Solar's rise to transform the power sector, Flannery says

Australia’s take-up of solar energy is “impossible to constrain” and will eventually remove the debate over rising electricity prices from the political landscape, according to Tim Flannery, chief of the government’s Climate Commission.

Professor Flannery’s comments come as the commission published its Australia’s Future – Solar Energy report on Monday. The report noted how roof-top solar photovoltaic (PV) systems rocketed from 8000 in 2007 to 1 million by earlier this year, with about 2.6 million Australians now drawing some of their power needs from the sun.

“It’s an ever changing technology that’s expanding in both scale, size, area, and what it can do,” Professor Flannery said. “Electricity, at some point in the future, you’ll buy it with your house.”

PV installations in Australia, the world’s sunniest continent, tripled in two years from the end of 2010, the report found. While solar PV still only accounted for about 1.3 per cent of total electricity consumed in 2012, the energy source accounted for 70 per cent of new power capacity added in that year, the commission said.

The solar spree has been strongest in rural and regional areas and in the mortgage belts of the major cities. PV is particularly attractive for those on fixed incomes or others worried about rising power prices, Professor Flannery said.

China poured some $US31.2 billion ($35.5 billion) into the solar energy industry last year, dwarfing the $US3.6 billion equivalent spent in Australia, the report found. China’s investment is the main reason prices of solar PV have dropped 80 per cent in four year, making the technology attractive in Australia even as most state-based incentive schemes have been wound back or ended.

Next stage

Professor Flannery said the next stage of the industry transformation is likely to come with the spread of lower-cost storage, allowing households to reduce power demand off the grid for the first couple of hours of late afternoon and evening when little usage is high but the PV supply has ceased for the day. The spread of cost-effective batteries “will change things again”, he said.

The report found that under the most favoured conditions, such as in Western Australia, the payback period for solar PV is now down to about seven years. Since most units have a 20-year life, households could expect more than a decade of free power.

In the future, the current angst over rising power prices “won’t be part of the economic and political landscape”, Professor Flannery said.

Electricity prices have been a hot political issue with the cost doubling for many users over the past five years or so. Debate over the carbon price, which accounts for about a fifth of the bill increase, has also made the issue a contentious one.

Alternative view

Tony Wood, director of the Grattan Institute’s energy program, said the commission’s report reads as an “uncritical supporter” of solar.

While the report noted PV had helped to avoid 3.4 million tonnes of carbon emissions in 2012, it did not state the cost of the abatement, compared with alternatives, Mr Wood said.

“Solar fundamentally is part of the right answer,” Mr Wood said. The report, though, should have detailed a full cost-benefit analysis on its appropriate share of carbon abatement efforts.

The report also highlighted Germany and Spain among big investors in solar. However, a fierce debate is now raging in Germany about cutting back support for solar while Spain has already done so, Mr Wood said.

China, too, will have to write-off billions of dollars in the value of its excessive investment in PV production that may slow if not reverse the drop in module prices.

Mr Wood also said it is unlikely that electricity prices would disappear from the political arena in the near term.

Rather, the issue may intensify, especially if network operators seek to rebalance their tariffs by raising the fixed component of the power bills to recoup funding as demand from the grid sinks.

For instance, a household now paying $1000 a year for electricity split between a $300 fixed charge and a $700 variable bill would see little difference if the two components were reversed. A household with solar power, though, may be relying on a reduced variable repayment to make the PV panels viable and would be hurt by such rebalancing of the bill.

The alternative, though, will be heavy writedowns in the value of network assets - something the industry is likely to resist.

“You can see a small train wreck in the distance, and it’s getting closer,” Mr Wood said. “It could be quite ugly.”

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