5 things to watch in Australian solar sector in 2020


With announcementssurveys, and reports pointing to a massive drop in investor confidence, 2020 is shaping to be a rollercoaster year for the Australian renewable energy sector. “Australia’s energy markets have not experienced a dull year in over a decade, 2020 will not be an exception – it promises to bring both good and bad news for solar investors,” Leonard Quong, an energy analyst at BloombergNEF, told pv magazine.

Network conditions

To start with the bad. Network conditions are expected to continue to deteriorate this year, driving up costs and causing further delays for large-scale projects. The situation in the market has been dire with developers, contractors and investors trying to wrap their heads around grid stability issues, risks associated with transmission losses i.e. falling marginal loss factors (MLFs), and connection problems.

Difficulties in finalizing grid connection processes and obtaining Generator Performance Standards (GPS) have delayed a number of large-scale renewable energy projects across Australia, undermining their economic viability. Additional technical requirements such as the installation of synchronous condensers and harmonic filters alongside a project have resulted in additional expenses for some developers. In addition to strict new connection rules and system strength requirements, MLFs have been one of the greatest challenges facing solar and wind proponents in Australia, translating into major dents in revenues of 10% or more for some utility-scale PV projects. On top of that, under-investment in network capacity to address congestion and constraints adds to the long list of headwinds.

“The rapid influx of new renewable capacity over recent years is also causing havoc on Australia’s physical network,” Quong said. “MLFs are cutting revenue expectations for many, ancillary service penalties are becoming incredibly costly for some and curtailment is beginning to bite into the production of a few solar projects across the country.”

Last September, AEMO constrained the output of five large-scale solar generators by 50%, including four solar farms located in north-west Victoria: Gannawarra, Karadoc, Wemen and Bannerton; and Broken Hill in NSW. NEM-wide solar and wind curtailment reached a record high of 6% of total output in Q4 2019, according to AEMO data. This happened mainly due to self-curtailment in response to negative prices, system security constraints on five solar farms in Victoria and NSW, system strength constraints in South Australia, and transmission outages and other network constraints.

This week alone, delays and grid bottlenecks have once again grabbed headlines with the Sydney Morning Herald reporting that another six other projects in Victoria and NSW have been told by AEMO to wait nine months or more before they can be connected to the grid. While these completed projects remain unsure about when they will be able to fully connect to the grid, other developers yet to begin construction on potentially billions of dollars of projects have been warned of delays for up to seven years, as reported by RenewEconomy.

Wholesale prices

In addition, wholesale electricity prices in Australia’s National Electricity Market (NEM) are expected to continue their downward trend, driven by the continued influx of new renewable energy generation. While this will be welcomed by customers, operating big PV projects will begin to feel the sting of falling power prices in combination with the increasing competition of coincident generators, such as rooftop solar.

Last year saw wild swings in wholesale power prices, which were increasingly hitting zero or below under pressure from large volumes of intermittent energy, epitomizing the cannibalization risk. On one September morning, Queensland saw spot prices go as low as minus 1000/MWh, forcing nearly all 21 operational PV plants in the state to switch off for a while.

As a result, BNEF expects the realized (or production weighted) electricity prices of solar will continue to soften, just as they did in 2019. In Queensland, the value of solar generation averaged just $56/MWh last year, more than 20% below the average electricity prices in the state.

“We expect this trend will become more apparent, and weigh more heavily on investors, in 2020,” Quong said. “The market may get battered and bruised by deteriorating conditions in 2020, but it will come out smarter and wiser for it. Investors are already looking to innovative business or technology approaches to overcome some of these challenges. Developers are studying co-location or battery storage as ways to reduce curtailment, improve system strength and to take advantage of rising ancillary service costs.”


A policy vacuum left after the 2020 Renewable Energy Target was officially achieved and surpassed by a substantial margin has left many unknowns and badly undermined investor confidence. However, extreme heat, intense bushfires that have been ravaging large swathes of the Australian countryside, and now flooding rains, are instilling a sense of urgency for more climate action. According to BNEF, new renewable energy supportive policies are likely to emerge throughout the year and low-carbon policy will become more supportive, but also more chaotic.

