Australian Solar Photovoltaic Market Analysis
Solar Importance in the Australian Energy Mix
The energy industry in Australia is mainly driven by the importance of coal and natural gas due to the strong mining industry and natural resources in the country. In 2019, fossil fuels electricity generation in the country accounted to 76% of the total electricity generated, whilst renewable energy represented 24% of the total. However this energy mix is very different depending on the territory.
Data from the Clean Energy Australia Report 2019 shows that Tasmania is the state with the highest penetration of renewables (95.6%) driven by Hydropower. Following Tasmania, South Australia has been another important milestone for renewable´s penetration accounting to 52.1% of total capacity.
On the other hand, in terms of renewable generation, New South Wales and Victoria lead the rankings with 12,160 GWh and 11,428 GWh respectively. In contrast with data of 2018 when total renewable generation reached 48,279 (55,093 GWh in 2019), there has been an increase of 14.1% driven by the states of Queensland and Western Australia that increased their renewable generation 4,064 GWh combined.
Differentiating by technology type of renewable energies, the most developed is the wind power accounting for 35.4% of total renewable energy generated. Wind power is closely followed with solar energies (32.9% of total) including large, medium and short scale installations and by hydro power (25.7%). Iven by the states of Queensland and Western Australia that increased their renewable generation 4,064 GWH combined.
Looking closely into solar data, Australia is a global leader in the photovoltaic sector, not only in large scale systems but also in medium-scale and specially in the small scale sector. In total, according to IRENA, the installed capacity of solar photovoltaic in 2019 was 15.9 GW, which represents an increase of 40.9% since 2018 (11.3 GW).
Large scale systems have experienced its biggest momentum in the last couple years increasing the cumulative installed capacity by 791% from 315 MW in 2017 to 2,807 in 2019.
The large-scale solar industry continued its momentum in 2019, with 27 new projects adding
1416 MW of new capacity. This almost doubled the industry’s total capacity in Australia, which is now over 2.8 GW, and its contribution to Australia’s renewable energy generation increased from 3.9% in 2018 to 9.3% in 2019.
Investment in renewable energy generation has been increasing markedly in Australia over the last years, driven by a combination of factors including government policy incentives, elevated electricity prices and declining costs of renewable generation technology. Over the past decade, the share of electricity generation from renewable sources has increased steadily to be 24% per cent in 2019 (a 20% increase compared to data of 2018). For a brief period, in November 2019, renewables passed the 50% mark of total generation in the National Electricity Market (NEM) and in March 2020, this milestone was not only achieved in the NEM but also on a national scale combining all grid systems.
In 2019, there were 92 large-scale solar or hybrid projects across Australia, of which 66 are under construction or financially committed and 27 finalised during 2019. Only in 2019, large-scale solar projects accounted for the creation of 19,225 jobs for the construction of 13,269 MW solar plants for a total of 24.9 billion australian dollars.
Despite the high investments in the sector that have led to continuous growth of the industry, recent changes to government policies as well as the bottlenecks when connecting new sources to the NEM electricity grid have lowered the growth expectations on investment in renewable energies in the near term. Nevertheless, over the longer term, the transition towards renewable energy generation is expected to continue, as ageing coal-powered stations are retiring and the process of decarbonisation continues and the rising maintenance costs.
Before the Covid-19 world crisis, industry revenue was forecasted to increase at an annualised 18.1% over the following five years according to Ibisworld, to reach $1.3 billion. Nevertheless, in spite of this situation, global markets expect renewable energies to be the motor of the economic recovery. Looking into updated information on large-scale projects during the first 4 months of the year, it's clear that the number of projects reaching financial close is similar in comparison to 2019.
All in all, in order for the industry to continue its growth, experts believe that the sector should now focus on achieving higher efficiencies when developing solar projects. This would be achieved by combining digitalisation, such as softwares for efficient engineering processes, with other technologies like energy storage or bifacials.