After a second month of capped solar installations, installers have gathered outside Parliament hoping Premier Daniel Andrews would listen to their concerns that the cap will force them to downsize.
Currently, the Victorian Solar Rebate is capped at 3,333 homes only. The rebate was initially viewed favourably across the sector, but it seems the industry has finally understood the true impact.
This article addresses those concerns, highlights the (low) points so far and offers possible solutions the Victorian Government must consider to salvage the state of the current program.
The Victoria Solar Homes initiative
Critics of the Solar Homes Rebate say that the initiative was created to get votes.
The Andrews Labor government wanted to appear progressive to win the 2018 State Election and pitched it to spur the solar industry in Victoria.
Families willing to install solar panels on their roof were promised to receive a rebate of $2,225 on top of the federal STCs (Small-scale technology certificates) so long as they are eligible.
- That families were the owner-occupier of an existing property valued at under $3m
- That owners have a combined household taxable income of less than $180,000 per year, and
- That they do not have an existing domestic solar system
For a standard $7,000 4kW - 5kW solar installation, this translated to a $3,000 out of expense to consumers.
It looked like a great initiative. On the surface, the Government deserves a round of applause for attempting to move Australia closer to the Paris Climate Agreement.
So what happened?
Prior to the rebate initiative, the price of solar installation was determined by the supply of the solar installers and the demand of consumers.
When a Government introduces a rebate, the price is reduced artificially and this increases demand.
Whilst it is agreed that this method is one way to increase the overall number of solar installations, the Victorian rebate was capped at only 3,333 homes due to Budget constraints.
Once they are gone, consumers need to wait until 9am on the first Monday of the following month or bypass the rebate and pay the $2,225 themselves.
Naturally, almost all would rather wait than to pay $2,225.
In July, the 3,333 rebates were taken up within 3 days.
In August, they were disappeared within 90 minutes.
Effectively, the policy has put a hard cap of 3,333 domestic installations per month.
The rebate was designed to be an effective way to invest in and grow the industry, create jobs and reduce our reliance on other energy sources (such as coal). However, it’s apparent that the Andrews Government did not perform adequate due diligence to assess its economic impact.
What’s the future look like if it remains the same?
This policy is expected to stay in effect for 10 years.
I believe that consumers will become frustrated with the rebate application process. There’s a strong risk that they’ll disillusioned or maybe worse, disinterested in the whole solar movement.
The biggest impact, though, will be on the small domestic solar installers.
Businesses have a real risk of shutdown due to lack of demand. Jobs will be lost. Skilled labourers will be out of work. At best, they will find work in other industries.
If or when the policy is changed or abolished, demand should increase once again. Depending on the time lag though, the industry will need time to skill up again.
And, hopefully, any new schemes do not result in the 2014 debacle where 244 solar installers went out of business when they:
- Resorted to discounts instead of creating value
- Installed lower quality panels and inverters
- Cared for bottom dollar only, and/or
- Didn’t meet warranty obligations
What can be improved:
As it stands, the Victorian Solar Rebate Program could wreck the solar industry in Victoria. As a Work in Progress, here are some options that will enable the program to pivot to something sustainable and relevant:
Halve the rebate, double the amount of families
If the program double the number of rebates to 6,666 households, but halves the rebate amount to $1,112 the total budget remains unchanged and more homes will be impacted. Whilst it is a good start, this still does not address the backlog of more than 10,000 applications.
Reduce limit of combined household income from $180,000 to $90,000.
No-one wants to adversely impact lower income families. Higher income families will become ineligible, which opens up more room for rebates for those families who need it the most.
Remove the subsidy altogether.
The solar industry was growing sustainably before the change in policy. Informed consumers won’t need to “wait” for the monthly rebate opening. They will buy solar as per the price set by the market.
Vision was great, execution not ideal
It is a shame that whilst the underlying vision was great, the execution is not. Many in the industry has agreed that this is a giant mistake that needs rectifying.
Which is okay. Everyone makes mistakes. No one expects perfection from anyone.
The best outcome is to acknowledge the error, fix it and move on.