Even before it had come to a close, 2017 was a record breaking year for Australian PV. Almost 1.1 GW of rooftop PV was installed in the STC market and at least another 0.1 GW of PV above 100kW was commissioned. We haven't finalised our numbers, but this means at least 1.2GW of PV was installed in 2017; quite possibly 1.3GW.
Many businesses worked right up until Christmas, and some even worked up until 31st December in order to get installations completed before the STC deeming period reduced. Hopefully everyone has had a refreshing break, no doubt during which the question was pondered: will it be a Happy New Year for Australian PV: can we sustain or even increase volumes in 2018, or will volumes dive?
Well if our twitter poll is anything to go by, 2018 will see an increase on 2017's volumes in the rooftop market, with the overwhelming consensus being an increase in the volume of rooftop PV that will be installed.
Businesses are confident, at least. But is their confidence well founded? Let's examine 2018.
Well one segment will certainly grow. The utility-scale solar segment saw 80MW of PV commissioned in 2017. SunWiz&RenewEconomy's Large Scale Lookout subscription service is currently showing 711MW of PV under construction. Presuming all of this is commissioned in 2018, and noting that the rooftop segment hasn't recorded a volume less than 700MW in the past seven years, its an easy conclusion: 2018 will exceed 2017's installation tally in Australia, and be another record year!
But most solar businesses don't play in the utility farm space. The market that is accessible to most solar businesses is residential (0-10kW), SME (10-100kW), and C&I (101-2000kW). How will each of these market segments fare in 2018?
In our mind, the key factors influencing uptake are:
- Electricity prices & feed-in tariffs
- Rate that electricity prices are rising
- PV system prices
- Momentum in Commercial Sales
- Market Robustness
1. Electricity Prices & feed-in tariffs
Electricity prices jumped in 2017, and with them feed-in tariffs. The cause jump was caused by Queensland LNG coming online and using up a lot of domestic gas AND electricity to liquify said gas, and by the retirement of coal fired generators. Basically there's less over-supply of electricity than usual, which has pushed up electricity prices. The high wholesale electricity prices have flowed through to high feed-in tariffs for excess household solar electricity that is exported to the grid. These factors combine to bring down the payback of a PV system, and at PVsell we're seeing a lot of paybacks coming in the 3-4 year range.
Now, electricity prices will remain high until more supply is brought into the market. This will happen when the large amount of renewable energy is deployed to meet the Renewable Energy Target. Though there's be GW deployed in 2018 its unlikely to substantially reduce the wholesale price of electricity in 2018, and other factors (retail & network & LGC component of electricity bills) will act to sustain high electricity prices this year, though it won't be long until they fall (if you believe AEMC forecasts).
But if you prefer to believe Jacobs (commissioned by the AEMO), its likely that prices in 2018 will be similar to prices in 2017 for most customers in most states. It'll be in subsequent years that electricity prices will decline significantly, which will affect PV return on investment.
Take home message: PV paybacks in 2018 will be similar to 2017 (and better than in 2019 and 2020)
2. Electricity Price Rises
Apart from the absolute electricity prices, the rise in said prices "bill shock" is what gets consumers of their backsides to buy PV. Electricity prices won't rise nearly as much in mid 2018 as they did in mid 2017, so regardless of the comparable Return On Investment for a PV system, it will be harder to motivate customers, many of whom will have grown used to the new price of electricity, just as they grew used to the price of fuel after swearing they'd never drive again when petrol reached $1/L.
Take home message: It will be more difficult to motivate customers to buy PV in 2018, but there'll still be a fair bit of bill shock
3. PV System Prices
Just when you thought PV system prices couldn't go any lower, they go lower. And do so again and again and again - as illustrated by the chart below which is SunWiz's analysis of SolarChoice's price dataset. That said, we don't expect to see any major price reductions in PV systems, but just enough to keep payback at a level that means you'd be foolish to not purchase PV in 2018!
Take home message: falling PV system prices are unlikely to significantly improve sales in 2017
Thanks in part to the national 'debate' that has played out on the front pages of the major newspapers, and thanks also to people's electricity bills, people are keenly aware that electricity prices have continued to skyrocket. The ongoing uncertainty in the policy environment only serves to keep electricity prices at levels that make rooftop solar a no-brainer. And speaking of no-brainers, Australia's parliament doesn't seem likely to land on a workable solution that will have any noteworthy impact 2018. It could be argued that the government's bashing of renewables only serves to plant seeds of doubt that the government will remove renewable subsidies (however unlikely it is they could negotiate that through the parliament). People's fear of missing out on a subsidy means they spring into action, and buy a solar power system.
With almost 1.8m PV systems installed in Australia, people are keenly aware of the bill relieve that PV offers, and they're just discovering that paybacks of under 5 years are now commonplace. Businesses too know that PV is a wise way of reducing their bill, and are likewise discovering they can make a better return on investment in a PV system than on many other parts of their business.
Take home message: People and businesses are aware that PV is a no-brainer, which will support sales in 2017
5: Momentum in Commercial sales
Over 30% of the volume of PV installed is now made up of Australian businesses putting solar panels on their roof. It's taken some time for Australian success in residential PV sales to be replicated in selling to businesses, which have a shorter attention span, longer turnaround, and higher expectations than residential customers. The solar industry is only now getting good at selling commercial PV, with an increasing number of businesses exclusively selling to businesses. But the long gestation period of a commercial sale means that sales enquiries that started when businesses received their Q3 electricity bill in 2017 are likely to be installed sometime in 2018. 46,000 businesses have now installed a total of 1GW of PV across Australia, and momentum is building.
Take home message: Momentum is building in Commercial PV sales, which sets us 2018 for another brilliant year
6. Market Robustness
In comparison to booms in previous years which have resulted from wind-backs in state and/or national subsidies, the goldrush in 2017 was due to underlying factors. The 2017 bonanza was experienced in every major state, rather than being reliant upon policy measures in any one state. This robust outcome bodes well for 2018.
The Australian solar industry also has a very robust structure. Rather than being dominated by a handful of companies, it is the many many hundreds of small businesses that make up most of the market. The 80/20 rule just doesn't apply - indeed the top 20% of companies have 30% market share. This means that Australian PV volumes aren't influenced by the rise or fall of a single company.
Prediction for 2018
With SunWiz&RenewEconomy's Large Scale Lookout subscription service showing 711MW of PV under construction, the residential and SME sector primed to continue at over 1.2GW, plus an increasing volume of C&I expected to deliver over 50MW, 2018 looks like it could well top 2GW.
Want to know more? Get everything you need to know about the 2017 year in Australian PV here