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The "Solar Panel Rebate" (that we are not allowed to call a rebate!)

Reducing the upfront cost of solar power systems

 

If you buy a solar system today, it is subsidised by a government scheme worth about $700 per kW installed. That's around $3,500 off a typical 5kW system, which is usually applied at the point of sale (i.e. any advertised prices you see almost certainly have the rebate already applied).

Is this scheme in danger of ending soon, or being scrapped entirely?

Well - the current legislation means that the solar rebate will start to reduce by one fifteenth every year from Jan 2017 until it drops to zero in 2032.

So no - there's no immediate danger of the rebate being significantly reduced or scrapped entirely.

But what most people aren't aware of is that the dollar value of this 'solar rebate' could plunge at any time if demand for solar systems suddenly increases.

How so? I go over the exact mechanism (known as STC creation) further down the page, but in a nutshell, the system is designed to 'self regulate'.

What that means is that if the market for solar runs hot, the value of the 'rebate' goes down in step with a thing called the 'STC price'. The STC price can be valued from $0 to $40. In other words $40 is the highest value it is allowed to go to by law.

The higher the STC price the more 'rebate' you get.

At the time of writing the value of the rebate is $39.85. Let's call it $40. So it is basically as high as it can be. This translates into a rebate of roughly $700 per kW installed. But if anything causes a rush on solar systems, the rebate is likely to drop.

How low could it go? The lowest it got to was a few year ago when it hit about $17. If it hits that again, the 'rebate' would be worth under $350 per kW installed.

Just to be clear, no-one can pretend to know what the STC price will be next week or next year. All we do know is that it can not go any higher from here - it can either stay where it is or drop lower.

The rebate that is not officially a rebate!

To make things confusing, the current "Rebate" for anyone buying a solar system of up to 100kW is called the STC program. Which stands for Small-scale Technology Certificate. The government says that this should not be called a "solar rebate".

From the Cllean Energy Regulator website:

"Under the Small-scale Renewable Energy Scheme the reduction in the cost of your solar panel is not a rebate. You will not qualify for any Government-based financial recompense at the completion of any process relating to STCs."

I think what our bureaucratic friends are trying to get across is that the thousands of dollars you get off your solar system price (usually by assigning the rights to its STC certificates to your installer) does not actually come from the government.

It is a government scheme, but it compels other people to buy your certificates. So it is a government run scheme, using other people's money.

Now, you could argue that all government schemes use other people's money!

But I'm not gonna pick a fight with the Clean Energy Regulator (I've picked enough fights with the content on this website thank you very much) so from now on I will try to refer to the "Money The Government Arranges For You To Get To Reduce The Up Front Cost Of Your Solar System" as the MTGAFYTGRTUFCOYSS scheme. 

Whattya think?

Oh Bugger it - I give in! I'll call it the "Solar Financial Incentive" then! 

The solar rebate Financial Incentive subsidises the upfront cost of installing a Solar Power System and is not means tested in any way. The only criteria for claiming it are:

1) Your system is less than 100kW in size.

2) You get it installed and designed by a Clean Energy Council accredited professional.

3) You use panels and inverters that are approved for use in Australia by the Clean Energy Council.

Note: Do not confuse this 'rebate' with the Feed In Tariff (FiT). The FiT is a State Government subsidy in which some states pay you for the electricity that your solar system will export to the grid.

What is the rebate Financial Incentive worth to me?

What you really want to know, I'm guessing, is:

a) How much can I get off the price of a solar system?

b) How much will a solar system cost me now?

The short answer is:

If you want a 3kW system, then you can get approx $2,100 off the total cost of the system (The 'rebate' is worth roughly $700 per kW, so 3kW x $700 = $2,100). You will get a proportionally bigger 'rebate' for larger systems.

(If you are confused by this talk of kW's then there is a good explanation here)

So how much does this mean you will have to pay for a solar PV system?

