Each year about this time, SunWiz sits down for a few days brainstorming with Nigel Morris (Solar Business Services) in which we gaze into a crystal ball and forecast how much solar power will be installed in Australia over the next five years. Last year the crystal ball was clouded by the inevitability of a roll-back of feed-in tariffs and a severe reduction in solar multiplier, which at one stage we feared could have crippled the solar industry.
Whether paradoxically or ironically, the reduction in government incentives unleashed a Solar Tsunami, to the point where SunWiz is confident that 1 gigawatt has been installed in 2012. When held up to the sun, our crystal ball for 2013 reveals a mixed story, with hope for some and disappointment for others. Government incentives for PV can't really get lower, but this doesn't mean the worst is over.
The headline bad news is that we expect the solar market will contract in 2013. Most people active in today's solar industry haven't experienced an overall market contraction (though those in NSW know how painful it can be). But were it not for Premiers Newman and Baillieu, 2012 might have been far smaller. The life might have been sucked out of the industry by 2012's incentive-driven solar surges, but anecdotally there's plenty of evidence that new buyers are keeping up with the Jones' in sufficient volumes to soften the blow. We expect that the market contraction won't be as bad as it might once have been... for the market has shown itself to be both resilient and creative; the low barriers to entry have spurred both high competition and will inevitably deliver some new business models that will re-shape the industry. Businesses will experiment with new sales channels, financing models, technologies, and some will be successful. However, any contraction will still result in more losers than winners and it will (now more than ever) pay to be "sun smart".
And in spite of overall market contraction, some sub-markets will grow - the key strategic challenges for PV businesses is therefore how to identify, target, and convert the growth markets, and to open up new markets. Commercial PV will be one of these markets, but its overall volume won't be enough to sustain - don't put all your eggs in that basket. Residential PV (once recovered from the January doldrums) will finally provide some degree of stability, hopefully in sufficient volume to keep businesses cashflow positive while they tackle strategic jobs and opportunities. Financing will provide access to new customers, but will need to be cleverly crafted to differentiate itself. One of the key challenges on the horizon are those of increasing market penetration. Saturation still seems a fair way off, but marketing efforts will increasingly need to avoid the wastage of reaching customers who have already purchased. Solutions that minimise exports and address network issues will be a challenging but ultimately highly-rewarding offering for the companies that bring and package the right product to market at the right time.
How does the future look, and which are the key sectors and states of opportunity? We're not able to release figures yet, but keep your eyes peeled for the release of our detailed forecast in the next few weeks.
December 2012 Solar Market Snapshot
--Last month saw 70MW of PV registered across Australia, a volume that would have been higher except for Christmas break.
--SolarChoice system price data showed an across-the-board price-increase following the multiplier elimination, but part of the cost was absorbed; and part offset by a higher STC price.
--Our 2012 market wrap reveals that the top 10 PV retailers account for less than one-third of the PV market.
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--STC creation has been quite low; particularly from the largest PV retailers.
--However, there was a high volume of tradings that occurred last week.
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Warwick Johnston is Managing Director of Sunwiz Consulting
This article was originally produced by Sunwiz, republished with permission.