Solar Credits – Good or Bad?

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The government released details on the 20 per cent Renewable Energy Target today. One of the main impacts for households are the solar credits. The media release highlights the impact of these:

• “Solar credits worth 5 times the value of REC’s”
• “Up to $7,500 in value to someone putting in Solar”
• “The means test scrapped”

Sounds great at first glance, but what does it really mean?

Solar Credits Worth 5 Times the Value of REC’s

One REC (renewable energy certificate) is the equivalent of producing 1 MWh of renewable energy. A standard solar electric system (1kW) received 21 REC’s to offset 15 years of energy production. All of a sudden, the same system would now receive 105 REC’s.

Without producing any more renewable energy!

Electricity retailers have to purchase REC’s to achieve the renewable energy targets set by legislation. The government release today touted a 4-fold increase of this target. At the same time, they are in effect devalueing the REC’s by four fifth.

The result: we are going backwards with regards to reducing energy emissions.

Up to $7,500 in Value to Someone Putting in Solar

REC prices are market driven. If more are created than needed by the energy retailers, they drop in price. Or they might increase if more are needed than available.

Currently, the market price sits around $45. The highest was $49. But they have been as low as $16 in the last 2 years.

If you take your 105 REC’s and sell them, you will get $4,725 currently. A far cry from the promised $7,500. And if it goes bad, it might be as little as $1,680. So unless I am missing something, they’ve got it wrong.

PS: I figured out where the $7,500 come from. See my post on the Renewable Energy Target Legislation.

The Means Test Scrapped

Currently the federal rebate for solar is $8,000. However, that is only for people whose combined household income is under $100,000. It was the Rudd government who introduced the means test, making it impossible for many middle income earners to go solar. When did they do that? On May 18th of this year – a mere 7 months ago.

Now they introduce solar credits and congratulate themselves for scrapping the means test.

So they are going back and forth, making it harder and harder for the industry to keep up with the changes and to plan with any certainty.

The other unanswered question (and no one in the Department of Climate Change had an answer for us when probing today) was what is going to happen to the $8,000 federal rebate?

If these solar credits are an additional incentive, great. But if it means that the federal solar rebate gets scrapped, everyone is worse off. We also do not know whether they will be any impact on solar hot water. The draft legislation is not available yet, but it might shed some more light on that in the next few days.

Conclusion

For anyone who is eligible for the federal solar rebate, I would grab it while it is there. With the pre-application process for solar electricity, you can be certain that you get the rebate before comitting to any purchase. Once you have that pre-approval, you have 9 months to install your system. Or you can change your mind, if legislation changes to your advantage. Without the pre-approval, they might scrap it from one day to the next (as we have seen with the waterwise program in Queensland).

And once the solar credits are a certainty, you can still benefit from them.

Related Topics

• Solar Credits Scheme will produce phantom benefits
  Sustainability organisations are concerned the upcoming Solar Credits Scheme will damage the future of Australia’s small-scale renewable energy generation. ...
  
  
• The new solar world arrives three weeks early
  The $8000 solar power rebate (and the larger Solar Homes and Communities Plan) was wound up three weeks early by Minister Peter Garrett yesterday, 9 June. What does it all...
  
  

Tags: REC

This entry was posted on Wednesday, December 17th, 2008 at 6:16 pm and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.