SOLARREPORTQUARTER2,

2023AustralianEnergyCouncil2TableofcontentsSTATEOF

SOLAR

IN

AUSTRALIA

3ALL-ELECTRICHOUSING

9LEVELISEDCOSTOFENERGY13PAYBACKPERIOD,DETAILEDMODEL16METHODOLOGYAPPENDIX181.

Solarinstallations

methodology

182.

Paybackperiodmethodology

183STATEOFSOLARINAUSTRALIAAccording

to

the

latest

data

from

the

Clean

Energy

Regulator

(CER),

a

substantial

increase

in

rooftopinstallations

was

recorded

in

the

second

quarter

of

2023

with

more

than

61,000

new

installationsaddedto

the

grid.Thetotalinstalledcapacityof

thesenewinstallations

was

520MW(see

figure1),taking

total

Australian

rooftop

solar

capacity

to

20.5

GW.

However,

it's

important

to

note

that

the

datareporting

has

a

12-month

lag.

Based

on

projections,

the

final

figures

are

expected

to

be

even

higher,with

approximately

91,000

new

rooftop

installations

expected

to

be

recorded

by

the

end

of

thereporting

period.

This

surge

in

installations

is

also

projected

to

lead

to

a

total

installed

capacity

of827

MW,

further

indicating

the

growing

adoption

of

rooftop

solar

solutions

in

the

second

quarter

of2023.Based

on

these

projections

there

appears

to

have

been

more

solar

installations

in

Q2

than

theprevious

fourth

quarter.

If

confirmed

this

will

be

the

first

time

the

second

quarter

installations

haveexceeded

those

in

a

fourth

quarter.

That’s

because

the

fourth

quarter

generally

has

the

mostinstallations

because

households

and

businesses

rushing

to

install

systems

before

the

year

end

inorder

to

maximise

the

number

of

small-scale

technology

certificates

(STCs)

that

their

solar

PVsystems

may

be

eligible

for.

One

factor

encouraging

solar

installations

in

Q2

is

likely

to

have

beenthe

discussion

and

reporting

of

increases

in

wholesale

electricity

costs

leading

to

an

expectation

andannouncement

of

significant

rises

in

household

power

bills

from

July

2023.

The

improved

take-upalso

came

at

atime

of

increasing

interest

rates

which

is

estimatedto

have

pushed

out

thepaybackperiodfor

solar

systemsby12months(thisis

discussedfurtherinSectionIV).4Figure

1:

Quarterly

installed

capacity

and

installation

numbers

of

rooftop

solar

PV

in

Australiasince2017(unadjusteddata)Source:

CleanEnergyRegulator

data,AustralianEnergyCouncilanalysis,dataasof25

July2023In

the

second

quarter

of

2023,

New

South

Wales

led

the

country

in

termsof

newly

installed

rooftopsolar

systems,

with

33.1

per

cent

of

the

national

total.

This

significant

level

of

installations

alsoresulted

in

New

SouthWales

installing

the

most

solar

capacity

inthe

quarter,

with

34.4

per

cent,

or189

MW

of

the

total

549

MW

installed

nationally

during

the

quarter.

It

was

closely

followed

byQueensland

and

Victoria

with

26.1

per

cent

and

17

per

cent

respectively

of

the

total

installations.Western

Australia

accounted

for

11

per

cent

ofthe

country’s

total

installed

rooftop

solar

systems

inQ2

2023,

and

South

Australia

accounted

for

8

per

cent

indicating

a

continued

interest

in

rooftop

solaracrossthe

country.5Figure

2:

Share

of

installed

capacity

and

installation

number

of

rooftop

PVs

acrossjurisdictionsin

Q2-2023Source:

CleanEnergyRegulator

data,AustralianEnergyCouncilanalysis,dataasof25

July2023The

average

system

size

of

rooftop

solar

installations

varies

depending

on

geographical

locationsand

individual

preferences.

In

recent

years,

there

has

been

a

notable

trend

towards

larger

systemsizesastechnologyadvancementsanddecreasingcoststakeholdinthe

market.As

at

the

end

of

the

second

quarter

of

2023,

the

average

system

size

for

rooftop

solar

installationsis

estimated

to

be

around

9.3

kilowatts

(kW)

across

Australia.