Here are some ballpark figures for costs. They will vary by a few thousand either way depending on the brand of panels and inverters each supplier uses, and their overheads, but if these prices are way out of your expectations, then solar may not be for you right now.

Keep in mind that adding the system cost to your mortgage can be surprisingly affordable if you take rising electricity costs into account - there is a solar payback calculator here for you to make your own mind up.

Typical cost of an installed 3kW solar system: $7,100
Government Solar Rebate Financial Incentive:   $2,100
Cost to you for 3kW of solar power: Approx $5,000

If you are interested in the financial payback of a system like the 3kW system above, then there are some solar payback calculators here that take into account rising electricity prices and your state's Feed In Tariff.

How the Solar Rebate Financial Incentive Works

The feds have cleverly designed the rebate Financial Incentive to actually cost the government very little. Sneaky eh?

Here's the scheme in a (8 part!) nutshell:

1) The government creates pieces of paper called Renewable Energy Certificates (RECS).

2) The government mandates that the filthy fossil fuel generators have to either build a certain amount of renewable generation (wind/solar) or buy the right to other people's renewable energy systems in the form of RECs.

3) When you go and buy a solar power system for your roof, the government gives you a certain number of RECS depending on how big your system is and how much sun your part of Australia gets.

4) The special type of RECs that you get for a residential solar system are called "Small Scale Technology Certificates" (STCs).

5) You (or more likely your installer) sell the STCs to the filthy fossil fuel generators and use the cash to offset the upfront cost of the solar system purchase.

6) The STC price is a bit like a share price - it fluctuates on the open market depending on supply and demand. E.g. when the solar industry is booming (usually just before the rebate is cut!) then the STC price drops and vice versa.

7) The current STC price at time of writing is about $37. You can see the current market price of a STC here. Look for the number in the box in the bottom RH corner labeled: STC.

8) Almost all solar system prices you see advertised will already have the solar rebate Financial Incentive included in the pricing.

Simple eh?

Why you should consider getting quotes for solar sooner rather than later

As mentioned above, the amount of 'rebate' you can claim depends on the current market price of an STC. At the current market price, the 'rebate' is worth roughly $700 per kW installed. However, in times of high demand for solar panel installations, lots of STC's are created.

When supply of STC's increases, the price of STC's generally decreases (Supply and demand - gotta love economics 101!).

A few years ago, when the government really looked like it was going to scrap the rebate entirely, demand for solar installations caused the price of STC's to drop to $17.50 - less than half of what it is now.

So if you got a 3kW system today, you'd claim a 'rebate' of $2,100 (3kW x $700 = $2,100). However, if demand for solar goes up and the STC price drops to $17.50 again, you'd only be able to claim a 'rebate' of under $1,000 for the exact same system. 

If you get 3 free quotes for solar now, you'll be locking in the current 'rebate' based on an STC price of $37 - but if you wait, the STC price could drop and significantly reduce the savings you can claim.

Other Things You Should Know

1) The amount of solar panel 'rebate' you can claim depends on where you live:

Solar Panel Rebate Zones

The lower the number the more cash you get!

Here are some examples for the approximate STC value for a 5kW system based on a $37 STC price:

Zone 1: incentive =  $4477
Zone 2: incentive =  $4255
Zone 3: incentive =  $3811
Zone 4: incentive =  $3256

2) A good solar installer will guarantee the value of your Solar Rebate Financial Incentive when you sign up for a system and handle the paperwork for you. I wrote an entire blog post explaining this process here.

And finally, if you'd like to get 3 free quotes for solar and lock in the current 'rebate', you can do so here

About Finn Peacock

I'm a Chartered Electrical Engineer, Solar and Energy Efficiency nut, dad, and founder of SolarQuotes.com.au. My last "real job" was working for the CSIRO in their renewable energy division. Since 2009 over 250,000 Australians have used my site to get quotes for high quality solar from pre-vetted solar installers.