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Solar: huge tax breaks and great business case could cushion tough outlook  

One regional solar business has experienced a record sales quarter – 41 per cent increase in sales and a 400 per cent increase in battery enquiries. What’s going on?

Like every other industry at the moment, the future of rooftop solar is up in the air. Overall demand in March dipped but some retailers, especially in regional areas, experienced a spike in enquiries driven by people rushing to future proof their homes after the last crisis. Much hinges on the industry’s status as an “essential service”.

A few short months ago, when China was in the midst of its COVID-19 outbreak, there was concern rippling through the solar industry that restricted supply of panels, inverters and other equipment would “bring the industry to its knees”.

But as Clean Energy Council director, distributed energy Darren Gladman explained, there hasn’t really been a noticeable impact on solar supply chains out of China.

There was some disruption to logistics, but now that Chinese manufacturing is gearing back up, the supply side is relatively healthy. In fact, Gladman told The Fifth Estate that the weakening Australian dollar (last week the lowest it’s been since 2002) is causing more problems for solar businesses than sluggish international supply chains.

That was the situation about a week ago.

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Increasingly tough government restrictions in Australia has since injected fresh confusion and uncertainty into the industry. Over the weekend, the Victorian and NSW governments announced closures of non-essential services, which led many experts scrambling to discern whether or not solar fell into that category.

The verdict so far is that rooftop solar, as a provider of power, is considered essential. It helps that most solar installations in homes and businesses can be done with no customer-installer contact, according to Finn Peacock from SolarQuotes, provided workers can access the switchboard without customer intervention.

“Solar installations, in my, opinion, are very low risk.”

However, the fortunes of the industry might change if an Italy-style lockdown is enforced, or rooftop solar is not considered an essential service.

Provided installations can continue, consumer confidence is the other variable. Peacock, who is a former CSIRO electrical engineer and founder of the solar comparison site, has already seen a 30 per cent drop off in new enquiries in March after a particularly strong January and February.

He says that enquires are still coming through, especially for solar and batteries, with energy security “top of mind” for people.

Geoff Bragg, Vice-Chairman of Solar Energy Industries Association, told an online audience at a Smart Energy Conference webinar last Thursday that he was getting varied reports about solar demand.

He’s noticed less impact in regional areas, with cities taking a bigger hit. One solar business, in Byron Bay, Smart Energy, has experienced a record sales quarter, including a 41 per cent increase in sales and a 400 per cent increase in battery enquiries over the last two weeks as consumers rushed to future proof their homes amid the second crisis the country has faced in the last few months.

Interestingly, Darren Gladman says the business case for solar has never looked better.

The tax advantage is suddenly big

The expansion of the Instant Asset Tax Write-off, which was announced as part of the Morrison government’s first stimulus package in response to COVID-19, could make solar very attractive for businesses.

Raised from $30,000 to $150,000 and now available for businesses with a turnover of up to $500 million instead of $50 million, a solar project set up so that savings exceed the monthly repayments could see the project coming out cash flow positive, “with a big tax refund on top of it.”

Homeowners now confined to the home office are also seeing a strong business case for rooftop solar.

“If you think about people working from home, the energy consumption profile matches daytime consumption.” It could also classify for a tax writeoff.

Geoff Bragg’s suggestion to the industry late last week was that it’s a good time to be marketing product.

“We need to remember there’s very few products that save you money in the long run, but solar does … a car certainly doesn’t.”

But what will happen to consumer confidence is hard to know, with the appetite for risk and spending likely to be low.

Toilet paper-style stockpiling of panels and inverters

Some of the larger wholesalers have gone down the stockpiling route with some equipment such as cables, leading to uneven distribution of product around the country.

“We’ve seen Australians stockpile toilet paper and hand sanitiser, and big companies stockpile inverters and panels and batteries,” NRG Solar director Sam Craft pointed out during the webinar.

This will likely correct itself fairly quickly, however, some delays are likely.

Solar could play a role in economic recovery

Assuming there’s no full lockdown and solar remain an essential service, Darren Gladman says that solar could play a key role in Australia’s economic recovery.

The Clean Energy Council pitched some ideas to the government last week that would both stimulate the economy and create jobs. This included battery backup for critical services such as communications facilities and schools (hospitals could also be a good idea, but Gladman suggests this may not be practical at this point)

There’s certainly scope for further rebates and incentives in this space.

This is no small hiccup

It’s likely the solar industry will have casualties from the coronavirus.

“I don’t want to pretend that this a trivial disruption, this is a very significant disruption,” Smart Energy Council chief executive John Grimes said at the webinar last week.

NRG Solar’s Sam Craft pointed out that although the industry was used to volatility but “this is a new type of disruption,” and that consolidation is likely. “Unfortunately, some business may not survive”.

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