However,

it's

important

to

note

thatthis

figure

does

vary

by

state

as

shown

in

table

1

below,with

some

areas

reporting

slightlyhigher

orlower

averages

due

to

specific

energy

demands

and

policies.

Nonetheless,

the

increasing

popularityof

rooftop

solar

and

the

desire

for

greater

energy

independence

have

contributed

to

the

rise

inaveragesystemsizes.6Table1:Average

unit

size(kW)

of

rooftop

solar

systemin

Australiaby

statesin

Q2-2023Source:

CleanEnergyRegulator

data,AustralianEnergyCouncilanalysis,dataasof

25July2023BatteryinstallationswithrooftopsolarBytheendofthesecondquarter

of2023,therewere

10,067newrooftopPVinstallationsequippedwithbatteriesregisteredto

theCleanEnergyRegulator(CER)(seefigure3).In

the

previous

quarterly

report,

the

total

number

of

rooftop

solar

installations

with

batteries

duringthe

first

quarter

of

2023

represented

20

per

cent

of

the

total

number

of

installations

recorded

in

2022.On

a

positive

note,

total

storage

capacity

in

the

National

Electricity

Market

(NEM)

and

WA’sWholesale

Electricity

Market

(WEM),

indicates

that

there

continues

to

be

anincrease

in

battery

withrooftop

solar

installations.

In

the

latest

data,

which

provides

a

half

yearly

overview,

combinedinstallations

accounted

for

nearly

half

of

the

total

number

recorded

in

2022

(46

per

cent).

Thesenumbers

are

expected

to

increase

further

given

that

there

can

be

a

12-month

lag

in

reporting

of

data.Overall

there

has

a

significant

uptake

of

solar

and

rooftop

installations

in

the

second

quarter

of2023,

again

possibly

encouraged

by

the

expectation

and

announcement

of

increases

in

electricitypricesfrom

1July2023.Similar

to

the

previous

quarter,

as

a

result

of

last

financial

year’s

closure

of

the

South

AustralianGovernment's

Home

Battery

Scheme

there

was

a

noticeable

decline

in

households

adopting

rooftopsolar

and

battery

systems

in

South

Australia.

When

comparing

states,

Queensland

led

the

way

inthe

second

quarter

with

2,381

new

PV

installations

equipped

with

batteries,

followed

by

Victoria

with2,220

new

combined

installations,

and

then

New

South

Wales

with

1,897

new

installations.Collectively,

the

Eastern

Australian

states

account

for

an

impressive

85.5

per

cent

of

the

country'stotalinstallationsofrooftopsolarandbatteries.7Figure3:

Numberofsolar

PVinstallationswithconcurrent

batteryinstallations,perstatesince2014Source:

CleanEnergyRegulator

data,AustralianEnergyCouncilanalysis,dataasof

25July2023Since

the

last

Solar

Report,

there

have

been

updates

to

State

Government

schemes

or

rebates

onsolarandbatterystorageinstallationin

AustralianCapitalTerritory,NorthernTerritoryandVictoria.8Table

2:

GovernmentpoliciesPolicyIncentive(Solar&Battery)State/TerritoryEnergy

targetAustralianCapital

?

Thestate’sNextGeneration??todelivera70percentcut

inemissionsby2035comparedto2005levelsTerritoryEnergyStorageProgram

hasceaseditsofferofarebateof$3,500(excludingGST)or50per

cent

of

thebatteryprice(excludingGST)

–whicheverisnet

zeroby2050F2lowesti.NewSouthWales

?

RebateSwapforSolar:Theprogram

giveslow-income?net

zeroby2050homeownersto

swapto

afree3kWsolarsystem.?Nospecificpolicyfornewsolarorbatteryinstallations.NorthernTerritory

?

HomeandBusinessBatterySchemeallowsresidentsto

buyandinstallbatteriesand?50percentby2030inverterswithamaximum

grantof$5,000(reducingfrom$6,000)from1July

20233iiQueenslandSouthAustraliaTasmania????NospecificpolicyNospecificpolicyNospecificpolicy??50percentby2030100percentby2030Victoria4,500interest-freeloansofupto$8,800areavailablein

2023-24.??65percentby203095percentby20351WesternAustralia

?

