CLIMATE SPECTATOR: Cut-price solar

Climate Spectator

This week's charts of the week look at the incredible changes that have occurred with solar PV installed system prices. It illustrates how difficult it is to accurately assess PV prices, with data just a few months old potentially being misleading.

I suspect a large number of policymakers are still yet to catch up with what has been happening in the last 12 to 24 months and instead, their decisions are informed by reports they may have read that are completely out of date. This is understandable because the economics of most energy technologies simply don't shift anywhere near as quickly as what we've seen with solar PV in recent years.

The first chart is drawn from a report by the Australia Institute, which was highly influential in government policy circles. It illustrates that between 2000 and 2009, system costs (adjusted for general inflation and excluding GST) were declining relatively moderately, but were still extremely expensive relative to competing alternatives at ten thousand dollars per watt.

If you based policy on this trend you'd probably say that solar PV was an expensive frivolity that wasn't going to amount to much. In fact, this is pretty much what the Australia Institute concluded. At the time, the Australia Institute said the program was largely welfare for the rich, and considering the prices over this period, it's not surprising that only the wealthy could afford PV systems.

Installed solar PV system price per watt free of subsidy (2009 Aust Dollars and excluding GST)



Source: The Australia Institute (2010)

This report was issued in November 2010 and was heavily reliant on government data from the PV rebate program that only went to mid-2009.

The next chart prepared by AECOM for the NSW Government's review of solar feed-in tariffs was issued slightly before the Australia Institute study in October 2010. Yet AECOM had made an effort to get the latest data direct from market suppliers about system prices, and included a more comprehensive 2009 dataset going beyond June.

What a huge difference in perspective. Taking into account the latest data for 2010, PV system prices were half what they were in 2008. While these numbers aren't adjusted for inflation unlike the Australia Institute's, the tiny 2.5 per cent per annum effect of inflation is completely overwhelmed by the 50 per cent plummet in prices. AECOM's report, which was actually issued before the Australia Institute's, could lead you to very different conclusions about whether solar PV might actually make an affordable and meaningful contribution to our energy needs.

Australian and international observed and forecast installed PV system price free of subsidies – nominal ($A/watt)



Source: AECOM (2010)

Note what AECOM projected system prices to be in 2011 and 2012 (the green dotted line). They expected the huge decline in prices would come to a halt and in 2011 would be around $5.70 per watt and about $5.30 per watt in 2012. It's not clear whether this was including or excluding GST.

This brings us to the next chart by ACIL Tasman, prepared for the Office of the Renewable Energy Regulator. It's ACIL's survey of what were quoted prices by suppliers for solar PV systems in October to December 2011, exclusive of GST. On average you'd pay below $4.30 per watt and if you were smart you'd pay below $4. Even after adding GST the prices are still well below those projected by AECOM just a little more than a year previously.

ACIL Tasman survey of installed PV system prices per kilowatt free of subsidies (excluding GST) – Oct – Dec 2011



Source: ACIL Tasman (2011)

This all brings us to the last chart, which provides internet quoted prices for PV systems including GST that were gathered yesterday. These are prices before any government rebate from renewable energy certificates (these were backed out assuming a price of $30 per certificate (STC)). These represent a wide variance in system size and quality of panels and inverters, but overall system prices tend to lie between $3000 and $3500 per kW with some very low quotes at $2500 and some quotes above $3500. If we backed out the GST then the prices would tend to average between $2730 and $3180 per kW. That's a dramatic price drop from ACIL's numbers just a few months ago.

Internet quoted prices for installed PV systems per kilowatt free of subsidies (including GST) – 12 April 2012