Policy hurdles slow Australia's commercial-solar rollout despite 86GW potential
Grid delays and tariff complexity slow commercial solar deployment.
Australia’s commercial and industrial (C&I) rooftop solar sector has 39 gigawatts (GW) to 86 GW of technical potential, but policy and regulatory barriers are limiting deployment, the Institute for Energy Economics and Financial Analysis (IEEFA) said.
Australia has installed 5.6 GW of C&I solar capacity, whilst forecasts project cumulative capacity of 17 GW to 31 GW by 2050, leaving a significant gap between potential and actual deployment.
IEEFA said faster C&I solar growth is needed for Australia to meet its target of sourcing 82% of electricity from renewables.
The report said C&I solar projects can be deployed faster than utility-scale developments as they require fewer planning approvals and do not depend on new transmission infrastructure.
The sector is the “missing middle” because systems are too large for residential incentives but too small for utility-scale programmes, IEEFA said.
The report identified four barriers slowing investment: business-level investment constraints, inconsistent network tariffs, slow and unpredictable grid connection processes, and regulatory settings that favour traditional network investment over distributed energy resources (DERs).
IEEFA said many businesses treat solar and storage as non-core investments and apply return thresholds above their cost of capital.
It added that leased commercial properties create additional challenges, as landlords control installation decisions but do not directly benefit from lower electricity bills, whilst tenants often have lease terms shorter than the lifespan of solar and battery systems.
Government support for C&I projects also remains limited, according to the report.
Residential incentives and the Cheaper Home Batteries Program target smaller systems, whilst the Capacity Investment Scheme focuses on projects of at least 30 MW. Existing certificate schemes are also declining, reducing financial support for C&I developments.
IEEFA said Australia’s 16 distribution network service providers operate different tariff structures, making it harder for businesses to assess investment returns and scale projects.
Grid connection processes also vary between network operators, creating delays, additional costs, and inconsistent technical requirements.
“An inconsistent, slow, and unpredictable grid connection process imposes material costs and delays on C&I projects,” the report said.
IEEFA recommended a long-term policy framework for zero-emissions energy projects across all scales, national standardisation of network tariffs, streamlined grid connection processes, and a review of electricity distribution regulation to improve competition from DERs.
The report said addressing these barriers would accelerate renewable generation and storage, reduce business energy costs, support electricity demand as coal generation exits the market, and contribute to Australia’s renewable energy targets.