Nospecificpolicy1Victorianrenewableenergyandstoragetargets,pagelastupdated15February,20239ALL-ELECTRICHOUSINGThe

decision

by

the

Victorian

Government

to

ban

gas

connections

for

new

households

from

1January

2024

is

an

important

step

towards

promoting

the

adoption

of

electricity

usage

and

renewableenergy

sources.

By

implementing

this

ban,

the

government

aims

to

encourage

greater

reliance

onelectricity,

which

can

be

generated

fromsolar

for

residential

householders.

This

move

aligns

with

itsbroadergoalofreducingcarbonemissionsandachievinganet-zerocarbonfootprintby2045.The

surging

costs

of

electricity

bills

have

indeed

become

a

pressing

concern

for

many

householdsacross

the

country.

By

shifting

the

focus

from

gas

to

electricity,

the

governmentwill

incentivise

morehouseholds

to

consider

investing

in

solar

and

battery

installations

as

an

alternative

to

traditionalenergy

sources.

Solar

panels

can

help

generate

electricity

on-site,

reducing

dependence

on

the

gridandpotentiallyloweringelectricitybills

inthelongrun.Moreover,

battery

installations

can

store

excess

energy

generated

from

renewable

sources

duringtimes

of

low

demand,

allowing

households

to

use

this

stored

energy

during

peak

hours

or

whenrenewable

sources

are

not

available.

This

promotes

energy

self-sufficiency

and

contributes

to

a

morestableand

reliablepowergrid.Simultaneously,

the

demand

for

solar

water

heaters

(SWH)

has

risen,

fuelled

by

the

desire

forenergy-efficient

and

eco-friendly

space

heating

and

cooling

solutions.

By

leveraging

renewable

solarpower,

both

solar

water

heaters

-

solar

and

solar

air

source

heat

pumps

can

help

users

lower

theirenergyconsumptionandutilitycosts.SolarwaterheatertrendsDespite

the

uptake

of

solar

PV

installations

across

the

nation,

to

date

there

has

not

been

a

matchingincrease

in

the

use

of

solar

water

heaters.

Approximately

120,000

SWHsystems

were

installedacrossAustralia

during2022,takingthenumberof

totalinstallationsto

almost

1.5millionunits.10Figure4:

SolarPVandsolarwaterheateruptakein

Australiasince

2001Source:

CleanEnergyRegulator

data,AustralianEnergyCouncilanalysis,dataasat

25July2023Figure

4

shows

that

since

2010,

the

number

of

installations

of

solar

panels

has

continued

to

increasesharply

since

overtakingSWH

installations

in

Australia.

There

was

anoticeable

increase

in

the

useof

SWH

from

2006

to

2009.

The

year

2009

saw

a

peak

of

194,695

solar

water

and

heat

pump

systeminstallations

-

double

compared

to

the

previous

year’s

85,385

recorded

installations.

This

was

dueto

Governmentrebateprogramsto

assist

withthe

initialpurchasecost.TheFederal

Government

offereda

rebateup

to

$1,600per

homefor

the

installationof

aPVsystemor$1,000rebatefor

SWH

systemiii,resultingintheinstallationofroughly195,000SWHs.As

shown

in

figure

5,

in

2009

New

South

Wales,

Queensland

and

Victoria

had

the

greatest

SWHuptake

of

the

rebate,

accounting

for

roughly

76

per

cent

of

the

total

installations

throughout

Australia.In

early

November

2009,

the

rebate

was

dropped

to

$1,200

for

the

installation

of

a

system.Queensland

and

New

South

Wales

experienced

a

sharp

decrease

in

SWH

installations,

droppingfrom

over

122,000in2009to

just

19,100SWHinstallationsin2020.Since

2021,

the

overall

trend

was

picked

up

again,

however,

it

is

all

thanks

to

the

Solar

HomesProgram

in

Victoria.

The

state

has

a

share

of

56

per

cent

of

the

total

installations

in

2022,

with

its11uptake

of

SWH

to

reach

new

peaks

of

57,744

and

66,510

new

installations

of

SWH

in

2021

and2022

(42,120

installations

in

2009).

