Reflecting on over thirty years involvement in the solar photovoltaic (PV) industry, Dr Muriel Watt described the solar industry’s journey since the 1970s as one of highs and lows. With a global market full of potential for Australian PV, Dr Watt said it will be interesting to see where the market can go in the future.

Australian and international markets

Since the Australian PV Association began collecting data in 1992, there has been steady growth of about 10-15 per cent per year in cumulative installed kilowatts (kW), with the grid market growing substantially since 1997.

However Australia’s position in the global PV market is minimal compared to recent increases in overseas markets. Germany’s market has seen the most rapid growth, increasing from less than 500 cumulative megawatts (MW) in 2005 to over 3,500 cumulative MW in 2007. The Japanese and United States markets have increased steadily since 2000 and there was a sharp rise in cumulative MW in Spain’s market last year. However, despite being one of the original major players in the global market— both in terms of production and market size – Australia’s contribution to the PV market is now minimal.

Moreover, the global market is large and has major growth potential. In 2007, total installed capacity was 2.8 gigawatts (GW) and forecasts for 2012 are estimated to be between 6 and 16 GW.

“The market is huge,” said Dr Watt. “It’s really enormous, is growing very rapidly and – in all parts of the market – Australia really should be a part of that growth.”

Key Australian support programs

While the Solar Homes and Communities Plan (SHCP), previously the Photovoltaic Rebate Program (PVRP), has funded a significant portion of the Australian market and has been a very important policy program for the industry, it has not been the only driver.

Up to the 2007 - 08 year, 18 MW was installed under the PVRP and 8 MW under the Renewable Remote Power Generation Program (RRPGP). Forty-nine systems were installed under the GreenPower scheme, which was one of the first drivers of the grid market in Australia. While the GreenPower scheme has not been a huge driver of the PV market, it has been an important driver for some of Australia’s larger systems. Under the Mandatory Renewable Energy Target, there are now 32 accredited systems and more systems are being registered for the Renewable Energy Certificates now the deeming period has increased.

The evolution of the PV Rebate

One of the features of the PV rebate, which has been in place since the year 2000, has been the routine changes to the scheme that have sometimes unexpectedly left the industry without a program at all.

However despite changes announced in the 2008 Federal Budget, with the introduction of a means test, the PVRP has been very good for the grid market, with 18MW and over 13,000 systems installed.

The remote area market has, until this last year, been the major Australian market. It continues to be a desperately needed market for Australian PV and for most of the world.

The RRPGP began in the year 2000. By the end of last year 8.37 MW had been installed. With an initial allocation of $205 million for ten years, the program is currently funded to 2011 and has less than $87 million in funding remaining.

“Off-grid use of PV is one of the few power sources that can be used anywhere and we have millions of people around the world who need power, do not have any other source of power and who rely on PV,” said Dr Watt.

“This is an area where Australia has excellent expertise, with people who are world leaders in many areas in systems development and applications technology.

“It is not a market we should ignore because the Asia-Pacific region needs our skills and our technology for this market area.”

The Solar Cities program will invest $93.8million over five years to demonstrate high penetration uptake of solar technologies, energy efficiency and smart metering. While the program relies on the PV rebate for residential systems it is also putting money into larger systems.

The Solar schools program is potentially quite a large market for PV that will deliver about 20 MW of PV and is potentially an attractive base market for the industry for the next eight years.

Regarding costs and pricing trends in the global context, while production costs have reduced to under $3 per watt, module and grid system prices in Australia have remained much higher than overseas markets.

An Australian feed-in tariff?

Feed-in tariffs aim to offer customers who invest in PV, or other renewable energy technologies, an electricity buy-back rate that facilitates an economic payback within the life of the system or scheme. The first feed-in tariff was implemented in California in the 1970s and feed-in tariffs are now available in 37 countries and various States. The Australian Capital Territory, Queensland, Victoria and South Australia and Alice Springs (will soon) have feed-in tariff schemes for solar PV. Feed-in tariffs can attract major market investment if they are appropriately structured.

“Feed-in tariffs are like all policy, the devil is in the detail,” Dr Watt stated. “As you have seen, we’ve got feed-in tariffs all over Australia but they’re not the feed-in tariffs we thought we wanted.”

For example, the German PV market grew rapidly when the feed-in tariff laws were revised to guarantee not only payback of the system, but also an investment return. This return on investment has made the German market so attractive. However an effective feed-in tariff is not the only German market driver. Research and development support in Germany is ten times that in Australia and German manufacturing is also greatly supported.

Issues with feed-in tariffs include the danger of having too high a price that can, among other things, create high demand; increase prices if supply is constrained; restrict uptake in non-subsidised markets; and, leave the leave the industry vulnerable to policy change.

Meanwhile, the difficulty with net export feed-in tariffs, as introduced in South Australia, Queensland and Victoria, is that retailers cannot guarantee a customer what they will earn from a system, making that system harder to sell. Finally, megawatt caps can create a boom and bust cycle for the industry.

The preferred feed-in tariff model A preferred feed-in tariff model must: * Be a nationally consistent feed-in tariff placed on top of the prevailing electricity tariff * Have a tariff that decreases by 5-10 per cent each year * Cover cost by a customer levy, rather than government budget cycles * Include all customer sectors as eligible (but may exclude large industry) * Include a levy that is spread across all customer types (but again could avoid the more sensitive large industry sector) * Have no cap * Be based on a payment on total generation * Have an initial starting tariff that aims to repay capital cost over the feed-in tariff time period, say 15-20 years.

Meeting Australia’s solar energy market potential

“The markets are huge and Australia is just playing on the edge of this market. We’ve got so many opportunities and there are so many ways we could be supporting this market and there are so many different parts in the market that we should be involved in that we’re not,” said Dr Watt.