By Jason Deign
Present forecasts of PV-and-battery adoption could end up significantly underestimating true adoption levels by not taking into account a massive glut in solar capacity.
Josefin Berg, senior analyst for solar demand at IHS Technology, told Energy Storage Report there are currently “several gigawatts’” worth of new solar panels worldwide that nobody wants to buy because of excess supply.
IHS alerted to the potential for manufacturing overcapacity in the PV market back in June, and has forecast there will be a shakeout among what few manufacturers are still left from previous oversupply and consolidation periods.
For now, however, as EnergyTrend noted: “Prices across the PV supply chain have collapsed to new lows in the second half of 2016 due to plunging demand.”
What will happen to the excess PV capacity currently sitting on the shelf is unclear, but in Australia CleanTechnica earlier this month predicted it would lead to a “big solar boom.”
Tripling utility-scale PV
The forecast came just days before the Australian Renewable Energy Agency announced 12 new large-scale PV plants, tripling the country’s utility-scale PV capacity overnight.
Meanwhile RenewEconomy reported on Curtin University research indicating that solar plus storage could become cheaper than Australian grid suppliers as soon as next year. Could the same happen elsewhere?
It seems eminently plausible if PV panels are being sold at cost or less.
Whether the customer is a large-scale PV project developer or an environmentally conscious homeowner, being able to buy high-quality panels for next to nothing will not only help cut the cost of energy but also free up cash.
Adding battery storage
In many other instances, however, a significant cut in the budgeted cost of solar panels might allow the asset owner to consider adding battery storage into the equation.
The storage option is even more attractive given the fact that battery costs are plummeting, too.
Earlier this month Tesla, which already has one of the cheapest battery systems on the market, cut the price of its commercial and utility-scale Powerpack product by 5%.
There are reasons to suspect the main impact of record-low PV prices will be in the distributed energy market, though.
This is partly because utility-scale developers tend to be pickier about their modules, since they need to be sure they can maximise the profitability of a project over its full lifespan.
Residential solar market
Hence they may still be willing to pay a slight premium for higher-quality PV panels, leaving the very cheapest products to find their way onto the residential solar market, where customers might not be quite as choosy.
An unexpected boost to residential solar generation could add impetus to a growing trend for distributed storage, highlighted by Bloomberg earlier this month.
And the distributed storage market is likely to be further helped by an increasing influx of cheap second-life batteries from electric vehicles, although admittedly this is not expected to happen for a couple of years.
Taken together, though, the price reductions that could come about from today’s PV oversupply plus ongoing cuts in the cost of batteries seem increasingly likely to remove financial barriers to solar-plus-storage adoption.
Any faster-than-expected reductions in solar-plus-storage pricing could put pressure on regulators.
Legislation is still challenging
Although some markets (most notably Germany) have put in place support mechanisms for solar-and-battery adoption, in many places the legislation around distributed energy storage is still challenging.
Legislators may want to keep it that way since, as the Curtin University research makes clear, once solar plus storage costs fall far enough below the cost of grid power there is a real risk of users cutting their utility bills to a bare minimum.
The Curtin University researchers estimate this could slash AUD$100m off annual utility revenues in West Australia alone, effectively reducing the funds available to maintain the grid.
However, it is difficult to see how obstructive regulation could benefit energy markets in the long run, particularly if there is a need to increase renewable penetration as part of carbon reduction efforts.
Thus regulators will need to think carefully about how they adjust legislation to cope with increasingly decentralised energy production and storage, while at the same time safeguarding the grid. And they may not have much time to do it.