However,

the

market

share

of

SWH

by

state

is

affected

in

inverseproportion

by

natural

gas

infrastructure.

For

example,

Victoria

has

a

high

proportion

of

gasinfrastructure,

whereas

the

Northern

Territory

has

a

relatively

small

gas

infrastructure

coverage,henceitslowerrateofuptakeiv.Figure5:

Solarwaterheateruptakeacrossjurisdictionssince

2001Source:Clean

EnergyRegulatordata,AustralianEnergyCouncilanalysis,dataasat

25July2023SWHcanreferto

either

astand-alonesolarhot

watersystemorheatpumpwaterheater.1.

Stand-alone

solar

hot

water

system:

This

type

of

solar

water

heater

directly

captures

heatfrom

the

sun

using

solar

collectors

(usually

mounted

on

the

roof).

These

collectors

absorbsunlight

and

transfer

the

captured

heat

to

the

water

circulating

through

the

system.

Stand-alone

solar

hot

water

systems

are

most

effective

when

installed

on

an

unshaded

roof

withdirectexposureto

sunlight.2.

Heat

pump

water

heater:

This

is

another

type

of

solar

water

heater,

butitoperates

differentlyfrom

the

stand-alone

solar

system.

Instead

of

directly

capturing

heat

from

the

sun,

a

heatpumpwaterheaterextractsheat

fromthe

ambient

air

(evenincoolerconditions)andusesitto

heat

thewater

inthestoragetank.

Thismakesthe

heat

pumpwater

heatermoresuitable12for

areas

where

direct

sunlight

may

be

limited

or

where

shading

is

a

concern,

as

it

doesn'trelysolelyon

directsunlightforitsoperation.Figure

6

shows

that

SWH

with

air

source

heat

pump

has

been

more

favourable

than

an

air

sourceheatpump

acrossalljurisdictions.Figure6:

Solarwaterheateruptakeacrossjurisdictions

in

2022Source:

CleanEnergyRegulator

data,AustralianEnergyCouncilanalysis,dataasat

25July2023It

is

expected

that

the

rising

cost

of

electricity

will

continue

to

attract

households

to

switch

to

solarhot

water,

however

one

study

has

found

that

there

are

a

number

of

barriers

to

entry

for

consumeruptake

of

SWH

systems.

It

states

that

raising

customer

awareness

of

SWH

is

vital

as

consumerscurrently

lack

knowledge

of

its

benefits

and

are

not

aware

of

its

efficient

technology.

Consumers

alsooftenexperienceissueswhen

considering

installing

a

new

system,

ormaintaining

andrepairing

oldSWHsystemsbecause

maintenanceandrepaircostscanbe

perceivedas

highv.The

transition

to

all-electric

homes

presents

certain

challenges;

however,

with

adequate

regulatorychanges

and

diligent

monitoring

of

its

impact

on

households,

jobs,

and

businesses,

these

challengescan

be

effectively

managed.

It

is

essential

to

recognize

that

fully

electrifying

existing

housing

willtake

time

and

cannot

be

achieved

overnight.

Nevertheless,

by

implementing

supportive

policies

andgradually

adopting

renewable

energy

technologies

will

enable

us

to

navigate

these

challenges

andcreateasmoothandsuccessfultransitionto

all-electrichomesinthelongrun.13LEVELISEDCOSTOFENERGYThe

Levelised

Costof

Energy

(LCOE)

is

the

cost

ofenergy

per

kilowatt

hour

(kWh)

produced.

Whenthisisequal

to

orbelow

thecost

consumers

paydirectlyto

suppliers

for

electricity,

thisiscalledgridparity.

Table

2

shows

the

LCOE

for

solar

in

Australia’s

major

cities,

indicative

retail

prices

and

currentFeed-in

tariff

(FiT)

rates.

The

detailed

methodology

can

be

found

in

the

Appendix.The

retail

comparison

rates

are

representative

variable

rates

and

do

not

include

supply

charges.

Forall

capital

cities,

excluding

Perth

and

Hobart,

retail

prices

are

based

on

the

implied

usage

chargesfrom

St

Vincent

de

Paul’s

tracking

of

market

offers,

which

was

last

updated

in

July

2022.

