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Solar Costs: Good and Getting Better.

March 22, 2012

Most people in Australia probably couldn’t tell you what they pay for electricity,  but they know it’s getting more expensive.  Some have blamed carbon reduction and renewable energy support policies.  The main reason for the price increase, however, is a surge in network infrastructure upgrade spending.  Solar power can help reduce those network costs.

Here in Australia, an international electricity price comparison study sponsored by the Energy Users Association of Australia has kicked up a fuss:  it shows that Australia actually has pretty high retail electricity prices relative to other countries – right up there with European prices, contrary to popular belief.

We reported last week that the New South Wales regulator, IPART, has recently offered their view on a fair and reasonable price that electricity retailers should offer owners of domestic solar PV systems by means of compensation in avoided retail and network costs.  It wasn’t much.

Here’s why:  solar PV is already an economically viable opportunity for Australian households.  This is probably news to many as, even in the industry, many continue to contend that price competitiveness with retail prices is still a few years away.

The IPART finding isn’t necessarily an accurate reflection of a ‘fair’ price, but explains why further benefit wasn’t allocated: solar can be competitive without up-turning the apple-cart (read: vested interests).

Australia has a lot of sun (when La Nina isn’t causing havoc) so solar systems typically hit the higher ends of capacity factor ranges.  There is now substantial competition in retail solar providers, contributing to the implosion in installed costs.  Meanwhile, retail electricity prices have increased massively.  The EUAA-commissioned study suggests prices have risen by 40% in real terms between 2007 and end 2011.

International evidence also points to price parity.  The 2012 Clean Energy Trends report by Clean Edge, issued last week, contains the following telling data and projections on PV installed costs and costs of electricity:

Clean Edge think that installed system costs have declined by 50% between 2007-2011, and will decline by a third again by 2021.

The average electricity retail price now paid by Australian consumers, according to the EUAA report, is $0.25/kWh.  This is likely to increase further in the near term.

We’re already hearing of installed PV costs in Australia close to $2.50 per Watt.

At this cost, investment in solar PV is a good hedge against electricity price increases.  However, informed consumers will continue to sit on the sidelines expecting and awaiting further solar installed cost declines.

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