Which Australian PV Risk are You under-prepared for?

This article featured in DKSH’s February Newsletter and on Renewable Energy World

After several years of unstoppable growth, is the Australian PV industry on the verge of the unthinkable, market collapse? Sure, there’s been challenges arise before: the end of the rebate, stock shortages, cash flow, delays in government payment. And your company has managed such issues… after all, you’re still here. But is your company prepared for the next level of challenges that lie ahead? At the end of 2011, will you expand into markets previously held by your now-defunct competitor, or will your company be crippled by a perfect storm?

The graph of 2010’s installations (extracted from SunWiz’s Market Insights) seems to indicate that there’s no end to the growth in the Australian PV market. Our installation rate grew five-fold over the course of last year. So, why am I cautious about 2011? Simply because such growth is almost certainly unsustainable – the market has been overheated: across Australia (not only in NSW), too many well-intentioned companies have unsophisticated approaches and believe they can’t go wrong.  Such companies may be in for a rude awakening in 2011; here’s why:


End of Feed-in Tariffs

It’s clear that FiT caps will be reached in SA, Victoria, and NSW this year. With a WA FiT overdue, only Queensland’s FiT is assured this year. How much of your demand is related to over-generous FiTs in your state, and how will you survive (sell) without a FiT?

REC Multiplier Decline

The decline in REC multiplier could catch many off-guard. How can you be sure that a system you’re selling today under a 5x multiplier will be installed before 30th of July? How will your business adapt to a $1200 increase in system price across the board?

Stagnant Clearing House

Will the Clearing House clear, or will STC creation exceed demand, with the off-market trades meaning those waiting for Clearing House payment miss out? How will you manage your cash flow with Clearing House payment not occurring until the end of April?

Audits and New Standards

Both ORER and DCC are auditing thousands of systems this year. Are you prepared for fines, litigation, imprisonment, loss of accreditation, or loss of ability to create RECs? Have you started earthing your array frames? Have you considered specific requirements for breaker voltage on transformerless inverters? Have you got a wind loading certificate in place for the cases you regularly encounter?

Australian Dollar

The Australian Dollar is at unprecedented levels, providing windfall profits on old sales, but providing a temptation to sell highly discounted systems for later installation. But what if the Australian Dollar falls, where will that leave your profit, and your ability to sell?

Some free advice:

  • Figure out how to sell without a Feed-in Tariff – NSW companies already face this challenge, and those that can sell now will dominate any periods without feed-in tariffs.
  • Hedge against currency fluctuations. Don’t watch your profit disappear simply due to forces beyond your control.
  • Branding, positioning, and differentiation all of this matters when you stop being ‘order takers’ and start needing to sell again.
  • Quality matters, especially if the insulation industry reputation is a guide. The public must believe you’re the only trustable company left when the government flushes out the rats.
  • Service matters. Your existing customer base is the best place to look for new sales. Actively encourage referrals, repeat sales, and cross-selling other services.
  • Promote larger systems. Actively wean yourself off a 1.5kW addiction.
  • There are some very-innovative new service offerings on the market. Proactively identify how to stand out.

SunWiz Can Help

The PV Sales Tool can assist you to create a compelling argument for your customers, and assist you to sell off the back of rising electricity prices when a FiT ends and when the REC multiplier declines. Solar Hot Spots (illustrated) can help you identify regions and market demographics that are more likely to buy more and larger systems. Clearing House Clarified can assist you to understand the risks of the Clearing House, and offers practical advice about how to manage your STCs. And here’s a free forecast on the exchange rate.