Australia homes leads the world in solar. But businesses are falling behind

Australia's Rooftop Solar Leadership Outpaced by Commercial Sector

Australia homes leads the world in solar - Australia’s rapid adoption of residential solar energy has created a stark contrast with the slower progress in commercial and industrial sectors, according to a recent study. While homes have become the primary adopters of rooftop solar, businesses remain underutilized in harnessing this clean energy source. This disparity highlights a growing challenge in Australia’s transition to renewable power as coal plants retire and demand for electricity rises.

The Institute for Energy Economics and Financial Analysis (IEEFA) report reveals that residential solar installations in Australia have surged to 22GW as of December 2025, placing the nation at the forefront globally on a per capita basis. However, the commercial and industrial sector has installed only approximately 5.6GW of solar, roughly a quarter of the residential total. Despite this, businesses account for a significant portion of the country’s electricity consumption, making their slower adoption a critical issue for the nation’s energy future.

The Case for Commercial Solar Acceleration

According to the IEEFA analysis, the commercial and industrial sector holds immense potential to contribute to Australia’s renewable energy goals. The report emphasizes that these sectors can deploy solar infrastructure more swiftly than utility-scale projects, as they often bypass lengthy planning and environmental approval processes. Additionally, rooftop solar on business premises avoids the delays associated with constructing new transmission lines, which are essential for large-scale power projects but can take years to complete.

“Commercial and industrial solar can be deployed faster than utility-scale alternatives because it generally doesn’t require extensive planning and environmental approval processes, nor new transmission build that can add several years to the rollout of utility-scale power projects,” the report explains. This efficiency could help bridge the gap as coal-fired power stations are decommissioned and the demand for clean energy intensifies.

Barriers to Business Solar Adoption

The IEEFA report identifies several obstacles preventing businesses from embracing rooftop solar. One major factor is the rental nature of many commercial properties, which complicates investment in long-term assets like solar panels and batteries. “Tenants might want upgrades because that will reduce their energy bills, but the landlord is the final decision-maker,” said Johanna Bowyer, a co-author of the study and lead Australian electricity analyst at IEEFA. She noted that business owners often lack confidence their leases will last long enough to recoup the costs of solar installations.

Another challenge is the inconsistency in network tariff structures, which can deter businesses from investing in solar systems. Additionally, the grid connection process for commercial sites is frequently slow and unpredictable, creating further delays. “The technical rooftop potential could be higher than that,” Bowyer added, suggesting that when agricultural areas are included, the country’s solar capacity might exceed 80GW.

Recommendations for Policy Reform

To address these gaps, the IEEFA report recommends reforms aimed at encouraging business investment in solar. It suggests creating incentive schemes tailored to the “missing middle” — businesses that are too large for residential programs but too small for utility-scale initiatives. For example, expanding the instant asset write-off for systems and batteries over a certain size could make solar installations more attractive to commercial operators.

The report also calls for the standardization of network tariffs and a review of the economic regulation of distribution services. These changes, it argues, could streamline the process for businesses to connect to the grid and reduce the financial burden of adopting solar technology. In Victoria, the opposition has already proposed a solution: the creation of “urban solar parks” to leverage rooftop spaces in Greater Melbourne for solar and battery installations.

“There are thousands of hectares of roof space on warehouses, factories, and buildings in urban areas where we can be putting up solar farms with battery power and using the energy closer to where it’s stored,” said Danny O’Brien, the state Nationals leader. This initiative aims to reduce reliance on new transmission lines while increasing local energy generation. However, experts remain cautious about whether solar alone can replace the need for transmission infrastructure.

Expert Perspectives on Solar’s Role

While the potential of commercial solar is evident, some analysts argue it may not fully replace the need for transmission lines. “Victoria’s already got pretty good incentives for commercial and industrial solar,” Bowyer acknowledged, but emphasized that storage deployment in these sectors is still lagging behind residential efforts. “Storage is well behind households, though demand is increasing quickly,” the report noted, highlighting the importance of pairing solar with battery storage to maximize its benefits.

“The middle of the day is usually when businesses are operating, and that is very well suited to the solar profile,” Bowyer explained. This timing aligns closely with peak solar generation, suggesting that commercial solar could provide significant value by meeting demand during high-output hours. Yet, the report underscores that the sector’s capacity could be even greater if policymakers address the current barriers to adoption.

With forecasts suggesting the commercial and industrial sector’s solar capacity could reach between 17 and 31GW by 2050, the urgency to accelerate progress is clear. “The commercial and industrial sector must play a far larger role in accelerating Australia’s energy transition… if the country is to meet its renewable energy targets,” the report’s authors stated. This shift would not only help diversify the energy mix but also reduce the strain on the national grid as electricity demand continues to grow.

As the conversation around renewable energy intensifies, the commercial sector’s underutilized potential becomes increasingly apparent. By addressing the structural and financial challenges outlined in the IEEFA report, Australia could unlock a new era of solar adoption that complements its residential success and supports the nation’s broader sustainability goals. The path forward requires collaboration between policymakers, business leaders, and energy providers to turn this potential into reality.