STATE OF SOLAR PV INAUSTRALIA Last year was another record-breaking year for rooftop solar in Australia. According to the latest data from the Clean Energy Regulator (CER) an estimated 3.04 million Australian homes and businesses had a rooftop PV system by the end of 2021. Despite the global impacts of the COVID-19 pandemic, the nation’s rooftop PV market was remarkably resilient with an additional 2.88 gigawatts (GW) and 349,122 installations added to the grid during 2021. Figure 1 shows the number of monthly installations with the average monthly system size installed across Australia. New installed rooftop capacity is expected to be higher than currently reported1 , therefore it is anticipated that the final number of new installations will increase to around 386,798 small-scale solar PV systems, with a total capacity of 3,218MW. This is a 4.5 per cent increase in installations, and 8.6 per cent rise in total capacity compared to the same period last year.

Increasing consumer demand for greater energy independence during daylight hours is a key factor
behind this growth of rooftop PV, and that has been reinforced over the past two years with more
people working from home and seeking to reduce their energy costs.

State capacity and installations Shown in Figure 2, New South Wales, Queensland, and Victoria continue to be the dominant states for annual grid-connected capacity, accounting for three-quarters of newly installed capacity for three consecutive years since 2019.

Despite Victoria accounting for more than 20 per cent of installed capacity nationally in 2021, it grew
just over 2.3 per cent in 2021 compared to 2020 – with new installed capacity increasing from 574MW
to 587MW (Table 1). Only the ACT and Tasmania saw a significant increase in installations, while
New South Wales, Victoria and Queensland remained relatively steady (+/-3 per cent) compared to
2020. South Australia and Western Australia experienced declines compared to 2020, while the Northern
Territory was the only region to record a strong decline in solar PV installations – down 47 per cent (14.8MW compared to 27.7MW in 2020). The Northern Territory’s installed capacity is relatively
small, therefore any change can have a substantial impact while its installed capacity does not have
a significant impact on Australia’s total overall installed capacity. While the data is incomplete for 2021 due to the reporting time lag, the most common installation size for household PV systems was between 6.5kW and 9.5kW, accounting for slightly more than half of total installations. Larger system sizes of 9.5kW to 14kW also accounted for a higher proportion of installations than reported in 2020, this rise may have been aided by incentives for larger system sizes such as the Victorian Government’s Solar For Business program.

Battery installations with rooftop solar Last year also marked a strong period for residential battery-with-solar installations, with uptake helped by state-based schemes (Figure 5). Current data shows South Australia’s solar-with-battery installation activity experienced a 55 per cent drop during 2021 compared to 2020 (1,676 new installations in 2021 versus 3,728 installations in 2020). South Australia’s Home Battery Scheme reduced its grant of up to $6,000 to $4,000 in April, then to $3000 in September for a home solar battery. The subsidy has been reduced over time due to increasing competition in the market and the continued reduction in the cost of home battery systems. As of January 2022, the Home Battery Scheme offers rebates of up to $2,000 for a home solar batteryi.

MINIMUM DEMAND While COVID-19 had little impact on the uptake of residential solar PV, the pandemic coupled with milder weather and increased rooftop PV supply impacted electricity demand with decreases shown across the National Electricity Market (NEM) in the second half of 2021.
All states, except Tasmania, recorded the lowest daily demand during the fourth quarter 2021, largely
due to increased distributed PV output, according to the Australian Energy Market Operator (AEMO).
AEMO also reported new minimum operational demand records were set in New South Wales,
Victoria, and South Australia. Operational demand is met from the grid, while underlying demand
refers to all electricity consumed so can be sourced from behind-the-meter solar, battery storage,
embedded networks as well as the grid. Across the NEM a new low of 12,936MW was recorded on Sunday 17 October. This was 1257MW below the previous low mark (14,193MW in Q3 2021) while the NEM-wide minimum demand record was reduced on three separate days in the fourth quarter 2021, and rooftop solar contributed 40 per cent of underlying demand when the new record was set. NSW operational demand was down 211MW on the previous minimum set in 1999, while Victoria was down 196 MW on the previous record set in Q4 2020, and South Australia was down 132 MW on its previous record from Q3 2021. New South Wales’ new minimum demand record of 4,425 MW was set on the same day as the NEM record. Victoria’s new minimum demand record of 2,333MW occurred at 1pm on Sunday 28 November 2021. On Sunday 21 November, SA set its new minimum demand record of 104 MW also at 1pm – distributed PV provided 1,220MW or 92 per cent of the underlying demand.

