The Australian solar market’s regional fragmentation intensified during the second quarter of 2025, with New South Wales experiencing a sharp contraction while Tasmania showed remarkable resilience in the face of national headwinds.
According to the latest quarterly report from Solar Nerds, national small-scale solar installations reached 656,388 kW across 64,564 systems in Q2 2025, marking a 17.32 per cent year-over-year decline that signals the market’s transition from rapid growth to strategic recalibration.
NSW bears brunt of market cooling while Tasmania holds steady
The quarter’s most pronounced trend was the widening gap between state performances. New South Wales recorded a steep 30.90 per cent year-over-year decline, the sharpest contraction among all states and territories. This dramatic fall from the state’s historical position as Australia’s solar powerhouse raises questions about market saturation, grid constraints, and consumer confidence in the nation’s most populous state.
Tasmania emerged as the quarter’s resilience story, with installations declining just 3.64 per cent compared to Q1 2025’s performance. The island state’s ability to maintain near-steady installation rates while larger markets contracted suggests unique local dynamics at play, potentially including sustained consumer demand and favourable financing conditions through platforms like Solaris Finance.
Queensland and New South Wales found themselves in an unprecedented dead heat for quarterly volume leadership, with Queensland installing 181,761 kW compared to NSW’s 180,154 kW. This virtual tie represents a significant shift from historical patterns where NSW typically dominated, and signals Queensland’s growing importance in the national solar landscape.
Commercial sector shows untapped potential amid residential saturation
The system size distribution data reveals significant opportunities for growth in the commercial segment, particularly in states that remain heavily skewed toward residential installations. While the national average shows 74 per cent of installations in the 0-15 kW range, jurisdictional variations tell a more nuanced story.
The Northern Territory continues to lead in commercial and industrial adoption, with 62 per cent of installations exceeding 15 kW. This stands in stark contrast to Queensland and Tasmania, where small residential systems comprise 78 per cent and 86 per cent of installations respectively. The disparity suggests substantial room for commercial sector expansion in these states, particularly as businesses seek to manage rising energy costs and meet sustainability targets.
Victoria, South Australia, NSW, and the ACT occupy a middle ground with more balanced size distributions, potentially representing a sustainable model for other states to emulate as residential markets mature.
Market structure reveals installer fragmentation amid trader concentration
The Q2 data exposes a striking dichotomy in market structure between the installation and trading segments. While the retail installation market remains highly fragmented – with the largest national player commanding just 3.54 per cent market share – the Small-scale Technology Certificate (STC) trading market shows significant concentration.
The top STC trader controls 28.87 per cent of the national market, with the top five traders collectively managing over half of all certificate transactions. This concentration of financial incentive management contrasts sharply with the dispersed installation market, creating potential vulnerabilities in the value chain that could impact installer cash flows and consumer pricing.
The recent acquisition of SolarQuotes by Origin Energy adds another layer of complexity to this landscape, potentially reshaping how consumers discover and evaluate solar installers. This consolidation in the lead generation space, combined with concentrated STC trading, suggests the market’s financial infrastructure is consolidating even as installation services remain fragmented.
Platform consolidation and the standardisation challenge
Behind the installation statistics lies another significant trend: the increasing homogenisation of solar proposals across the industry. With most installers relying on just two dominant software platforms – Pylon and OpenSolar – for system design and quoting, consumers are experiencing a concerning lack of differentiation in their solar journey.
This standardisation extends beyond mere presentation, potentially limiting innovation in system design and making it harder for quality installers to differentiate their offerings. For consumers navigating this landscape, understanding how to evaluate solar proposals effectively has become increasingly critical.
Battery revolution set to reshape quarterly benchmarks
The most significant development on the horizon is the inclusion of battery installation data in quarterly reports from Q3 2025 onwards. The rollout of the federal battery rebate program is expected to trigger a surge in storage adoption, fundamentally altering how we measure and understand the solar market’s evolution.
This new data stream will provide unprecedented insights into storage attachment rates, system sizing trends, and the emergence of solar-plus-storage as the new standard for residential and commercial installations. Industry stakeholders should prepare for a more complex but richer analytical landscape that better reflects the integrated nature of modern distributed energy resources.
Strategic implications for a maturing market
The Q2 2025 results confirm that Australia’s solar market has entered a new phase characterised by regional divergence, segment-specific challenges, and structural consolidation. The stark performance gap between NSW and Tasmania, the untapped commercial potential in residential-heavy states, and the contrast between fragmented installation and concentrated trading markets all point to a market in transition.
For installers, the data suggests opportunities lie in commercial sector development and states showing resilience like Tasmania and South Australia. For policymakers, addressing the structural imbalances between installation and trading concentration may be necessary to ensure healthy market competition. For consumers, the evolving landscape underscores the importance of working with experienced partners who can navigate both the technical and financial complexities of solar adoption.
As battery data begins flowing in Q3, the industry will gain new tools to understand and optimise the next phase of Australia’s renewable energy transition. The foundations laid during this transitional period will determine whether Australia can maintain its position as a global leader in distributed solar adoption while addressing the structural challenges revealed in these latest statistics.
For comprehensive quarterly solar installation data and analysis, visit Solar Nerds. For solar and battery financing solutions, explore options at Solaris Finance.