Perth

pricesare

regulated

and

obtained

from

Synergy.

Hobart

prices

were

obtained

from

Aurora

Energy’s

Tariff31,

while

Darwin

prices

are

obtained

from

Jacana

Energy’s

regulated

residential

usage

charges.Tables3,

4and5showtheLCOEacross

major

citiesatdifferent

discountrates.Table3:

Centralestimate:4.95percentdiscountrate(ten-yearaveragemortgagerate)All

figuresin$/KWhSystemSize5kWRetailpricesFIT3kW$0.08$0.09$0.10$0.10$0.12$0.11$0.09$0.084kW$0.08$0.09$0.09$0.10$0.11$0.10$0.09$0.076kW$0.07$0.08$0.08$0.10$0.11$0.09$0.08$0.077kW$0.07$0.08$0.08$0.10$0.10$0.09$0.08$0.0710kW$0.07$0.08$0.07$0.09$0.11$0.09$0.08$0.07AdelaideBrisbaneCanberraDarwinHobartMelbourneSydney$0.08$0.08$0.08$0.10$0.11$0.10$0.08$0.07$0.38$0.09$0.10$0.08$0.08$0.09$0.08$0.11$0.03$0.23$0.28$0.27$0.28$0.19$0.35$0.30PerthSource:AustralianEnergyCouncilanalysis,

July2023Table4:

Low

cost

of

capital

sensitivity:

6.38per

centdiscountrate

(low

currentstandardvariablerate)All

figuresin$/KWhSystemSize5kWRetailpricesFIT3kW$0.09$0.10$0.10$0.11$0.13$0.12$0.10$0.084kW$0.08$0.09$0.09$0.11$0.12$0.11$0.09$0.076kW$0.08$0.09$0.08$0.10$0.11$0.10$0.08$0.087kW$0.08$0.08$0.08$0.10$0.11$0.10$0.08$0.0710kW$0.08$0.08$0.08$0.10$0.11$0.09$0.08$0.08AdelaideBrisbaneCanberraDarwinHobartMelbourneSydney$0.08$0.09$0.08$0.10$0.11$0.10$0.09$0.08$0.38$0.09$0.10$0.08$0.08$0.09$0.08$0.11$0.03$0.23$0.28$0.27$0.28$0.19$0.35$0.30Perth14Source:AustralianEnergyCouncilanalysis,

July2023Table5:

High

costofcapital

sensitivity:15.02percent

discountrate(indicativepersonalloanrate)All

figuresin$/KWhSystemSize5kWRetailpricesFIT3kW$0.12$0.14$0.15$0.16$0.20$0.18$0.14$0.114kW$0.11$0.13$0.13$0.17$0.17$0.15$0.13$0.106kW$0.10$0.12$0.11$0.15$0.16$0.14$0.11$0.107kW$0.11$0.12$0.11$0.15$0.16$0.13$0.11$0.1010kW$0.11$0.12$0.11$0.14$0.16$0.13$0.11$0.11AdelaideBrisbaneCanberraDarwinHobartMelbourneSydney$0.11$0.12$0.12$0.15$0.16$0.14$0.12$0.10$0.38$0.09$0.10$0.08$0.08$0.09$0.08$0.11$0.03$0.23$0.28$0.27$0.28$0.19$0.35$0.30PerthSource:AustralianEnergyCouncilanalysis,

July2023Smallandlarge

business-Levelisedcost

of

electricityTables

6

and

7

show

the

estimated

cost

of

electricity

production

for

commercial-sized

solar

systems.Asbusinesses

look

to

reduce

overhead

costs,installation

of

larger-scale

solar

systems

continues

toincrease.Business

tariffs

differ

to

residential

retail

tariffs.

Depending

on

the

size

of

the

customer

and

theamount

of

energy

used,

businesses

can

negotiate

lower

prices.

If

a

business

was

to

consume

allelectricity

onsite,

the

electricity

prices

in

Tables

6

and

7

would

represent

the

cost

per

kWh

ofconsumption

from

the

energy

generated

from

the

different

system

sizes

listed.

