Solar Industry to Dominate Australian Energy Market in 2022 and Beyond

January 10, 2022

Overview

Prosun Solar’s Market Analysis 2022 is designed to monitor the state of the solar industry and keep our customers and partners abreast of all the latest developments. Our Industry Analysis collects and analyses the most important data pertaining to the solar industry and presents it for your viewing pleasure in the most simplified and easy to digest manner possible. The following is an update on how the ongoing COVID-19 pandemic will affect the solar industry:

  • Despite the economic slowdown caused by the pandemic, the solar panel installation industry is expected to grow by as much as 10.5% per annum for at least another year.
  • The solar installation industry remains healthy, with increasing profit margins, albeit not as much as expected. The last five years have seen a substantial increase in demand for solar panels and 2022 will be no exception.
  • Demand for domestic and consumer solar panels remains at an all-time high and is expected to rise in 2022. Despite the negative effects and volatility caused by the pandemic in consumer and commercial markets, the demand for solar panels has not been affected.

Major Risks to the Solar Industry in 2022

As it stands, the solar industry has not born the brunt of the pandemic induced economic slowdown. Tis is not to say that the PV industry has not been negatively affected. On the contrary, surging costs fueled by supply chain and silicon shortages is biggest challenge the solar industry will face in 2022. As much as fifty-six percent of the 90GW planned global utility solar PV developments are at risk of delay and cancellation because of bottlenecks in the supply chain and commodity price inflation. While these factors have affected other industries, the solar PV industry has been hot particularly hard by the three hundred percent hike in polysilicon costs, as well as the increase in cost of silver, copper, aluminum, glass and rear earth metals.

This is without a doubt one of the most severe challenges being faced by the global solar industry. Industry experts do not expect the supply chain bottleneck to be sorted within the next twelve months, and so developers and offtakers will have to make some tough choices. They will have to choose between reducing project margins, delaying projects or increasing off-take prices.

Risks to the Australian Solar Industry

The Australian Solar Panel Industry was one of the last ones to be affected by the global price hikes, nevertheless, we can expect to feel negative pricing events in 2022. These events are driven by a combination of a surge in demand for solar energy systems (as of yet unaffected by price hikes) and growing grid constraints. Forecasts for large scale solar projects in Australia in 2022 have been cut down to 1GW from 2GW in 2021. The Australian industry can mitigate these negative impacts by increasing storage capacity and upgrading and increasing transmission systems. However, it is unlikely that this will happen anytime soon. This situation is in stark contrast to predictions in 2020 that energy prices in Australia would drop by as much as 7.1%, owing to reductions in renewable energy prices. This is still probably later down the line, but for the foreseeable future, the solar industry will not be bouncing back to business as usual.

Solar Energy to Dominate Australia’s Renewable Energy Sector

As of 2022, Solar Energy is all set to become Australia’s primary source of energy. Projections made in  August of 2021 revealed that the Australian solar energy market could supply up to seventy-seven percent of the nation’s total energy demand by 2026. As of 2022, there is no reason to believe that this will change. Even with the general slowdown in solar energy production, there is still a huge demand for solar panels, and this will not dwindle anytime soon.

Beating Out Other Renewables

Solar energy in Australia is not only slated to replace coal power, but it is also well ahead of other renewable sources of energy like wind and geo thermal. The solar industry enjoys a considerable lead in adoption not only in Australia, but all over the world. The AMEO (Australian Electricity Market Operator) has bumped up forecasts from last year. The new prediction is that by 2025, 8.9GW of new distributed capacity will be installed.

No reliability or supply gaps are forecast for 2022 onwards, and there are no concerns around transmission reliability and supply shortages. In fact, solar energy has proven to be a far more reliable source of energy for Australia than coal power, in light of last year’s flooding of Victorian’s Yallourn plant.

We expect that in 2022, supply shortfall will not nearly be as much of a concern as demand shortfall. Focus has already shifted to this new predicament, as more and more Australians have begun to generate their own energy for their businesses and homes.

Consumers Lead the Way

AMEO’s Draft 2022 Integrated Systems Plan (ISP) suggests that the most optimal scenario for the Australian energy sector is through a consumer led method. Should a sufficient number of Australians rapidly adopt solar energy, and invest substantially in generation, storage and backup systems, coal powered plants could shut down three times faster than projected. In such a scenario, coal power will exit the National Energy Market as early as 2043. Prosun Solar’s own projections are in line with AMEO’s own. We strongly believe in a people first approach and advocate change from the ground up. A belief in personal responsibility is the foundation of our democracy and our way of life. A customer based adoption will not only empower the average Australian, but also prove to be the fastest and best way to energy sustainability.

Review

The solar energy sector currently faces some of its biggest challenges to date. Nevertheless, the industry is financially stable and profitable. While profit margins are expected to decrease in 2022, the scale of adoption will not suffer as much in Australia. The Australian solar industry will continue to receive government support and demand will remain. We can expect to see prices increase by some degree given the continuing shortage of rare earth metals and silicon, but solar energy will still remain the most affordable and most viable source of renewable energy.