The history of solar rebates in Australia

Fast read

Under John Howard's direction, the Australian Federal Government first announced solar incentives in May 2007. For the initial round of these subsidies, each household received an upfront payment of $8,000 to support the purchase of solar systems.

The Small Trading Certificate (STC) programme. Which compensates customers for producing clean energy, was later introduced by the Labor Government. To replace the rebate and promote the adoption of clean energy. The STC programme is being phased out gradually, and the rebate is scheduled to expire in 2031.

With more than 3 million solar systems installed around the nation. The solar business in Australia has expanded tremendously since introducing the incentives. Nevertheless, the adoption of solar storage batteries has lagged, and it is necessary to raise their affordability to boost acceptance.

What is the history of solar rebates in Australia?

In Australia, the mainstream history solar rebates started in May 2007 with John Howard. In those days, you bought a 1.5-kilowatt system before the solar rebate at around $12,000. So that meant that with the $8,000 that John Howard gave you as a rebate for every household. It meant suddenly, for about $4,000, you could get about a 1.5 kilowatt system.

A one-and-a-half kilowatt solar power system in Sydney, maybe about 2200 kilowatt hours of generation a year, or on average, 6 kWh per day, which is between 25 and 30% of average daily consumption.

Now the interesting aspect is that in the early days, the solar kWhs generated on your roof did not enter your house to be consumed. They were all exported into the grid and measured through a Gross Meter.

When the $8,000 solar rebate started in Australia, the State Governments around the country introduced the ‘feed-in tariff’. That meant your 2200 kilowatt hours, all of which you were exporting at $0.60 and then pulling back out of the grid at maybe $0.20. So on 0.60c per kWh, one would get paid around $1300 per year for the generated solar electricity.

It meant that people who spent the $4,000 within three to four years had their money back. This is how the whole solar industry boom started. A deal given by Federal and State Governments was too good to refuse.

solar panels on roof thanks to the solar rebate
Solar rebates in Australia provide financial incentives to feed excess energy back to the grid

What happens in the long run?

It costs governments many rebates and subsidies for relatively small solar systems.

After a few years, the Rudd Labor Australian Government changed the $8000 solar rebate in Australia into a Small Trading Certificate (STC) rebate. The STC rebate rewards consumers for generating clean energy.

To keep it simple, you get one-off support in purchasing the solar panel system. Regarding the total rebate amount available every year, the amount available is going down a little, and by 2031 the rebate will finish.

The logic is that the industry is growing and selling higher and higher volumes. Therefore will get efficiencies and lower pricing.

Moving ahead, we might question the ongoing necessity of the rebate. Today, in some instances, homeowners are seeing payback periods as short as three to four years to recoup the cost of a solar system. If the system is of high quality, it is expected to last for decades.

Maybe that solar rebate money could be better utilised to be available for solar and battery combinations. With 3 million solar systems out there and less than 100,000 of them with batteries, there is an urgent need to find a way to get batteries into the energy at a more affordable price point.

Where is the future heading?

The history of solar rebates in Australia traces back to May 2007 when John Howard introduced mainstream solar rebates. At that time, a 1.5-kilowatt system cost around $12,000, but with Howard’s $8,000 rebate for every household, it brought the cost down to approximately $4,000. This sparked a boom in the solar industry, making solar systems more accessible to households.

In the early days, solar systems exported the generated kilowatt-hours into the grid, and a Gross Meter measured them, bypassing direct household consumption. The $8,000 solar rebate introduction also led State Governments to establish feed-in tariffs. This compensated households for the solar electricity they generated and fed back into the grid.

As time progressed, the Rudd Labor Government transformed the $8,000 solar rebate into a Small Trading Certificate (STC) rebate. This rebate incentivises consumers to generate clean energy and contributes to the overall support in purchasing solar systems. However, the total rebate amount is gradually decreasing each year, and by 2031, it is expected to phase out.

Looking ahead, the solar industry is growing, and the decreasing rebate reflects the anticipation of increased efficiencies and lower pricing because of higher volumes. A growing question about the ongoing necessity of the rebate is arising, especially with the decreasing payback period for quality solar systems that can last for decades.

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