Australia's 800-MW PV Market: How Long Can it Last?

Australia surprised everyone, including itself, when it broke back into the top 10 PV markets last year. This created a frenzy of investment activity in Australia from international players. While a strong 2011 was expected, few forecast that the Australian PV Market would double in size. But as the Australian PV market heads for 800 MW in 2011, Warwick Johnston of SunWiz Consulting asks: How long can it last?

2011 was supposed to be the year that broke the back of Australian PV’s re-emergence as a top international PV market. Policy support was expected to wane as states reached their feed-in tariff caps, and the federal government subsidies were also expected to drop slightly. But as a lesson to policy makers, Australia again proved that the worst way of reducing the cost of PV subsidies is by reducing them drastically. The federal government gave months’ notice that it was going to reduce subsidies by 40 percent overnight, and around the same time successive state government announced roll-backs (or in two cases absolute removal) of feed-in tariffs. In a perfect storm for solar, demand surged in May and June, and in response the industry tooled up, and raced to a cliff.

The net effect of these announcements was to pull-forward into the first half of the year customers that might otherwise have bought in an orderly fashion in the second half of the year (or indeed, never bought at all). The solar industry’s bubble had burst, its veteran large PV retailer collapsed, many closed up shop, and some believe a cleansing event will ripple through the supply chain. Installations in the state with the best remaining feed-in tariff fell 70 percent from their peak, with most other states experiencing drops of 80 percent. This has set installation levels back to those 18 months ago, when Australia looked more like a 300-MW market.

In spite of the industry shakeup that is currently playing out, a fantastic opportunity remains for Australian solar power. Acclaimed experts from the Australian PV Industry SunWiz and SolarBusinessServices have collaborated to forecast opportunities in the local market. The Australian PV Market 2011-2016 Forecast report, released this week, describes the expected volumes of PV installation in each sector and state for years ahead, covering a range of scenarios that relate to various policy and economic settings.

The good news is that in a small but rapidly increasing portion of the market, government subsidies are sweeteners rather than deal-makers. As illustrated by the figure below — drawn from the Forecast — grid parity has been reached in many places around the country, and highly-favourable financial outcomes are on offer in the 10-50-kW small commercial sector. The residential sector will stabilise after its current contraction, and there will be substantial opportunities in the large-scale sector.

Indeed there is excellent reason for foreign investment in the Australian market. Australia’s PV market has comprised almost entirely of residential installations, some 300,000 of them in 2011. Most Australian PV integrators lack experience in installations larger than 30 kW, which is the sector that is set to grow most in coming years. Whole swathes of the country are suitable for MW-scale installations, but require specific skill sets.

How long can it last? According the the report, Australia is on the brink of having a mature, self-sufficient solar industry that will be increasingly stable and prosperous for years to come.

SunWiz is a highly-respected solar consultancy that provides market intelligence, outsourced engineering, project development, and bespoke consulting to the Australian PV Industry. The Australian PV Market 2011-2016 Forecast, produced in collaboration between SunWiz and industry veteran SolarBusinessServices, draws upon scientific modelling and daily-updated solar socio-economic research, combined with years of relevant local experience.