An update of the challenges facing the solar industry, likening to a "solar eclipse." It highlights a significant decline in solar energy prices, curtailment levels affecting revenue, and the financial stresses. Despite the potential of solar power, investment experiences remain complicated.
Introduction
Almost a year ago we wrote an article called Solar Farms facing Solar Eclipse where we outlined the predicament of the solar industry. With almost another 12 months of observations, we can only conclude the so-called solar eclipse is well underway.
Latest Trends
Looking at the rolling 12-month solar weighted bundled price, the downward trend has continued to slide, but the fall has accelerated since about January 2025, primarily due to the fall in spot LGC prices.
Since January 2025, the bundled 12-month rolling average power and LGC price has fallen from:
- QLD: $73/MWh to $35/MWh (-52%); less than half of what it was 12 months ago
- NSW: $96/MWh has almost halved to $49/MWh (-49%)
- VIC: $65/MWh to $36/MWh (-45%)
- SA: $85/MWh has fallen the least, now at $59/MWh (-31%)
However, the metric of solar weighted average price only tells half the story as it does not recognise the level of curtailment. Higher curtailment slows the fall of the solar weighted average price. The SA rolling annual curtailment level is now 41% as at the end of February. By comparison, the other Regions are similar to each other with QLD under 18%, NSW about 19% and VIC around 21%.
Implications
Most solar farms operate under a PPA rather than a merchant strategy; therefore, they are protected from current trends. However, some buyers of solar PPAs are feeling the stress and experiencing "PPA Regret." The only consoling news for the PPA holders is that the higher the level of curtailment, presumably lowers the unfavorable settlement amount.
Unless the PPA is a whole-of-life PPA, the asset will eventually become exposed to market conditions, at which point it will face a reality check. It is clear that many developers will face a write-down of asset value unless the PPA covers the whole life. However, even then, given the higher level of curtailment, it is strongly suspected that, although the unit price is fixed, with less energy being dispatched, it will lead to lower revenue. Write-downs are therefore a very likely scenario for most, if not all, solar developers.
The competition for solar farms clearly comes from other solar farms, but just as importantly, there is the ever-increasing rooftop PV capacity, which is causing demand to be reduced. Lower demand during solar hours then impacts solar-weighted spot prices.
Mitigation
Converting a solar farm to a battery hybrid installation is a popular mitigation, but that requires more capital. If the developer is facing an under-performing asset, making a larger investment might be challenging. As always, a solar farm needs a battery, but the reverse is not true.
If a battery charged during the solar hours, it would be able to extract a lower cost than the solar-weighted spot prices because a battery would gladly charge during negative spot prices, where a solar farm might curtail. Therefore, charging battery from the grid is likely to be lower than charging from a solar farm at a transfer or PPA price. The only offsetting benefit, is the curtailed solar energy might be able to be captured by the battery depending upon relative capacity of the two assets and the storage status of the battery.
Conclusion
From our modelling, the recovery of daytime prices is still many years away, before daytime demand growth is significant enough to compensate for the ongoing supply increase that keeps daytime prices suppressed.
Australia seems almost seduced by solar power, both on the roof and in the paddock, but as an investment, it is not necessarily a pleasant experience.
The chart pack contains solar related items consisting of:
- rolling annual solar weighted prices relied upon in the commentary
- generation statistics showing market share proportion, and curtailment proportions
- spot price price band analysis for February and rolling annual, proportion of negative prices
- latest solar PV capacity and February daily profiles for each Region
- LGC forward prices as at the end of the last 5-months
Appendix A: Solar Weighted Prices
The rolling 12-month solar weighted bundled prices is shown for each Region broken down into power and LGC prices. The deterioration is evident. In the northern States, both solar weighted power and LGCs have fallen; where the southern States it is just the LGC fall.
Appendix B: Generation
B.1 February Market Share
Looking at the month of February for many years, solar continues to increase.
B.2 Curtailment
The February curtailment statistics are shown for wind and solar since 2023, where SA stands well above the solar curtailment compared to the other Regions.
Appendix C: Spot Prices
C.1 February Price Band Contribution
The price band analysis of the spot prices is shown for all the February's since 2017 by Region.
C.2 Rolling Year Price Band Contribution
The rolling year by month price band analysis is shown for each Region. NSW has been the most consistent, while SA the least consistent over time.
C.3 Proportion of Negative Prices
The proportion of negative prices for 2025 was the highest on record except for TAS. South Australia topped the list with over 30%, and Tasmania was the least at less than 1%.
Appendix D: Solar PV
D.1 Solar PV Capacity
The solar PV data comes from the Clean Energy Regulator and the data drip-feeds so the last 12-months of data is always subject to change and will increase over time as the applications for registration flow through.
D.2 Solar PV Annual Growth
Due to the registration delays, 2025 currently looks less than 2024, but over time this is bound to be increased.
D.3 Solar PV Daily Profile
The daily solar PV generation for each day of February and the each Region is shown below.
Appendix E: LGC Prices
The forward LGC prices as at the end of the month for the last 5-months are shown below and shows how the downward trend has continued.
Disclaimer and Notes
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