Are solar rebates really needed now that panel and inverter prices have come down?

Fast read

Since 2010, solar system prices have plummeted, with solar panels down over 80% and inverters following suit, resulting in a 50% decrease in overall solar system costs per kW. Despite these price drops, Small Scale Technology Certificate rebates have also been progressively reduced, aligning with the declining solar costs.

These rebates have significantly spurred the solar industry by making solar more affordable. Removing them now would increase upfront costs by 25-30%, deterring potential buyers. However, the industry would eventually adapt, and solar's return on investment remains attractive.

Solar rebates offer valuable benefits, including cost reduction, market stimulation, support for renewable energy targets, equity and accessibility, and job creation, although their removal could promote market balance and quality over price.

Should solar rebates be removed?

Since 2010, the price of solar systems has dropped drastically. The price of solar panels has been reduced by over 80%, with solar inverters also coming down in price. As a result, solar system prices have declined by over 50% per kW.

Are rebates still needed?

Over the same period of time, the rebates on offer under the Small Scale Technology Certificates have been reduced. The reductions have been following an annual plan, which will continue to zero at the end of 2030. The value of the rebate now is only half of what it was in 2015. Therefore, it has been reduced approximately in line with the cost reductions of solar over that time.

The rebates have undoubtedly benefited the solar industry’s growth and still encourage homeowners and businesses to invest in solar due to the discounted pricing available.

If the solar rebates were to be removed now, solar systems would become around 25 -30% more expensive upfront. As an expense costing several thousand dollars or more on average, it would negatively influence the decision for many to purchase solar.

A crippling industry

The solar industry would not be crippled, but it would be slowed for a year or two. After this period, the industry would adjust. While prices would increase, investment in solar would still provide substantial returns with a simple payback on the investment of between 5 and 7 years, which is still a compelling return on investment.

Combined with the continued increase in the cost of electricity annually, including a 20%+ increase from July 2023, the savings benefit of solar without rebates will continue to improve. This would continue to see sales in solar grow based on improved payback and ROI.

residential solar system

So what are the benefits of solar rebates?

Here are a few reasons why solar rebates are still valuable:

Cost reduction

Solar rebates help offset the upfront cost of purchasing and installing a solar energy system. Solar installations can still require a significant investment despite the decreasing prices of panels and inverters. Rebates can make solar more affordable and accelerate the payback period for homeowners or businesses.

Market stimulation

Solar rebates play a vital role in stimulating the solar market. Incentivising solar adoption encourages more people to consider solar energy a viable option for their homes or businesses. Increased demand leads to economies of scale and further decreases in equipment prices, such as batteries, benefitting future adopters.

Renewable energy targets

Many governments and jurisdictions have renewable energy targets or clean energy goals. Solar rebates help governments achieve these targets by promoting the adoption of solar power, a clean and sustainable energy source. These rebates are policy tools to drive the transition to renewable energy and reduce carbon emissions.

Equity and accessibility

Solar rebates can address equity issues by making solar power more accessible to a broader range of consumers. Lower-income households may still find the upfront costs prohibitive, even with reduced equipment prices. Rebates can help bridge the affordability gap and enable a more inclusive transition to solar energy.

Job creation and economic benefits

The solar industry has been a significant source of job creation in recent years. Solar rebates can stimulate this sector, increasing employment opportunities in installation, manufacturing, and related industries. This, in turn, provides economic benefits to local communities and the broader economy.

Summary

The removal of rebates would also have the benefit of allowing the industry to grow on its own without artificial incentives that distort consumer decision processes. As rebates are applied based on the system’s standard capacity and do not consider performance, quality or longevity, they benefit cheaper equipment and installers more than quality products and solutions. Removing these distorting rebates will allow for quality products to present a stronger value argument on increasing market share and an improved result for the economy and the environment with more long-term environmentally sustainable solutions.

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