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The implications of Australia’s rooftop solar boom

Australia now has a total of 1.85 million rooftop solar installations, data that confirms we are experiencing a rooftop solar boom. And it’s relatively recent; according to the Clean Energy Regulator there were only 118 solar panel installations in 2001. In 2017 there were 170,710.

The implications of this boom, which saw its biggest increase from 2009 to 2010 (a leap of 68%) are overwhelmingly positive. Emissions are decreasing and solar users have access to cheaper electricity.

But there are issues around the solar boom that need serious thought. As fewer people pay for electricity offered by the retailers, who pays for the cost of the distribution network? After all, network costs make up half of a residential electricity bill.

Then there’s the problem of supplying demand at any time of the day, regardless of whether the sun is out or the wind blowing. And are there enough trained and accredited solar installers to meet demand for installation and ongoing maintenance?

Who pays for the electricity grid?

Professor Michael Brear is director of the Melbourne Energy Institute at the University of Melbourne. He thinks households have taken to solar because of the financial benefits, as well as the knowledge they are lowering carbon emissions.

He also believes people need to contribute to the upkeep of the main grid, even if they have ample solar energy. “It’s a bit like insurance,” he explains. “You can’t just pay for insurance when you have an accident, you have to have it all the time. We use the grid a lot more than we think and we need to pay our share.”

Brear’s observation goes to the heart of the problem of a shared electricity grid: who is going to pay for it if no one needs the electricity it offers? Will those who cannot get the benefits of solar end up paying an extortionate amount for power?

“I think what will happen is that solar will continue to grow,” Brear says. “But there will have to be reforms as to how people pay for their grid-delivered electricity; how they use the grid so that the cost of maintaining the systems is shared between solar and non-solar users in an equitable way.”

The energy market ‘Death Spiral’

This scenario, where fewer people pay more for power because of a shrinking consumer pool, is called the ‘death spiral’. As the cost burden of the network goes up, it’s paid for through the electricity bills of people who don’t have solar.

Wilf Johnston, managing director of Flex Australia, Energy Matters’ parent company, says the death spiral represents an exponential collapse in the number of people paying for commercially produced electricity.

“There’s been some talk about segregating tariffs so that you have a network component and an energy component,” he says, addressing the issue of how to pay for the distribution network. “But I think that’s not likely to happen for five or ten years.”

The fact is that the grid is playing a growing role in the lives of households and businesses that generate electricity from solar. Rather than a pipeline model, where energy is sent from power plant to consume in a one-way flow, the distribution grid is now a matrix, with power flowing back into it from solar homes. The network is also playing a role in trading networks, where households and businesses can trade power with each other through microgrids.

Are rebates necessary in a booming industry?

All this activity begs the question: Why do governments need to subsidise a the rooftop solar boom? Feed-in tariffs given by state governments to solar users who feed excess electricity back into the grid were a prime factor in the early days of the industry.

However, Tony Wood, energy program director at the Grattan Institute, says if residential solar generators produce too much energy, they can have an impact on grid stability. He says this may in time lead to cuts in government rebates for solar power.

Both Brear and Johnston believe solar uptake is strong enough to thrive without subsidies. “Ten years ago there were very substantial subsidies, or feed-in tariffs, and those made installing solar a no-brainer economically,” says Brear. “Those tariffs are now enormously wound back and in some cases they’re basically zero – and solar is still a terrific investment for many homes.”

In turn, Johnston believes solar uptake is forcing people to think of energy as a product that they can buy and sell. He also believes energy retailers, far from disappearing from the energy landscape, will have a role to play in the future.

“I think all energy products – batteries or solar systems – will come with an energy retail product stapled to it. It will reach a point where it won’t make sense to buy a solar system unless you have a solar-friendly electricity tariff attached to it.

“At the moment when you buy a solar system and ask what are the savings, you get an estimate. But we don’t know whether the tariffs are going up or down, or their impact on the bill. But if you sell the system with an energy retail product associated with it, then you can start quantifying some of the value more easily. Everything is bundled together.”

Renewables industry and employment

The renewable energy sector is a growth area for employment. Australian Bureau of Statistics figures released in April 2018 show full-time equivalent (FTE) employment in renewable energy activities in Australia estimated at 14,820 in 2016-17. This is an increase of 3,680 (33%) from 2015-16 and represents the highest level of FTE employment in renewable energy activities since 2012-13.

Roof-top solar PV remains the largest employer in the renewable energy sector. It represented 6,430 FTE jobs and 43 per cent of total FTE renewable energy employment in 2016-17.

But despite the Clean Energy Council’s registry of 5,000 accredited solar installers, the solar industry is facing a skills shortage.

Johnston says the problem is that not all of those 5,000 accredited installers are still working in the industry.

“A lot of people left the solar industry a couple of years ago when things were a little slower. The official registered numbers of installers will not reflect that. On paper it may look like there’s a lot of trained capacity, but a lot of that capacity is doing other things,” he says.

“The market is 30-plus per cent up on where it was a couple of years ago and in that time we haven’t trained the same percentage of new installers. Training takes time and even after training new installers don’t have the experience.”

How renewables will fill the coal gap

Both men agree that the electricity grid needs a constant and reliable supply of power, no matter what the weather. The intermittency of solar and wind is a problem as more of it enters the energy matrix.

“There needs to be firming of renewable generation so the load gets it when it wants it,” says Brear. “At the moment the cheapest [way] is to use some other fossil fuel source of generation to provide the firming. That may change in the coming years.

“You could use batteries or excess energy turned into hydrogen then turned into electricity when required, or pumped hydro. These methods may come in and displace that firming service provided by the fossil plants.”

In fact the biggest implication of the rooftop solar boom is the end of coal’s dominance as a power source, although fossil fuels remain on the table. Brear points to investment in gas-fired plants: “It’s a fossil fuel, but much cleaner than coal.”

But he agrees that there is significant risk associated with coal investments, and that banks and investors are “very cognisant of those risks”.

Johnston believes batteries, like the Tesla Powerwall, can provide the consistency supplied by coal-fired plants. He points out that new National Energy Guarantee (NEG) modelling assumes no new coal entering the future energy mix.

He adds that the Tesla big battery at South Australia’s Hornsdale Power Reserve can come online in milliseconds, supplying peak demand or correcting changes in frequency.

Rooftop solar boom helping tenants and industry also

In the meantime, the rooftop solar boom continues. Organisations like SunTenants making solar possible for renters to access the benefits of solar. Large-scale solar installations are also thriving. This week, UK billionaire Sanjeev Gupta’s signed a deal to power his Laverton steelworks from a solar farm.

As for the reasons behind the rooftop solar boom, Brear concludes that Australians are combining financial with environmental concerns.

“Why put your hard-earned into rooftop PV?” he asks. “Well, you might care about the environment, and you get a commercial return. That’s better than a lot of investments.”

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