to rise again in 3-6 months.

The strong Australian dollar

Underpinning all of the above is the strong Australian dollar, which has enabled the country’s solar industry to import solar PV system components at affordable prices (and is also ironically accused of being a major factor in Silex’s woes). Historically the exchange rate has fluctuated significantly, and it is not expected to maintain its current high indefinitely. A weakened Australian dollar, once the current oversupply of solar component stock has been exhausted, will mean that new components will have to be purchased at higher cost, which will be passed on to end users.

According to Morris, who emphasised the important role that the exchange rate plays in the Australian solar industry, “It is entirely possible that the exchange rate could lead to price increases. If I was a betting man, I would say that the value of Australian dollar will fall again. Historically, it has always been 72c to the US dollar when averaged over a 10 year period. Right now it at an historic high.”

How long will solar PV system prices remain low?

It is difficult to say how long solar system prices will stay at their current levels, but the factors above indicate that the solar installation market is in a temporary ‘sweet spot’, from which it will inevitably dislodge itself–at least for the interim. Payback periods, which based on the current prices available are approximately 5-7 years in states with no or small feed-in tariff incentives, would grow longer with an increase in solar system purchase price, although this may be offset to some degree by the rising price of electricity in Australia. A solar power system is an investment whose value increases with the price of retail electricity, provided the power it produces is used directly by the home.

A note about cheap products

Although it is true that the cost of solar PV systems has been declining rapidly, and that the primary consideration for many who are considering going solar is the up-front cost, it is very important to to carefully consider which components are included in a system. Purchasing a solar system is a decision that a household will only make once, so the longevity and bankability of its components are factors that should should be cautiously weighed against costs by anyone in the market for a system.

Solar still has a bright future

Looking into the long-term future, solar PV will continue to grow and is expected to become an increasingly important part of the world’s energy framework. Even the International Energy Agency (IEA) has speculated that 60% of the world’s energy could be sourced from solar power (both solar PV and concentrating solar power) by the year 2060.

© 2011 Solar Choice Pty Ltd

Townsville is one of Australia’s Solar Cities and home to a Solar Choice Solar Community. Queensland is famous for its sunny weather, and Townsville is no exception, with an average of 6 peak sun hours across the year, making it an ideal location for installing solar power. In addition to the state’s natural blessing of abundant sunshine (or possibly in recognition of this), the Queensland government offers the most generous support for solar power in the country, at 44c per kilowatt-hour (kWh) on a net feed-in tariff.

Solar Choice Solar PV system Quote Comparison for Townsville

The link at the bottom of this article is an example of a Solar Choice Solar Quote Comparison for the Townsville area. For the sake of confidentiality and to maintain our commitment of impartiality with regard to our installers, key details–such as the the names of the accredited solar installers and the total cost of the systems on offer–have been removed. However, by filling out the Quote Comparison Request form to the right of this page, it is possible to instantly receive a full, unedited, and up-to-date version of the document.

Solar Choice is Australia’s free, nation-wide Solar Brokering and Solar System Installation Quote Comparison service. Solar Choice specialises in impartially comparing and assessing solar power system prices and installers throughout Australia,  advising our customers and assisting them in determining what size system and which type of components will best suit their needs. Our customers’ receiving an automated Solar Quote Comparison is usually the first step in this process, providing a snapshot of the solar market in their area. (Read more: An overview of Solar Choice’s personalised brokering service.)

What information does the Townsville Solar Quote Comparison contain?

-Townsville Solar Installer names and website details. Up to 7 installers may be included.

-Prices for 1.5kW, 2kW, 3kW, 4kW, 5kW, and 10kW systems from Townsville solar installers in our network (if offered–some installers do not install larger systems, or may only quote on request)

-Solar panel information: number and capacity (usually in the format e.g. “8 x 190 watts”), brand, technology (monocrystalline, polycrystalline, or thin-film), country of manufacture, applicable solar warranties, and (if not part of a package deal) the price.

-Solar inverter information: Rated capacity, brand, country of origin, applicable warranties, and cost (if not part of a package deal)

-The amount of your Solar Choice discount–this discount is available exclusively through Solar Choice, and guarantees a better deal than going direct to the installer

-The value of the federal Solar Credits applicable for the system, and therefore what discount you are entitled to through the federal Enhanced Renewable Energy Target Scheme

-Each installer’s required deposit amount

-A range of possible extra charges or options: oversized inverter option, possible additional costs for tile roofs, 2-story homes, tilt-frames, electrical cabling, meter installation, travel fees, or ground-mounting solar arrays

Download a sample Townsville Solar Power System Quote Comparison

Click to download a sample of a Solar Quote Comparison for Townsville (pdf)

(Top image via Wikipedia)