How solar ran out of puff

Sydney Morning Herald
Tuesday 17/4/2007 Page: 12

The president of the Australian Conservation Foundation, Professor Ian Lowe, remembers a time when solar had all the answers. "In the 1970s, the case for solar energy was the case against all other forms of energy," Lowe says. It was the superstar solution to the energy crisis. The expectation was that because solar offered no-risk electricity generation and would never run out, it would swiftly dispatch coal-fired electricity to the dustbin of absurd human inventions. And with our climate, it seemed better suited to conditions in Australia than almost anywhere else.

But 30 years later solar is the renewable power that never grew up - at least in Australia. While global growth in the installation of rooftop solar panels is estimated at 40 per cent a year (and higher in booming solar markets such as Germany and Japan), in Australia it is about 16 per cent, says the Business Council for Sustainable Energy. And that growth is on such a small base that solar barely registers in figures from the Australian Bureau of Agricultural and Resources Economics figures on how our electricity is made.

Of the nearly 8 per cent of Australian electricity generated by renewables, 6.5 per cent is hydroelectricity, 0.8 per cent is bioenergy (power from reusing waste), wind accounts for
0.6 per cent and less than 0.1 per cent is generated by solar power. The rest of our power is coal-fired electricity, which, Lowe points out, compares poorly to countries such as New Zealand (mostly hydroelectricity), Norway (where renewables account for a third of electricity generation) and Iceland (three-quarters).

Nowhere is the good news/bad news nature of the solar story more evident than at the University of New South Wales's world-renowned School of Photovoltaic and Renewable Energy Engineering, which claims its many solar-cell breakthroughs have generated "approximately $1 billion" in sales worldwide.

The school's researchers have collected a swag of prestigious awards, including the Alternative Nobel Prize, the Australia Prize and the World Technology Award. One of its graduates, Zhengrong Shi, heads one of the largest solar energy corporations in the world, China's SunTech Power Holdings. He is worth a reported $2.7 billion.

But ask its head of school, Dr Richard Coricish, why more Australians aren't installing grid-connected solar systems at home and his frustration is obvious. "If you don't include the environmental costs of coal-fired electricity when comparing them with solar, it becomes very difficult. [Saving money] is not what motivates me and if that's all that motivates the consumer, then perhaps solar isn't for them.

"I don't want to sound too negative because it's an exciting time for us - the world is beating a path to our door. But the [Australian] situation does frustrate me." Corkish is right: unless you are going to add the environmental costs of coal-fired electricity to your power bill, it's hard to justify installing solar panels. Yet.

The problem is the cost of installing a grid-connected solar system - between $9000 and $40,000, depending on the size of your house and family. Even when you take into account the maximum $4000 federal rebate, it's an investment many ordinary, debt-ridden home owners can't justify. The price tag is inflated by the cost of producing refined silicon (which is also in demand for semiconductor manufacture in the electronics industry), which accounts for about 40 per cent of the cost.

Most estimates show it takes between 20 and 30 years for a grid-connected solar system to "pay for itself' - that is, to recoup the initial outlay through savings made compared with existing bills. As a result, only 30,000 Australian households - out of 8 million - have installed solar panels.

Apart from reducing the up-front cost of the systems, which is being explored through research, one of the best ways to increase uptake would be if governments changed the electricity pricing structure, says Duncan Macgregor, of the solar hot water and solar panel installer Going Solar. At present, electricity retailers such as Origin Energy pay people with solar panels about the same rate for feeding surplus solar-generated power back into the grid as they charge for coalfired electricity. This is despite the fact that they on-sell solar-generated electricity - branded GreenPower - at a premium to environmentally conscious consumers.

At least two state governments are planning to adopt "feed-in tariffs", which increase the rate home owners are paid for producing electricity from solar panels. Last year South Australia announced a plan to double the rates solar users are paid for generating surplus power. The Victorian Government has also introduced legislation in Parliament which is expected to extend existing feed-in tariffs for wind energy to solar from next January.

Tony Wood, a spokesman for Origin Energy, the largest installer of solar panels in Australia, says the cost of higher rates paid to the providers of solar power is likely to be passed onto customers. This would be done by increasing the distribution network tariff for consumers of coal-fired electricity, because solar electricity systems use energy generated locally. The cost of maintaining the poles and lines of the distribution network is enormous - it is forecast to cost $9 billion over the next five years in NSW alone.

The NSW Minister for Energy, Ian Macdonald, says he prefers to let the market decide which types of renewable fuels to use,"rather than the Government picking winners". He says that the State Government requires that 15 per cent of electricity used in NSW to come from renewable sources by 2020.

The economic story of solar hot water, however, is much more attractive to the average home owner. A solar hot water system costs up to three times more than a gas or electric set-up but, at about $4000, it is still much more affordable than solar electricity. Because of the money saved, a solar hot water system should pay for itself "within five to 10 years", says Stephen Kranch, the national manager of Solahart. And because solar hot water tanks usually last 20 years, installing a solar hot water system can mean free hot water for up to 10 years. "The consumer should look very positively at solar hot water. It makes economic as well as environmental sense," says Ian Lowe.

The Business Council for Sustainable Energy says the number of Australian households buying a solar water heating system more than doubled between 2001 and last year, when it reached 45,700. In total, 348,000 Australian households have solar hot water - but this is still only about 5 per cent of the market. NSW and Victoria are two of the poorest performing states in the uptake of solar hot water, with 2.5 per cent and 1 per cent of households, respectively, owning a solar tank.

Kranch says the price gap between a solar system and a conventional one prevents the market from growing faster. The key to building the market, he says, is introducing a simplified system of rebates. At present, consumers can apply for a state government rebate, which in Victoria is a maximum of $1500. An additional sweetener is offered through a complex system of renewable energy certificates, a carbon trading-type scheme of electronic certificates which are traded between registered organisations and whose value changes depending on supply and demand.