“Even if Australia’s federal government cannot form a cohesive national policy to manage the energy transition, a number of new regulations and policies could offer investors some reprieve,” Quong said, noting that state and local governments, in particular, will be the driving force of new mechanisms. “But, even silver clouds can have grey linings; any new policies may be able to secure new investments, but will likely further complicate Australia’s already complicated renewable energy and carbon policy landscape.”

With Australia now in position to calculate the costs of the first wave of climate-change-related devastation, the climate debate has heated up and politicians are looking to up the ante. This week, member for Warringah Zali Steggall has unveiled draft legislation that would establish a pathway for Australia to reach a zero net emissions target by 2050 in a bid to unite members from both sides of parliament around the plan. The proposal has resonated with the Coalition government, with federal energy and emissions reduction minister Angus Taylor telling the Sydney Morning Herald that the government is looking to announce a long-term emissions reduction target and potentially join more than 80 countries to commit to net-zero carbon emissions by 2050.


The country’s slow-to-adapt transmission network and lack of long-term policy certainty were the reasons behind the last year’s drop in renewables investment. According to BNEF, big PV was the biggest casualty of the last year’s drop in investor confidence in Australia falling to US$1.2 billion from US$3 billion in 2018. An analysis from the Clean Energy Council (CEC) has echoed the BNEF findings showing more than 50% drop in utility-scale renewable energy investment and a fall from 51 projects worth $10.7 billion in 2018 down to 28 projects worth $4.5 billion in 2019.

Between rapidly growing issues on the grid, and Australia’s ever-present policy dilemma, 2019 was expected to be a slower year for new clean energy investment but 2020 offers no brighter prospect. “Unless there is a substantial change in policy direction or the market finds solutions for the issues on the network, investment will not return to previous highs – at least until Australia’s large coal generators begin to retire,” Quong said. “While it may not return to historic levels it will continue. State governments and companies are setting renewable energy targets that will secure new capacity in years to come and utility-scale PV remains one of the lowest-cost sources of new generation to build in the country.”

Indeed, analyzing the cost to generate electricity from new power plants in Australia, the Australian Energy Market Operator (AEMO) and the national science agency CSIRO have found solar and wind technologies to be the lowest cost. As reported earlier, LCOE on some Australian PV projects has been as low as $27-36 MWh assuming competitive returns for equity investors are factored in. Writing in WA Today, Dr Matt Edwards a photovoltaic scientist at the University of New South Wales and a director of the Coalition for Conservation, confirmed, “With all subsidies taken out, solar PV and wind wipe the floor with gas, coal and nuclear.” He said the “levelized cost of solar and wind is about $50/MWh, half that of gas and coal’s $100/MWh even without a carbon price.” And “Solar plus storage is now also cheaper than coal, and getting cheaper.”

Installation rates

Despite the headwinds, Australia is poised for a record rollout of big PV in 2020, with a significant part of the solar pipeline comprised of the slippage of projects scheduled for the previous year. According to consultancy Rystad Energy, large-scale PV projects will be the largest source of new capacity additions this year, totaling 1.96 GW. Much more capacity is on the drawing board at this stage.

“About 2.8GW of utility-scale solar and 4.6GW of wind are still under construction in the country as we speak, a sizeable pipeline,” Quong said. “We also expect that rooftop solar will continue its record-breaking run, and could see about 2.2-2.8GW of new capacity installed on household and business rooftops around the country by the end of 2020.”

The robust health of the rooftop PV segment was earlier confirmed by solar analyst SunWiz, which put the final tally of sub-100kW systems registered in 2019 at 2.13 GW. This year, BNEF also expects a surge in virtual power plants and microgrids. Grid-scale battery installations will exceed 150 MW, but behind-the-meter storage will lag, the analysts say.

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