Household solar boom back on track after severe weather and supply disruptions lead to 14% drop in capacity

When record rainfall caused flooding in south-east Queensland last February, Steve McLean’s solar installers were kept off roofs, blowing a $60,000 hole in his firm’s budget and setting back what might have been another record year for his business.

“If we didn’t do a system for five weeks, you can imagine that no one else did … We got absolutely smashed in February and March,” McLean, the owner of Gold Coast Solar Systems, said. “If you take that number out of the marketplace, well, that was disastrous.”

Bad weather and Covid-related supply disruptions for solar panels and installers contributed to a 14% drop last year in new solar photovoltaic (PV) capacity added to Australian rooftops. The total capacity was 2.76GW nationally, making it the third-biggest yearly tally behind 2021’s 3.21GW and 2.94GW in 2020, Green Energy Markets said.

But after that early setback the industry regained its footing, with December the third-busiest month on record with 306MW installed, Green Energy Markets’ projects manager, Emily Perin, said.

Electricity price spikes from the middle of last year – and the prospect of more to come – also stoked PV demand. “Things really started improving for the remainder of the year,” Perin said. “But obviously, it didn’t make up for the first half.”

She said the industry “will probably see a modest increase on 2022” provided Covid-related supply issues don’t return. However, higher interest rates will squeeze discretionary spending by households and companies, Perin predicted.

A table showing monthly installations of solar photovoltaic capacity

Rising global PV demand, particularly as nations scramble to find alternatives to Russian energy after its invasion of Ukraine could also nudge solar panel prices higher in the near term, she said.

The average size of household PV systems continued to creep higher, topping 7.5kW, Green Energy Markets said.

On the Gold Coast, McLean typically installs systems of 10 to 13kW capacity. “I try to oversize at least 30% to future-proof [customers] against the rising cost of energy,” he said. “We know it’s going to continue to rise whatever the policies around governments and networks are.”

Last month, the federal government imposed one-year price caps on gas and black coal in a bid to limit the rise in energy prices driven mostly by fallout from Russia’s war on Ukraine. Even so, power costs are still expected to rise 23% this year.

An average client with a quarterly electricity bill of $600 to $800 installing a large PV system can be well placed to add a battery later and “be almost completely self sufficient”, McLean said. Although including an electric vehicle to the household adds “quite a considerable amount to the energy draw”, possibly doubling it.

The managing director of industry analysis group SunWiz, Warwick Johnston, said battery sales to households likely topped 43,000 units last year.

“The number of installations that happened in 2022 were at least the same as occurred in 2021 with the potential to be 10% to 20% higher” once final numbers land, Johnston said.

The battery uptake for households continues to rise, allowing the sector to grow even as the number of new systems fell about a fifth in 2021.

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SunWiz’s data indicates 15% of new systems come with energy storage systems.

The increased uptake came even though prices of batteries trended higher in 2022 in part because of demand for lithium to power the expanded fleets of EVs entering global markets.

The median price for a Watt-hour was about 65 cents in early 2020, and started 2023 at about 93 cents, SunWiz said. Price rises in some cases were the first in more than a decade for a technology that – like PV – has tended to get cheaper over time.

Payback periods for PV systems alone average out at five to six years, while adding storage typically doubles that. But for sun-blessed South Australia the payback period is under seven years for combined systems.

Buyers aren’t always motivated by price alone. Johnston said the strained power supply – with the main grid nearing a crisis point last June – is prompting some households to seek “electricity insurance, called the battery”.

Similarly, the widening gap between what households pay for power they get from the grid compared with what they receive for exporting surplus electricity is adding to the appeal of storage.

Given the expansion planned for lithium supplies, the cost of batteries will probably decrease. “When they do come down significantly, there’s going t0 be huge interest,” Johnston said.

Solar and battery installer McLean, meanwhile, is “under pressure” to handle a rising number of inquiries, including for batteries. “And I believe that will continue.”

McLean said governments should subsidise batteries as their greater use also helps avoid costly network investments.

Having a target of 20% of the population, for instance, would have “a massive impact on the grid requirement for supplying fossil fuels”, he said. “That’s the real game.”

Author: systems