Earlier this year, the Clean Energy Regulator commissioned GHD, Green Energy Markets (GEM) and Jacobs Australia to model the near-term outlook for Australia’s small and mid-scale solar PV sectors (0-30MW). ⁶²

Modelling approach

Modellers combined industry research with regression modelling, agent-based modelling and machine learning to obtain projections for installation numbers, installed capacity and STC creation from 2021 to 2025. Projections were made in a variety of subcategories including system capacity bands and by state and territory. GEM also modelled an additional scenario in which favourable market conditions accelerate the uptake of highly distributed energy resources.

Results from the three modellers have been averaged to produce the installed capacity estimates for the capacity bands discussed below.

The modelling reports are available on the Clean Energy Regulator’s website. ⁶³

Results

Overall, installed capacity of small and mid-scale (0kW-30MW) solar PV is estimated to be 3.8GW per year on average from 2021 to 2022, before increasing to 4.5GW per year at end of 2025. If installed, this would result in 20.3GW of additional capacity by 2025, more than doubling Australia’s current small and mid-scale capacity to 34.6GW.

Small-scale (0-100kW) results

Total installed capacity of small-scale technologies is estimated to grow by approximately 3.5GW per year in 2021 and 2022. From 2023 to 2025, yearly growth is expected to increase steadily, with 4.2GW installed in 2025. In total, 18.7GW of additional small-scale capacity is expected from 2021 to 2025 (see Figure 1.1). For comparison, 8.6GW of additional small-scale capacity was installed from 2016 to 2020.

The small-scale sector includes both residential and commercial solar PV systems with a capacity less than 100kW. Factors influencing near-term uptake in this sector include electricity prices, feed-in tariffs, government incentives, capital costs, low interest rates and increasing consumer awareness.

Mid-scale (100 kW to 30 MW) results

Installed capacity of mid-scale solar PV is estimated to grow by approximately 1.6GW during the 2021-2025 period. This can be further split into two capacity bands exhibiting different trends.
Installed capacity of systems in the 100kW-5MW band shows potential yearly growth of approximately 160MW between 2021 to 2023. This increases from 2024, reaching 210MW in 2025 (see Figure 1.2). Total installed capacity between 2021 and 2025 is expected to reach 860MW. Growth in this capacity band is supported by ongoing cost reductions resulting from low module prices, government incentives and voluntary emissions reduction commitments made by corporations.

In contrast, installation of systems in the 5MW-30MW band is expected to slow by 40%, from 190MW to 110MW per year, over the 5 years to 2025 (see Figure 1.3). The estimate for total installed capacity between 2021 and 2025 is 700MW. Declining growth in the 5MW-30MW capacity band can be attributed to falling wholesale electricity prices, which are expected to impact the financial viability of in-front-of-the-meter power plants.

It should be noted that mid-scale results differ significantly among the modellers. This reflects the relative immaturity of the mid-scale market and the diverse range of applications and incentives driving its near-term growth. Behind-the-meter systems are installed to generate electricity for self-consumption, while systems installed as power plants with limited self-use generally participate in the wholesale market. In addition, off-grid or micro-grid power systems are often built to avoid the cost of diesel generation. Mid-scale solar uptake moderated in 2020 owing to the COVID-19 pandemic. However, the sector has shown signs of recovery in 2021 and any longer-term effects remain to be seen.

Footnotes

⁶² Note that this modelling does not inform the setting of the Small-scale Technology Percentage (STP). Modelling to inform the STP will be completed in early 2022.

⁶³ Small-scale technology percentage modelling reports.