Originally published in newmatilda.com
Solar power may soon be the cheapest way to power your home – and the rapid growth of the industry is making other energy providers nervous. Ben Eltham on the solar revolution.
Few ordinary punters know who she is, but in renewable energy circles, she’s a rock star. Executive Secretary of global renewable energy policy network, REN21, Christine Lins is based at the UN Environment Program in Paris. REN21’s well-known Global Status Report is one of the most frequently cited reports establishing baseline data of the growth of the renewable energy internationally. Word has spread to Australia: Lins’ talk in Melbourne last week packed out a large lecture at the University of Melbourne.
You can watch her full speech at the Grattan Institute website, so I won’t recapitulate it here. But one thing stood out from her presentation: the astonishing global growth in solar energy.
Some of the statistics from the Global Status Report underline the solar explosion. An amazing 47 per cent of all new electricity generation in the entire EU came from photovoltaics in 2011. Almost 30 gigawatts of solar energy was added to global energy supply last year, a 74 per cent increase. Between 2006 and 2011, the operating capacity of solar electricity globally increased by an average of 58 per cent a year.
The reason for solar’s explosion is clear: shrinking costs. In just one year, 2011, the price of solar PV modules fell by 42 per cent. No wonder Lins called last year a “very special year” for renewable energy.”This is often a figure whenever I present this to an audience that is not too familiar with renewables development where this is some frowning, and people are wondering, because I think these are really remarkable figures,” Lins said last week, with typically Austrian understatement.
This plummeting cost base is transforming the energy industry, including in Australia. Although solar is still only a relatively small component of Australia’s energy mix, its growth is so rapid and its costs are shrinking so quickly that solar threatens to upend the entire structure of the Australian energy sector. That’s got a lot of people very excited. It’s got many established players in the energy industry very worried.
Nigel Morris is a well-known solar PV industry analyst, and a director of energy consulting firm Solar Business Services. He is optimistic about the exponential growth of solar PV globally. “I’d say it’s revolutionary for the energy industry in Australia, not just solar,” he told New Matilda in a recent phone interview. “The way that we traditionally view the electricity industry is absolutely going through a revolution.”
“As a general rule, in Australia, as a residential customer, on average solar system pricing, you will generate electricity cheaper than you can buy it in a vast majority of cases.”
“In many cases,” Morris says, “we are at socket parity.”
Socket parity is a term much bandied about in the industry, and not without justification. That’s because as electricity prices go up and solar PV costs come down, we are already in a situation in Australia where ordinary householders can generate much of the household electricity on their own roof, dramatically reducing their energy consumption from the grid.
The penny appears to have dropped for Australian householders, egged on by generous feed-in tariffs from state governments and renewable energy certificate credits from Canberra. According to the Australian PV Association (pdf), solar installations grew to 1.4 gigawatts in 2011, up from 571 megawatts in 2010 and 184 megawatts in 2009.
This rapid proliferation in solar systems is starting to seriously affect old calculations about the energy industry in Australia. The government’s normally conservative Bureau of Resources and Energy Economics is now predicting that solar will be the cheapest form of electricity generation by 2030. It’s what Mark Twidell of the Australian Solar Institute calls a “perfect storm of cost reduction”.
Twidell points out that solar PV has special advantages that other energy generation technologies lack. While wind turbines are themselves falling in costs by around 10 per cent a year, they remain large and quite complex mechanical engines. PV, by contrast, is closer in its technology base to the world of electronics fabrication. “When you look at the various technologies, most of them are spinning a turbine, whereas PV is solid state,” he says. “It’s a completely different cost structure. It’s disruptive in that costs can still go down.” As a result, solar PV appears to be enjoying a cost curve similar to the famous Moore’s Law we see in computer chips.
All that solar is starting to reduce household demand for electricity. Muriel Watt, an energy policy expert from the University of New South Wales, thinks “there’s a lot of capacity that has gone in the past few years, almost all of that is acting as negative load, so yes, that would be making significant contribution to reducing demand.”
