Little solar communities: Australia's looming micro-grid moment

Part two of the solar story after rooftop residential will be micro-grids - already a $750m market in the US. And falling solar support Down Under will only bring it on faster.

Australian society is made up of a strong sense of independence, can-do attitude, and healthy scepticism for authority, which is understandable given its geography and history. Therefore, it’s little wonder that household-owned, rooftop solar is the major force in the Australian solar market.

Australia is also home to massive youth unemployment, which is sapping the potential of a generation of kids. According to the Clean Energy Council, and referenced by The Australia Institute in its recent report on the subject, employment in the solar industry has overtaken coal-fired power, and is expected to increase by 8000 more jobs by 2018 (assuming we still have a RET). That’s more jobs created in the next four years than existed in the entire electricity sector, including renewables, in 2007. All people, and particularly young people hungry to learn new skills, have brighter employment prospects with a healthy solar market.

Given the widespread disappointment at current solar policy settings, and disconnect between energy retail prices and services, you may be forgiven for thinking that solar owners’ most natural next step is to assess the viability of going off-grid. However, as we found in our December 2013 report What Happens When We Unplug?, it could take until 2020 for single homes to cost-effectively defect from the grid (which doesn’t mean it won’t happen in the interim, only that those who proceed may be doing it for other reasons).

However, micro-grids are a different story.

The bright side of eliminating feed-in tariffs (and other support for renewable energy) is likely to be more demand for solar-powered micro-grids, where solar power and storage can viably be deployed at scale, without the need for government support. This emerging infrastructure model will also create jobs for young and old alike – from designing and building systems, to maintaining and servicing infrastructure and customers.

We found community scale models could be cost-effective before 2020 for the mass-market, and battery costs seem to be moving faster than we assumed they would. In fact, according to recent analysis by Navigant Research, revenue from the (currently) niche market of energy storage for micro-grids is worth $US662 million ($757 million) in 2014, and will be $US4 billion ($4.58 billion) by 2024. Meanwhile, a separate Navigant report, specifically on the Asia Pacific micro-grid market, anticipates $31 billion of investment between today and 2023, with the “declining costs for renewables … increasing the business prospects”.

In the US, solar-powered micro-grids (often with a diesel gen-set for back-up power) are becoming a reality in the wake of events such as Hurricane Katrina – during the aftermath of the hurricane, the areas that coped best were powered by micro-grids. The move to create solar micro-grids – such as the 300kW solar/400kW battery storage example on Alcatraz Island – is moving on apace. Micro-grids powered by renewable energy have a fuel supply that is hard to disconnect, even by the most powerful cyclone. Ensuring that solar panels don’t become deadly shrapnel during the event itself is a major issue to be overcome, but the likes of Lockheed Martin are already working on this market opportunity, as the US military continues to lead the charge.

Meanwhile, the developing world increasingly views solar, and “village-scale” micro-grids, as an obvious and cost-effective choice for its vast, distributed populations. By way of example, the trend is being led by new Indian Prime Minister Narendra Modi, who aims to increase solar’s contribution to the Indian energy mix from 1 per cent to 5 per cent within seven years (likely to be extremely conservative, given the figures now coming out of both countries are large enough to create critical mass). Solar micro-grids also fulfil a social objective – lifting people out of poverty, using their own entrepreneurial spirit to create local wealth and employment opportunities. Multinational firms are only now beginning to appreciate this opportunity.

It looks as though nature has pushed US society towards implementation of solar micro-grids. Meanwhile, India is finding that the sheer size and distributed nature of its society is creating both economic and social incentives. As for Australia, it looks as though it’s likely to be politics which pushes the early adopters and, potentially, also the early majority, to take the next steps towards micro-grids at scale.

As the proverb says, a journey of a thousand miles begins with a single step. Rooftops one day, micro-grids the next – and so the journey continues.

Alex Houlston is co-founder and director of both energy services company Energy for the People and crowd-funding solar company, The People’s Solar

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles