I hope like me, you got a chance to recharge your batteries with a summer break after a grueling year in 2013.
The holidays are a chance to reflect, talk to “real people” and look at the big picture for a while. It seems like months ago already and I’m starting this solar year on a pretty upbeat note. Here’s why.
Firstly, almost without exception every business I have talked to (including non-solar ones) are feeling much more upbeat about consumer confidence. The year has started surprisingly strongly for many and the sense I share with many is that with the election behind us, a record-breaking summer where solar proved its value again and the whole country pinching pennies last year, 2014 could be the year when spending gets back to normal.
I start every year with a Forecasting lock-d0wn with Warwick Johnston from Sunwiz who co-authors our annual Forecast each year. It’s a brain melting 5 day session where we run countless scenario’s, multiply combinations and permutations of factors and crucially look back at what happened last year. We spend the year capturing data, announcements, policy changes and read thousands of pages of reports, integrating them into our thinking.
Some fascinating things happened in Australia in solar in 2013, bucking some historic trends. The market is definitely telling us some things about how its likely to behave this year and we are pleased to announce that yet again, we were really, really close on our forecast for the year.
We have completed the first cut of this years forecast which looks forward five years, and we have had to make some changes based on where we are at politically. Until the report is finalised I won’t give too much away but I will say that I think we’ll need our running shoes in the first half; the second half could be more challenging is foreign exchange and silicon wafer prices keep heading the wrong direction.
There are also a potentially nasty combination of things that could happen this year which together could have serious implications for sales. Although we consider this our Low case scenario and traditionally the market doesn’t behave like that it is certainly possible. The sentiment from Government and the rubbish from some of our politicians certainly doesn’t inspire confidence.
A good reference point for the potential implications is a report done by SKM titled “Modelling the Renewable Energy Target for the Climate Change Authority“” in December 2012. Although things have changed since it was written, their closing statements describe what we potentially face this year:
“A lower target such as the “Updated 20% Target” is expected to delay the development of renewable generation by approximately 5 to 6 years. With “No RET” the amount of renewable development is lower and the delay is substantially longer (i.e. up to 10 years to reach the same levels). In the “Combined LRET & SRES” case, the amount of renewable development is only marginally less than in “Reference Case 1” Modelling of the Renewable Energy Targets by 2020 and is similarly delayed by 5 to 6 years. In a “Zero Carbon Price” environment further renewable development in the period from 2020 to 2030 is negligible”
“With “Zero Carbon Price” there is little or no renewable generation development post 2020 due to a substantial decrease in wholesale prices (i.e. nearly $50/MWh lower by 2030) making such projects economically unviable. The “Low Demand” case results in a slower growth of renewable generation post 2020 again due to lower wholesale prices and the lower demand growth.A lower RET is also expected to delay renewable development that would have been deployed earlier under the existing target. For example, approximately 14,000 GWh less renewable generation development is estimated under the “Updated 20% target”, but most of this development still occurs post 2023 when the modelling assumes that carbon and gas prices rise to levels that make renewable generation an economically viable alternative to new thermal generation.”
I guess the point is here, pretty much every analysis we have seen in the past few years is saying similar things; The RET and the Carbon price (and more) were working and if you take them away, there are minimal financial savings, significant abatement losses and you simply delay the inevitable instead of encouraging it.
We may have a lot of coal, but we’ve got a lot more sun.
Annually, the amount of solar energy that falls on Australia is >10,000 more than we even need (58,000,000 Pj or 16,111,111 TWh ).
The REC Agents association put out an excellent briefing note recently too highlighting yet more data that just shows how awesome solar is. Their analysis showed that solar is predictable and has better capacity factor than it is given credit for in many cases, especially when you get your head around the fact it is delivered in a shorter window than non renewable energy. A 25% contribution in the case of South Australia, for example. And this input is going to get bigger and bigger, enhancing diversity and reliability for decades.
On the solar industry side, consolidation continues locally and abroad. In the first weeks of the new year, one of the countries larger Solar Retailers has been brought to it’s knees by the ACCC and effectively banned from trading for misleading behaviour. There will be negative consequences for consumers on that one, which will undoubtedly spill over. If the court documents prove to be accurate in the FY ending 2012 the combined entities sold $22Million dollars of solar systems and made a Net profit of 1.4% ($318,601).
You have to ask yourself what the point of that was and wonder how many others had similar results trying to chase them into the gutter. I also wonder how many disappointed and unsupported customers will be left behind.This is just the first collapse of the year, there will undoubtedly be more as the industry settles into a new predominantly unsubsidised rhythm and from what I’m hearing margins aren’t great our there.
So,some swings and some round about’s this year.
Welcome to 2014.