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Should the Victorian solar rebate be abolished?

Solar installers rallied on the steps of Victorian Parliament to urge a rethink of the Solar Homes scheme.

Demand for residential solar systems has plunged in Victoria after the Andrew’s government solar scheme was put on hold a few months ago.

The resulting impact on over 200 businesses registered in Victoria as an approved solar retailer has been catastrophic, leading to large numbers of staff being retrenched and in some cases businesses have elected to exit the Victorian solar market altogether.

In a demonstration against the scheme over 300 representatives from affected businesses rallied on the steps of the state parliament last week calling for changes to the scheme or for it to be scrapped.

The impacts of the poorly administered scheme have flowed through to consumers as Solar Choice’s Solar Price Index noted a 13 per cent spike in average solar prices in Victoria during July 2019.

Source: Solar Choice Price Index

The Victorian Solar Rebate has been enormously popular since first opening in 2018

The $1.34 billion scheme is designed to help 650,000 households save half of the cost of their solar system with a limit of $2225 per household.

In the months following the opening of the program, demand for solar almost doubled with 3300 installs in September 2018, increasing to an average of over 5500 installs over the following six months.

In response to the increased demand, solar installers rushed to hire more staff and buy more equipment to cope with the interest generated by the billion dollar subsidy program.

This all came to a crashing halt after the first six months as the scheme’s allotted allocation was exhausted.

Most installers in Victoria subsequently saw their sales plummet as customers have opted to wait a few months for the scheme to reopen again.

Following fierce criticism from the solar industry, the state government shifted the application process to offer a maximum of 3333 rebates per month which, in July, was snapped up in the first three days.

The new quota system has unintentionally acted as a quantity cap of systems installed in the state as few eligible customers are willing to proceed without the rebate.

This has led to suggestions that the scheme should be scrapped altogether, with the quota allowed by the scheme only slightly higher than the number of installs that were happening in Victoria before the scheme existed, which was supported by the national solar rebate system.

Fears that the 3333 quota was being unfairly distributed to “clever” installers gaming the system were somewhat alleviated by Solar Victoria chief executive officer Stan Krpan who said in an interview with RenewEconomy that of the installers receiving rebates in July “the top 35 represented 15 per cent of market share” .

However, Krpan’s views on the challenges faced by the installers is that the scheme simply represents additional volume to the market and he does not agree that the quota will result in a market cap.

Further, he suggests that the “teething issues” experienced by installers are likely to fade as they adapt to the new scheme, and it seems he doesn’t agree with the need for change.

Solar installers rallied on the steps of Victorian Parliament to urge a rethink of the Solar Homes scheme. Source: Smart Energy Council

An administrative and communication nightmare

In fear of attracting “solar cowboys” to the scheme to capitalise on the rebates at the expense of the customer, the state government has introduced one of the strictest application processes in the solar industry.

Stan Krpan advised that installers that have been successful in getting their quotes approved for the rebate have been highly pro-active with their customers in the lead up to the scheme reopening.

The application process in some cases requires customers to download a face-recognition app on their phone to prove their identity.

Similarly the Andrews government has failed to communicate well with the solar industry, with the allocation of the first stage of the rebates expiring with zero warning provided to installers.

While the government has consulted with some parties in the industry, it‘s clear that they have not heeded the advice and warnings they receive. Ultimately, many businesses in the solar industry are facing negative cash flows and threats to their existence.

What changes would help the industry and consumers?

Most installers have called for adjustments to the scheme that would spread demand over a longer period of the month and increase demand outside of the scheme.

For example, reducing the eligibility to only households with a combined income of less than $100,000 (instead of $180,000) would significantly reduce the households competing for the rebates and reduce decision-making inertia in those who would no longer be eligible for the scheme.

Another option would be to halve the rebate to $1112.50 and double the quota to 6666 which would enable residential solar volumes in Victoria to return to the levels observed in the first six months of the scheme.

Both of these options would improve the flow of demand in the industry, enabling solar installers to manage their businesses effectively, while also doing a better job of reaching the “650,000 homes with solar” target set by the Andrews government.

If the government is unwilling to change the implementation of the scheme, and the rebate quota continues to be reached in the first few days of each month, then the industry would likely be better off without the scheme altogether where all businesses are on a level playing field and can build success from installing high quality systems with an attractive return on investment.

Jeff Sykes is the chief strategist at Solar Choice.

 

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