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 (November 2019), it is subsidised by a federal government scheme worth about $630 per kW installed (based on a $37 STC price – I explain this later). That’s around $3,150 off on a typical 5kW system that is usually applied at the point of sale; i.e. any advertised prices you see almost certainly have the rebate already applied.

You can discover the maximum solar rebate you are entitled to with this STC calculator >>

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

Well – current legislation means the solar rebate started to reduce by one fifteenth every year from Jan 2017 until it drops to zero in 2031. At this point, there’s no confirmed danger of the rebate being scrapped entirely for the foreseeable future.

While the subsidy seems safe for now, what most people aren’t aware of is the dollar value of this ‘solar rebate’ can be significantly reduced 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 subsidy system is designed to ‘self regulate’.

What that means is that if the market for solar power runs too hot, the value of the ‘rebate’ may reduce in step with a thing called the ‘STC price’. The STC price can be anywhere 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 moment, the value of the rebate is around $37 per STC. This translates into a rebate of roughly $630 per kW installed. But situations can arise where the value is pushed down.

How low could the subsidy go? The lowest STC value was some years ago when it hit about $17. If it hits that again, the ‘rebate’ would be worth under $289 per kW installed – a greatly reduced subsidy.

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 than $40.

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 Clean 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 STCs to your installer) does not actually come from the government.

It is a government program, but it compels other people to buy your certificates. So it is a government run scheme, using other people’s money to provide the subsidy.

Now, you could argue that all government subsidy and incentive 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 rebate as 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 PV system is less than 100kW in size.

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

3) You use solar 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 subsidy where electricity retailers pay you for the electricity your solar system exports to the grid.

What is the rebate financial incentive worth to me?

I’m guessing what you really want to know is:

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

b) How much will a solar power system cost me now, after the subsidy?

The short answer is:

If you want a 3kW system (for example), then you can get approx $1,890 off the total cost of the system in subsidies (The ‘rebate’ is worth roughly $630 per kW, so 5kW x $630 = $1,890). You will get a proportionally bigger ‘rebate’ for larger systems.

(If you are confused by this talk of “kW” (kilowatt) then there is a good explanation here)

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

Below are some ballpark figures for costs. They will vary 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 panels 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: $5,950
Government Solar Rebate Financial Incentive:   $1,890
Cost to you for 3kW of solar power: Approx $4,060

If you are interested in the financial payback of a system such as the 3kW system above, use our solar payback calculator – it takes 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 subsidy eh?

Here’s the subsidy scheme in a (8 part) nutshell:

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

2) The government compels filthy fossil fuel generators to either build a certain amount of renewable generation (wind/solar power) or buy the right to the 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, how much sun your part of Australia gets and the installation date.

4) The special type of RECs 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. The value of the STCs is used 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. For example, when the solar energy industry is really booming then the STC price can drop.

7) You can see the current market price of a STC here. Look for the number in the box in the bottom right-hand corner labeled: STC.

8) Almost all solar system prices you see advertised will already have the solar rebate financial incentive included in the pricing – so the cost after the subsidy.

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 a market price of $37 (for example), the ‘rebate’ is worth roughly $630 per kW installed. However, in times of high demand for solar panel installations, lots of STCs are created.

When supply of STCs increases too much, the STC price can decrease and the subsidy reduces (supply and demand – gotta love economics 101!).

A few years ago, when the government really looked like it was going to scrap the solar rebate entirely, demand for system installations caused the price of STCs to drop to $17.50.

So, if you bought a 3kW system today, you’d be eligible for a ‘rebate’ of $1,890 (3kW x $630 = $1,890). However, if demand for solar panels goes up too much and the STC price drops to $17.50 again, you’d only be entitled to a ‘rebate’ of under $900 for the exact same system. 

If you get 3 free quotes for solar now, you’ll be locking in the current ‘rebate’ based on the current STC price – but if you wait, the STC price could drop and significantly reduce the savings from the subsidy you can claim.

Other things you should know about the subsidy

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 subsidy cash you get!

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

Zone 1: incentive =  $3885
Zone 2: incentive =  $3663
Zone 3: incentive =  $3293
Zone 4: incentive =  $2849

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 434,000 Australians have used my site to get quotes for high quality solar from pre-vetted solar installers.

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