Runaway Home Battery Rebate Forces Rethink

The success of the Albanese Government’s home battery rebate is piling pressure on the program’s funding and policy settings. A Smart Energy Council meeting yesterday tackled what could be needed to keep it going until its originally intended end date.

How Much Cheaper Home Batteries Funding Is Available?

The Cheaper Home Batteries Program (CHBP) was originally launched with a commitment to $2.3 billion in funding. Given the massive uptake, recently updated SolarQuotes analysis indicates that could run out in early June next year; well before the program’s 2030 end. However, Smart Energy Council CEO John Grimes recently pointed out the program is uncapped.

“That means $2.3 billion is the first payment, not the last payment,” he said.

But a blank check under current settings and consumer response isn’t realistic either.

Big Batteries Blowing Budget

It’s not just the huge number of systems being installed creating pressure on the battery rebate — it’s their capacity, as useable capacity is tied to the level of rebate provided.

In a Smart Energy Council member meeting yesterday discussing the issues — attended by SolarQuotes Editor Max Opray and resident fact-checker Ronald Brakels — the organisation’s Chief Advocacy Officer David McElrea said the average battery size installed since October is probably around 28 kWh. That’s a big jump compared to installations last year that averaged 10 – 12 kWh.

“More and more batteries are larger sizes,” he said. “This is not a bad thing in and of itself … for the network, provided the inverter is the right size and there’s the right number of solar panels, large batteries could provide that broad stability. But from the federal government’s perspective, they’re paying an increased amount out-of-pocket for larger batteries. It’s clear they didn’t anticipate battery size would increase as quickly as it has.”

And obviously neither did the Smart Energy Council, which has played an important role in advising the government on the design and implementation of the CHBP.

“Australia is now the largest residential battery market in the world, thanks to the government’s foresight.” said Nigel Morris, Smart Energy Council Chief Strategy Officer. “Uptake of the program exceeded everybody’s wildest and most optimistic projections … placing obvious pressure on project funding.”

What Does The Smart Energy Council Want?

The Smart Energy Council said its priorities for the scheme are:

• Additional money to be allocated.
• No abrupt or unforeseen changes.
• Avoiding boom/bust cycle for the industry.
• Stable policy settings.
• More consumers to benefit from more batteries in homes.
• Maintain high standards of consumer protection.
• A politically and financially sustainable program.

The organisation was keen to emphasise if there are changes, sufficient notice must be given to industry. Installers are in many cases booked out to March, sometimes to April. Wholesalers have ordered stock; so there’s a risk of stranded assets if changes are harsh. The Council also wants some price stability for customers to the extent possible.

What Rebate Changes Were Discussed?

The Smart Energy Council considers the first and most obvious change that could be made is the rebate might need to reduce. They expect the rebate could drop in 2026 more than planned and have made an educated guess of around $100 less estimated value per kWh than in 2025.

Original Proposed Rebate Reduction Schedule

The rebate was always intended to gradually reduce over the years ahead in line with the following provisional schedule. But it was made clear the original levels may need to be tweaked depending on how the program fared.

Explainer: In the table above, rebate value/kWh (useable capacity of battery ) is estimated. “STCs” are Small-scale Technology Certificates; the units on which the rebate is based. Unlike the STCs for solar installations that are purchased by “liable entities” such as electricity retailers, the Albanese government is effectively buying STCs at a fixed price of $40 each through the STC Clearing House.

To arrive at an estimated rebate figure before admin fees and charges, the STC factor is multiplied by $40, times useable battery capacity (up to first 50 kWh). But rather than doing a bit of mental gymnastics to get a subsidy estimate for a specific solar battery, try our super-simple battery rebate calculator.

A “Sliding Scale” Alternative

Other than cutting values of the rebate, the meeting noted another option is to reduce the maximum size of battery eligible under the rebate, but the Smart Energy Council doesn’t support that.

At another point an alternative was put forward: a sliding scale with different tiers. It could be the full value of the rebate for a small battery, and less for medium-sized and large batteries.

Ronald’s Take

As mentioned, Ronald attended the meeting and here’s his view on the situation:

“Zero price batteries are bad. This goes for dirt cheap batteries too. They are bad because:

 

1. Because people are not paying the actual price, they have no incentive to not install the maximum, meaning other people potentially miss out.
2. Others missing out is bad because 2 medium batteries benefits others more than one big fat one.
3. When a range of batteries cost nothing, price no longer acts as an indicator of quality. It’s impossible to say if a battery is merely cheap, which could be desired by someone on a budget, or dirt cheap which may not be a good idea even if money is tight.

 

Reducing the STC amount per usable kWh is one option. Reducing the kWh cap will also reduce this problem, because, at the moment, it only happens with very large batteries.

 

But, while two 2 homes with 25 kWh batteries is better for the grid than one home with 50 kWh, 2 homes with 40 kWh is even better. A cut to the cap can cause the new limit to become the ceiling in practice. So, in purely terms of economic efficiency, a lower STC amount is better than a lower cap.

 

Batteries are cheap to make in China. So we don’t want a system that encourages people to install 10 kWh when for just a few thousand more they could have had 30 kWh put in.

 

So, again, in terms of economic efficiency, an STC cut is better than a cap reduction. If people are going to get an installer to come out to their place and put in a battery, they may as well put in a big one while they’re at it.”

The Smart Energy Council said if the Federal Government is to change the rebate, they need to do so rapidly.

“We’re worried that if we don’t act, the patient will die on the operating table.”

Things could change quickly. Stay up to date with what’s happening with the Cheaper Home Batteries Program by subscribing to the SolarQuotes weekly newsletter.