Perhaps ironically, one of the biggest drivers of household solar has been rising electricity prices themselves. “There was always this view that the elasticity of demand was very low and you could keep putting prices up and people wouldn’t change what they used, but I they’ve just realise that that was incorrect,” Watt says. “Often times people will simply say ‘We’ve been thinking of putting insulation in for a long time, now that our power bill is $500, we’re actually going to do it’.”
As Watt observes, electricity retailers make money by selling electricity to you. “By and large they’re selling kilowatt hours,” she says. “So if you’re reducing your kilowatt hours their business model no longer works. Similarly the networks make money by kilowatt hours flowing through the network, so if you reduce that, their business model doesn’t work … we really need to change our retail market models.”
And because solar so threatens the existing business models of retailers and wholesalers, big energy is beginning to fight back. Morris says there is widespread concern in the solar industry that retailers and networks will begin to clamp down on solar installations, either by charging customers big money to hook up their panels, or simply by prohibiting them altogether.
“I’d say it’s the number one topic of discussion I’m having with solar companies every time I give a seminar,” he says. “It is not just something that might happen, it is something that is happening today.”
“If the network owner simply doesn’t want to connect you, there is no alternative, you have nowhere else to go … I had two calls this week from customers who had deals essentially agreed for 100 kilowatt systems, in one case the distributor said ‘We don’t want you to connect, we’re not going to allow you to connect’.”
Watt agrees. “There’s parts of the network in Brisbane where you can’t automatically connect [solar], and there’s parts of the diesel grid areas of northern Western Australia that you can’t automatically connect,” she confirms. “In terms of charging large sums of money, they’ve certainly done that for commercial installations where they hit you with large grid upgrade costs.”
Morris says “there is little if any” regulation around connecting solar — or indeed any form of distributed energy — in a network geometry still geared to the centralised distribution of power from big plants to households and small businesses. The issue was highlighted recently with a recent Queensland Competition Authority discussion paper, which recommended that householders with solar panels on their roof be forced to buy their own electricity from the grid at retail prices.
The recommendation was framed around what would be “fair and reasonable” to electricity retailers and distributors — but it’s hardly fair on consumers, who aren’t even allowed to use the electricity they generate on their roofs. When interviewed by Climate Spectator’s Tristan Edis, Matthew Wright from Beyond Zero Emissions likened the proposal to “telling someone they aren’t allowed to eat the fruit and vegetables grown in their own backyard and must sell it to the local Coles or Woolworths where they’ll then have to buy it back at a substantial mark-up.”
Mark Twidell says that regulatory reform is necessary if solar is not to be strangled by the entrenched power of the companies that run the grid. “I would say that it is inevitable that as markets change, regulations need to change. If we get the incentives right, it’s a win-win.”
But perhaps the clearest analysis of the changing nature of energy in Australia was outlined by Christine Lins. “There is a triangle of renewables policy”, she said in Melbourne last week, with the three points of the triangle occupied by energy security, industry policy and the environment. In Australia, blessed with vast reserves of fossil fuels, energy security has not been a driving force behind the development of renewable energy. Instead, the environment has been the main justification for policies like solar feed-in tariffs. But Lins argued that industry policy might be the real winning argument for the further development of renewables in Australia.
Rather than focusing on what jobs might be lost in dirty industries like coal, Australia could be focusing on the jobs of the future on offer with solar and other renewables. Lins pointed out that there are now five million jobs in renewable energy industries world-wide, a number sure to grow rapidly.
Twidell agrees. “70 to 80 per cent of the activity in solar is local,” he observes, with many of the jobs in renewable energy likely to be created in local services, such as electricians and installers.
This is a big new front in the war over the future of Australian energy. For a long time, the supposedly costly and uneconomic nature of clean energy has long been the most effective argument wheeled out by fossil fuel industries intent on protecting their turf. But as solar races towards cost parity, that argument is evaporating. Indeed, solar energy will soon be the cheapest and best way to power ordinary households and businesses.
Big energy is fighting back, however, lobbying for new regulations and industry protections. Given the vast lobbying power of the mining and fossil fuel industries, they have a good chance of succeeding. Now more than ever, the renewable industry’s best weapon will be ordinary voters.