The solar news from down under is looking better since SolarTown reported earlier this summer on installation problems and dwindling government incentives in Australia. Today, the good news coming from New South Wales (NSW) is that NSW is on the verge of achieving grid parity in some areas-"a lot of places except Melbourne and Hobart," according to Andrew Blakers, director of the center for sustainable energy systems at the Australian National Universiy.
According to Muriel Watt, spokeswoman of the Photovoltaic Association, solar has become competitive with coal-powered electricity, as the cost of producing energy from rooftop panels over the course of their 25-year lifetime equates to the cost of retail electricity. Grid parity is reached when the price of solar power is equivalent to electricity purchased from the grid. Depending on the definition used, this has been reached or will take a few more years to reach in Australia. In any case, it is or will be the first country in which solar has reached grid parity.
According to Giles Parkinson, this was a result of a few things. First, the high demand for solar panels as a result of government incentives implemented in 2008 delivered economies of scale to solar manufacturers. This means that as demand increased, production increased, which meant the price of manufacturing decreased because manufacturers learned to produce solar modules more efficiently.
Second, the rising Australian dollar made it cheap and attractive for Australians to import solar modules. Australia also experiences stronger sunlight than most of the world, making photovoltaic (PV) panels there more effective.
Last, government incentives for solar panels raised the price of retail electricity. Throughout August, these factors allowed solar PV to reach grid parity.
As electricity prices rise, it makes sense to install solar panels in Australia even without government subsidies. Until October of last year, NSW was an area with strong government incentives for installing solar power. The feed-in tariffs, which were part of the incentives, became controversial because of the rapid increase in the price of retail electricity; the feed-in tariffs were eventually abolished.
The days of other government incentives are also numbered, as the price of unsubsidized panels decreased by half, reducing up-front costs. The purpose of government incentives is to make the technology cheaper by encouraging demand, and once that occurs, it will no longer make sense to keep the government subsidies. However, it will be several years until the industry can support itself, which means that incentives will be around for at least as long as that. And as domestic manufacturers outsource to China in order to reduce manufacturing costs, the cost of PV will drop even lower.