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Australia cuts solar subsidies, and not before time

It's becoming competitive, and doesn't need support

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Grid-connect system cost

The change in system costs – panels with grid connection as a bundle – over the last three years is quite startling. Thanks to the Wayback machine, I can check off solar system costs in 2008 and now.

Whole-of-system costs – excluding the subsidy – have fallen faster than panel costs. To pick just one installer, Aussie Solar (mainly because they build the system I bought with a house, so I’ve dealt with them, and therefore know they’re at least more substantial than some dude on eBay with a Website, a lockup and a van):

2008 price for a 1.5 kW system, pre-rebate: A$15,400

2011 price for a 1.5 kW system, pre-rebate: A$9,195 (the sum of the subsidy and the user capex)

The change, more than A$6,000, is more than the difference in panel price alone (yes, I realise these systems use different panels to those I priced above, but the gap between 130W panels and 175W panels isn't enough to invalidate this point).

If I apply the rebates in 2008 and now, the customer’s capex for a solar installation has risen from A$6,160 in 2008 to A$7,995 now (at the new A$1,200 level of rebate).

The price deflation (which I didn’t actually expect when I started looking at these figures) suggests, quite amazingly, that at least one of the tree-huggers’ assertions was right: with the right support, the solar industry would reach sufficient size to start enjoying economies of scale.

The growth in the market made it worthwhile for international manufacturers to compete on price, while at the same time expanding the number of distribution channels (leading to local price competition as well).

The existence of the parallel market in off-grid systems seems to support a hypothesis that competitive pressure is bringing down prices. In the less-contested off-grid market, there’s less evidence of price pressure. The 2008 price list I have shows a Latronics inverter at exactly the same price as it’s listed for today.

So it would appear that the government’s support had at least one of the outcomes that subsidy advocates believe it ought. But once a market becomes self-sustaining in its own right, it’s time to wind back the subsidy.

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