16 August 2012 – Solar energy, once regarded as a laggard, is now way out in front as the technology du jour. The critical issue here is how this will affect developers and the housing industry which are driving the growth in PV installations.

The reality is solar installations are now getting cheaper. Leading utilities such as Origin Energy and AGL Energy are running letterbox campaigns offering attractive terms, such as $100 upfront for a $2000 system.

The price of silicon, the main ingredient used for manufacturing solar panels, has gone down to $25 per kilogram now from $450 per kg in 2008.  Current installation rates are from $2000 to $12,000.

That means the payback period for households shifting to solar panels would range from four to eight years at current electricity prices. And with electricity prices heading north, the payback period is shorter.

Nigel Morris from Solar Business Services spells out https://theenergycollective.com/solarbusiness/100981/inevitability-solar-pv-australia the challenges but believes the growth will drive itself.

He writes: “We do start to see housing penetration issues by 2020; under this scenario we would be approaching complete saturation of the housing stock if system sizes don’t increase on average, (although they already are) or if housing growth slows.

“However, we will have a replacement-and-upgrade market operating by then, and the currently unexploited commercial and ground-mount PV markets will add significant chunks to this demand by then. Cautious tick”

With rising electricity prices and solar panel prices falling since 2008 , the market for rooftop solar is booming. A report from Sunwiz consulting found that Australia installed more small-scale solar than Germany in calendar 2011.

In 2008, only 25 megawatts of solar were connected to the grid across the country. Now there are about 1700. From 25 to 1700, that’s a 6700 per cent rise in just four years.

The solar PV industry is showing extraordinary growth and that’s great news for the building industry.

Significantly, much of the growth is occurring in the outer suburbs. Developers at solar companies have targeted mortgage-belt areas with aggressive marketing campaigns.

They’re now offering enormous discounts for bulk purchases by neighbours. Some developers have rolled panels into their plans. These greenfield sites offer huge opportunities for developers. It’s now estimated that one in 10 Australian households will have solar panels within the next few months.

Curiously much of the growth is happening in South Australia.

As reported by Energy Matters South Australia has the nation’s highest penetration of rooftop solar panels.

Approximately one out of five SA homes had installed systems by the end of February this year – representing a total capacity of 267 MW. In 2011-12, residential solar panel installations are estimated to have generated 306 GWh of electricity in South Australia.

That’s the equivalent to 2.4 per cent of South Australia’s annual energy. With 20 per cent of the state’s residential rooftops now sporting solar panels, South Australia’s solar industry is booming and that will affect the local building industry.

But it’s also growing fast in other states.

Sydney is going to have the largest rooftop PV installation

spread across 30 properties in the City of Sydney, including Town Hall House, Glebe, Redfern, and Paddington town halls, the Redfern Oval grandstand, Railway Square bus station not to mention libraries, council depots and community centres. It will provide 12.5 per cent of the power for city council properties.

Indeed, a lot of money is now being invested into solar. It’s now recognised as the best and most cost effective renewable energy technology. The University of New South Wales (UNSW) and the University of Queensland, for example, have been awarded a AU$40.7 million grant to establish two photovoltaic research programs.

What’s underpinning the growth too is the Australian Energy Technology Assessment from Australia’s Bureau of Resources and Energy Economics, prepared by engineering firm Worley Parsons which was released last week. It found that solar is getting cheaper and that costs will decline by just over a fifth with every doubling of capacity.

More to the point, it will be cheaper than coal which is already struggling with a weakening in global prices, a high Australian dollar and increasing costs. The solar industry could potentially reshape Australia.

The fundamental issue is that with technology, solar PV prices will continue to go down, they won’t tick back up again. And that might be just the boost the building industry needs. Australian builders could help position this country as the growth market for solar.

How will this play out with the housing market and building industry? The big unknown here is the state of the housing market. Developers like Stockland are saying it’s the weakest they have ever seen. Recent cuts to interest rates have not encouraged consumers into the housing market. One reason is the growing level of job and financial security. But another good reason is housing prices.

Simply put, people will hold back from the market if they think that house prices will fall because they fear they would end up losing money if prices keep going down. But people would come back into the market as prices stabilise and start to lift. When that happens, their fear becomes: if I don’t buy now, the price is going to go up, and I’m going to lose out.

Obviously monetary, immigration and council policies will play a major role here in turning this around and that will boost the solar industry, which in turn will help drive growth in the building industry.

Leon Gettler is a freelance business journalist, author and podcaster. He works for a range of publications and produces two podcasts for RMIT every week: Talking Business and Talking Technology. He has an acute interest in the environment, its impact on business and the response of businesses and governments.