For

businesses,installation

occurs

if

the

benefits

of

installation

outweigh

the

cost.

The

average

electricity

bill

forindustrialbusinessesin2014-15was10.72

c/kWhvi.Table

6:

Central

estimate:

5.37

per

cent

discount

rate,

ten-year

average

small

businessinterestrateAll

figuresin$/KWhSystemSize50kW$0.0810kW$0.08$0.08$0.08$0.10$0.09$0.09$0.0930kW$0.08$0.08$0.08$0.09$0.09$0.08$0.0770kW$0.08$0.08$0.08$0.09$0.09$0.08$0.07100kW$0.08$0.08$0.08$0.09$0.09$0.08$0.07AdelaideBrisbaneCanberraHobartMelbourneSydney$0.08$0.08$0.09$0.09$0.08$0.08PerthSource:AustralianEnergyCouncilanalysis,

July202315Table7:

Centralestimate:4.56

percentdiscountrate,ten-yearaveragelarge

businessinterestrateAll

figuresin$/KWhSystemSize50kW$0.0810kW$0.07$0.08$0.08$0.09$0.09$0.08$0.0830kW$0.07$0.08$0.08$0.08$0.09$0.08$0.0770kW$0.08$0.08$0.08$0.08$0.09$0.08$0.07100kWAdelaideBrisbaneCanberraHobartMelbourneSydney$0.08$0.07$0.07$0.09$0.08$0.08$0.07$0.08$0.08$0.08$0.09$0.08$0.08PerthSource:AustralianEnergyCouncilanalysis,

July202316PAYBACKPERIOD,DETAILEDMODELThe

payback

period

is

defined

as

the

year

when

the

cumulative

savings

are

greater

than

thecumulativecostsof

asolarPVsystem.Savingsrepresent

the

avoidedcostofconsumptionandanyrevenue

received

from

FiTs.

The

cumulative

cost

incurred

represents

the

initial

investment

and

thetimevalueofmoney.Adetailedmethodologyis

contained

in

Appendix2.While

installing

solar

panels

usually

requires

an

upfront

investment,

customers

with

solar

panelshave

lower

electricity

bills

by

reducing

their

grid

electricity

consumption

and

exporting

excesselectricity

to

the

gridin

exchange

for

solar

feed-in

tariffcredits.

However,

effective

solar

feed-in

tariffrates

declined

in

all

regions

across

the

country.

When

choosing

an

energy

plan,

customers

with

solarpanels

should

compare

energy

plans

using

their

historical

electricity

consumption

and

solar

exportvolume.

The

energy

plan

with

the

highest

solar

feed-in

tariff

may

not

always

be

the

best

plan

overall,asitmay

includehighersupplyandusage

chargesthan

other

plans.Figure

7

highlights

the

payback

period

for

different

system

sizes

across

Australia.

Note

that

electricityprices

are

subject

to

change

with

consumer

price

index

(CPI)

levels

and

therefore

will

affect

thepayback

period.

Many

retailers

offer

higher

solar

FiTs,

which

help

to

offset

the

impact

of

higher

pricesinsome

states

anddeliver

savingsto

customers

withsolarpanels.Thelow

paybackperiodsacrossmanycitiesfurtherhighlightsthegreater

encouragementfor

customers

to

installsolarPV.Figure7:

Paybackperiodforsolar

PV(5.45per

centdiscountrate)10503kW4kW5kWSource:

AustralianEnergyCouncilanalysis,July2023Compared

to

the

previous

quarter,

the

rapid

rise

in

interest

rates

in

Australia

has

added

a

year

tothepaybackperiodinall

states.17Figure

8

shows

the

expected

payback

period

for

systems

with

a

4.95

per

cent

discount

rate

(10-yearaverage

home

loan

rate).

Melbourne

sees

a

strong

incentive

to

install

a

5kW

system

rather

than

a3kW

or4kW

unit

size.

This

can

reduce

the

payback

time

bythree

years

for

a

5kW

system

comparedto

a3kW

system.Adelaide,Brisbane,

SydneyandPerthshowno

change

inpaybackperiodswith

ahigherinterestrate.Figure8:

Paybackperiodforsolar

P