Rapid expansion looms as threat to solar

Blue skies or a clouded future? This week had elements of both to add cheer or fear to Australia's solar energy industry.

The Climate Commission kicked off the week with a report, Australia's future - solar energy, which as the title suggests was a paean to the million-plus households who have installed solar photovoltaic panels on their roofs.

"A move towards significantly greater user of solar energy is inevitable," the report trumpeted.

Days later, energy consultants pitt & sherry added proof of solar energy's impact on the electricity market serving the country's eastern states.

Last financial year, solar panels supplied almost 2.7 terawatt hours of electricity, almost double the 1.4 terawatt hours a year earlier and 100 times that generated in 2008-09, said Hugh Saddler, principal consultant at pitt & sherry. A terawatt is equal to 1 trillion watts.

Solar's contribution, while only about 1.5 per cent of total generation, is eroding the business model of the incumbents. For one thing, it is helping to flatten the peak summer demand periods that generators used to make their fattest profits.

The solar surge was also equivalent to roughly a third of the slump in electricity demand over the past year, Dr Saddler said.

While perhaps 90 per cent of solar PVs are being snapped up by households, the industry is shifting towards the potential of commercial customers which typically consume energy while the sun shines, unlike many households. For instance, Yingli Green Energy, the world's biggest solar PV producer, opened its Australian office on Thursday with the specific aim of targeting business. he Chinese company can produce 2.5 gigawatts of solar capacity annually - or more than Australia's total installed amount.

A surge in commercial PV would add to the power industry's pain. Businesses would effectively go "behind the meter", unlike homes, Dr Saddler said. "That will look completely like energy efficiency.

"It will see that consumption just fall away.

"It won't measurable in any way by the electricity system.

"It will only be possible to be estimated by the size of the array the business has installed."

Proof that solar's rise will not be without interruption, though, came late on Thursday when the West Australian government slashed in half the feed-in tariff paid to some 75,000 households to 20¢ per kilowatt-hour as part of budget savings.

Clean Energy Council policy director Russell Marsh was among industry advocates to denounce the move, which will be retrospective.

"Households had invested in good faith," he said. "Other states may look at this and ... may consider doing similar things."

He noted the NSW government had considered a similar move two years ago but backed down after widespread opposition.

"It's not a precedent we'd want to see followed across the rest of Australia," Mr Marsh said.

Provided states do not actively disadvantage households with solar, as Queensland's government is considering, the reduced costs of panels - down about 80 per cent in four years - should continue to make PV attractive, Mr Marsh said.

Whether the PV industry can continue its rapid expansion remains to be seen.

The Climate Commission likened the effects of the spread of solar energy on the power sector to the disruption caused by the internet on big media companies.