Why Australia Is Ideal for Solar Power in Homes and Businesses

3rd June 20

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Solar power systems have several advantages over other forms of electricity generation. Photovoltaic panels have standard sizes regardless of the project capacity, which means that all installations use the same building blocks. This modular design adapts to any scale, from small home installations to utility-scale solar farms. Photovoltaic modules also generate electricity without moving parts, which means they don’t suffer mechanical wear. Their maintenance needs are simple, and they can last for decades.

However, the financial performance of photovoltaic technology depends on many external factors. These aspects must be considered before adding solar panels to a building:

  • Electricity production depends on the sunlight available. The local climate affects solar productivity, and buildings casting shadows on the property can also interfere.
  • Solar savings increase when electricity tariffs are high. For example, 1000 kilowatt-hours are worth $200 at 20 cents/kWh, but their value increases to $350 at 35 cents/kWh.
  • Government incentives and taxes affect the business case for solar power. Incentives like cash rebates reduce the cost of solar installations, shortening their payback period. On the other hand, factors like high import taxes make solar power more expensive.
  • Low interest rates and PPAs make solar power easier to afford. When low-interest financing is available, solar projects can easily pay loans with the savings achieved. Power purchase agreements (PPA) are also an attractive option, where the user pays for the electricity delivered instead of purchasing a solar array. The PPA electricity price is lower than local tariffs, achieving immediate savings.

Australia has all the favorable conditions for solar power systems. As a result, solar arrays are excellent investments for businesses and homeowners. The country is sunny, electricity is expensive, there are excellent solar incentives, technology costs are low, and there is an abundance of solar PPA and financing options.

Taking Advantage of the Abundant Sunshine in Australia

The sunshine available in many parts of Australia is equivalent to more than 6 kWh/m2 each day. For comparison, the sunshine in northern Europe is less than half. If you install identical solar PV systems in both locations, the one in Australia will produce twice as much electricity, on average.

  • The most efficient solar panels can convert over 20% of sunlight into electricity.
  • With the solar resources available in Australia, a 330-watt module will tend to produce over 500 kWh each year. 

According to Geoscience Australia, the country receives 58 million petajoules of solar radiation annually. This is 10,000 times more than the energy consumed by Australia in one year. Abundant sunshine improves the financial performance of solar power systems, since each kilowatt of installed capacity produces more kilowatt-hours over time.

Using Solar Power to Avoid Australia’s Electricity Prices

Australia has some of the highest electricity tariffs in the world. Electricity prices for business often exceed 20 cents/kWh, while some households pay around 40 cents/kWh. However, expensive electricity also increases the value of solar panels, since each kilowatt-hour generated is energy that was not purchased from the local grid.

While abundant sunshine increases the energy output of solar panels, high kWh prices increase the value of that energy. In many parts of Australia, you can choose your electricity provider. However, this does not eliminate the transmission and distribution charges, which represent more than 50% of the kWh price in many cases. On the other hand, solar power systems can erase the full kWh price from your operating expenses.

Taking Advantage of the Solar Incentives in Australia

The Clean Energy Regulator offers renewable energy certificates for many technologies, including solar power. Installations up to 100 kW are eligible for Small-Scale Technology Certificates (STC), while larger systems can claim Large-Scale Generation Certificates (LGC). 

  • These certificates are calculated based on the electricity output of solar systems, which means that larger installations earn more.
  • Solar power systems in sunnier places also get more STCs and LGCs per kilowatt of installed capacity.

Both certificate types are purchased by energy retailers and other large-scale energy buyers as part of their clean power obligations. STCs are cashed upfront, based on how much electricity the solar PV system will generate by 2030. On the other hand, LGCs are sold at regular intervals based on how much electricity has been produced. This means that STCs act like a solar rebate, while LGCs act like a bonus payment for performance.

Renewable energy certificates can be combined with local incentive programs from state governments. These benefits include solar battery incentives, and low-interest or zero-interest financing programs.

Australia is also characterized by low import tariffs for solar panels and related components, and shipping costs are also low. Compared with other large solar markets, Australia is relatively close to China, where most solar components are produced.

Access to Solar Power Purchase Agreements and Financing

Australia has relatively low interest rates, and some corporations can get loans for less than 3% annual interest. Considering the low cost of solar technology and the generous incentives available, solar power systems are very affordable in Australia.

A Solar Power Purchase Agreement (PPA) is an attractive deal for companies. In this case, the installation is owned by the provider, who is responsible for financing, operation and maintenance. In exchange, the user agrees to purchase the electricity produced, at a discount with respect to the local tariff. A solar PPA brings two main advantages: immediate savings without purchasing a photovoltaic system, and delegating maintenance to the experts.

At Solar Bay, we have ample experience with project funding, and solar PPAs with large commercial and industrial consumers.

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