In New South Wales, Victoria and South Australia, day-to-day variation in summer temperatures can
cause large changes in daily electricity consumption and variations in daily peaks. November’s
average demand profile is illustrated in Figure 6, reflecting the impact of increased rooftop PV
coupled with favourable weather conditions across the NEM states during 2021.

The market operator notes the increased uptake of solar PV is also contributing to increases in the daily operational demand swings between the minimum and maximum demand levels. As renewable energy further grows and coal plants retire, grid demand in the middle of the day is expected to continue to shrink further, moving to later in the evening once the sun sets. This demand peak, and subsequent quick drop, requires careful planning to ensure supply risks are managed. The shifting demand requires firm generation to start up and shut down more often, and in a very short space of time to meet the population’s energy needs.

LEVELISED COST OF ENERGY The Levelised Cost of Energy (LCOE) is the cost of energy per kilowatt hour (kWh) produced. When this is equal to or below the cost consumers pay directly to suppliers for electricity, this is called grid parity. Table 4 shows the LCOE for solar in Australia’s major cities, indicative retail prices and current Feed-in tariff (FiT) rates. The detailed methodology can be found in the Appendix. The retail comparison rates are representative variable rates and do not include supply charges. For all capital cities, excluding Perth and Hobart, retail prices are based on the implied usage charges from St Vincent de Paul’s tracking of market offers, which was last updated in July 2021. Perth prices are regulated and obtained from Synergy. Hobart prices were obtained from Aurora Energy’s Tariff 31, while Darwin prices are obtained from Jacana Energy’s regulated residential usage charges.

Business tariffs differ to residential retail tariffs. Depending on the size of the customer and the amount of energy used, businesses have the ability to negotiate lower prices. If a business was to consume all electricity onsite, the electricity prices in Tables 8 and 9 would represent the cost per kWh of consumption from the energy generated from the different system sizes listed. For businesses, installation occurs if the benefits of installation outweigh the cost. The average electricity bill for industrial businesses in 2014-15 was 10.72 c/kWh.

PAYBACK PERIOD, DETAILED MODEL Using a similar methodology to that used to calculate the LCOE of solar PV in Australia (see Section 4), the Australian Energy Council has calculated the payback period for residential solar PV systems. The payback period is defined as the year when the cumulative savings are greater than the cumulative costs of a solar PV system. Savings represent the avoided cost of consumption and any revenue received from FiTs. The cumulative cost incurred represents the initial investment and the time value of money. A detailed methodology is contained in Appendix 2. Figure 7 highlights the payback period for different system sizes across Australia. Note that electricity prices are subject to change with consumer price index (CPI) levels and therefore will affect the payback period. Many retailers offer higher solar FiTs, which help to offset the impact of higher prices in some states and deliver savings to customers with solar panels. The low payback periods across many cities further highlights the greater encouragement for customers to install solar PV.

In NSW, the system price has increased $370 for a 3kW PV system, $210 for a 4kW system, $170 for a 5kW system compares to a quarter ago. Other states see relatively stable system prices. Melbourne sees a strong encouragement to install a 5kW system rather than a 3kW or 4kW unit size. This can reduce the payback time by two years for a 5kW system compares to a 3kW system.

METHODOLOGY APPENDIX Solar installations methodology Analysis from the Clean Energy Regulator’s (CER) monthly data allows us to estimate the amount of solar PV installed in Australia. Since November 2015, the CER has consistently released data dated as at the first of each month. The new consistent release date allows us to provide a more accurate estimate of the capacity of recent installations. Due to the lag in reporting of new installations, however, the CER data takes up to 12 months to be finalised. A single rate tariff was analysed to calculate the implied usage charge in Victoria, South Australia, New South Wales and the ACT. Tariff 11 in Queensland. Tasmania’s usage charge was obtained for Aurora Energy tariff 31 and Synergy the sole retailer in Western Australia was used.


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