By John Wright, Wright Energy Consulting
This post was prompted by the recent release of a Rooftop PV Information Paper by the Australian Energy Market Operator (AEMO). Part of AMEO’s charter is to deliver electricity planning advice in eastern and south-eastern Australia. Up to now rooftop PV generation was not included in their demand forecasts due to its small contribution (not “observable”).
However, the report states “Given its current and forecast growth, AEMO will now publish its analysis of existing and forecast levels of rooftop PV … in its annual forecasting reports.” The current and forecast increases in rooftop PV are quite substantial. Over the last four years, the total estimated installed capacity has risen from 23 MW in 2008 to an estimated 1,450 MW by the end of February 2012. Based on a moderate growth scenario, installed capacity is forecast to reach 5,100 MW by 2020 and almost 12,000 MW by 2031. Under a rapid growth scenario (large electricity price rises and PV price reductions combined with government incentives), the 2031 rooftop forecast is up to 18,000 MW – which would account for 10% of Australia’s electricity generation (rooftop PV accounted for about 0.6% in 2011). This situation follows on from similar PV growth in other countries, with Germany being the standout.
Germany is the world’s biggest small scale PV user. This has been achieved largely by policy based on generous feed-in tariffs (FiT). As is becoming common in the rest of the world, the German FiT system is a “victim” of its own success. Currently, Germany is attempting to reign in new PV installations although there are some predictions that the German market will be a "healthy" 6-7 gigawatts (GW) this year, not much less than in 2011. The government has been trying to reduce installations to around 3.5 GW (see Global PV in the balance: Can we get it right?). Notwithstanding these cut-back attempts, the German government has announced that once the cumulative installed capacity has reached 52 GW, all FiT support will cease (see Re-considering the Economics of Photovoltaic Power, PDF). It will be interesting to follow the progress of a no-FiT PV market into the future.
These are interesting, and somewhat confusing times for the small-scale PV market worldwide. What has caused these changes and the remarkable growth in rooftop and other small-scale PV installations? Is there some sort of energy revolution in progress? “Revolution” is a strong word. “Game changer” is another description that is often used, and indeed I think that it is a safe bet that the continued expansion of small scale PVs will have major impacts on the world’s energy markets, power price structure, management technology and greenhouse gas (GHG) emissions. I think that comes close to a revolution in the making.
So, why has there been such a rush to install small, particularly rooftop, PV systems? Government policy was the initial driver. Generous FiTs were introduced to encourage householders to install PV systems with, initially, payback times of 3-5 years. With increasing electricity costs, especially in Australia as much needed investment in poles and wires was required, the various schemes on offer were taken up enthusiastically, to the point where the schemes were oversubscribed. Then, as is the case with Germany, the FiTs were progressively reduced. However, on top of this reduction, there have been unprecedented reductions in module prices (up to 45% in the last year alone) partly due to the entry of China into the market and manufacturing economies of scale. A paper by the Bloomberg New Energy Finance Team titled Re-considering the Economics of Photovoltaic Power provides an interesting commentary and some detail on falling PV prices.
Hovering in the background are a host of potential PV technology advances such as “super-efficient” carbon solar cells (see Australia's Future Grid: Evaluating Whole-of-System Options for Australia’s Future Electricity System), devices that internally shift incident radiation to make greater use of the sun’s spectrum and various concentrated PV systems claiming increased conversion efficiency. These potential advances paint a rosy future for PV.
While falling PV module prices will encourage increased usage, it will not be without some pain as the PV manufacturing industry goes through somewhat of a shakeout as subsidies are wound back and competition forces, particularly from Asian manufacture, take control. At the time of writing, Shott Solar has announced that they will withdraw from solar PV manufacturing due to “the severe deterioration of the market over the last several months.” Others are under similar commercial pressure. But, there appears to be little doubt that the small-scale PV growth will continue after the shakeout and adjustment to continuing falls in PV module prices.
Not all will be plane sailing with the integration of the increased PV generation with the grid supply. We are seeing the end of the era of large, “one way” centralized generation to a much more widely distributed, “two way” system where many more variable, small scale generators are added to the grid. This has the potential of creating technical and regulatory problems, such as grid stability. Already in Australia there are times when distribution networks suffer from congestion and PV systems are unable to export power – with resultant consternation from householders who receive less than expected returns from their rooftop installations. At times of low solar radiation (clouds), any deficit must be made up by other generation that is not so affected. This is usually by fossil fuel powered spinning reserve and, likely in the future, electricity storage (although the economics make this tough at present). Thus, the future distribution network challenges are not trivial and must be worked through.
This is where the "smart grid" will have to come into play. The smart grid combines a range of generation and distribution technologies and software with advanced communication technology to manage demand and supply to ensure smooth grid operation. I think that it is fair to say that smart grid technology and systems development is still in its infancy and in most cases, we lack the tools to fully understand the future challenges that the new two-way, ever more distributed electricity grid will bring. A lot of countries are in the progress of developing tools appropriate to their respective situations. In Australia, the Warren Centre and CSIRO have, or are, setting up major projects in this area. I think we can look forward to rapid advances that will be absolutely needed to take full advantage of the progress of the PV revolution.