Is solar better off without federal rebates?

Fast read

Solar rebates in Australia have positively influenced the industry by making photovoltaic systems more accessible and mainstream and creating employment opportunities.

From the establishment of the “Renewable Energy Target” in 2001, over 3.4 million solar systems have been installed by mid-2023. However, the rebate schemes have their drawbacks, incentivising lower-quality products and installations, leading to premature system failures and negative industry stigma.

The current Small Scale Technology Certificates (STC) model also encourages the use of cheaper equipment, allowing repeated claims for replacing failing systems and disadvantaging quality solar providers.

As the rebate system is expected to conclude by 2030, there's a need to balance affordability with quality to sustain the solar industry's reputation. Consumers are encouraged to prioritize quality solar products and engage with reputable suppliers and installers for their renewable energy needs.

Have the solar rebates been good for the industry?

This is a fascinating question and one that has been posed and debated for many years. Solar rebates are financial incentives that benefit consumers from purchasing solar systems and other renewable energy products, such as solar hot water systems.

These benefits are usually in the form of subsidising the initial cost of a solar system. There are also some battery rebates like in the ACT, but they are traditionally a State based initiative. Also, they sometimes have a volume target and a cut-off date.

When the Howard Government proposed and implemented the initial $8000 rebate in 2007/2008, solar panels cost over $5 per watt. While today they are a tenth of this. While the average rebates have now been reduced to less than $3000 per household on average, the real question is whether the solar rebate should continue, given that solar panels and inverters have become so much cheaper. 

The solar rebate benefits

Rebates have been able to provide a positive impact on the Australian solar industry by making solar PV systems more affordable for homeowners and businesses. As an emerging technology from around 2007 to 2008, when solar technology was prohibitively expensive  the Federal Government rebate scheme was able to accelerate the uptake of solar for homeowners and has continued to do this.

This has had the benefit of increasing public awareness about solar technology and growing the take-up. This awareness and exposure have now made solar power mainstream,  rather than being a fringe or hippy as it was over 2 decades ago.

residential solar system
The solar rebate has helped to see that now 1 in 4 roofs in Australia has solar panels installed

Supporting growth in the solar industry

Since the Federal Government first introduced a “Renewable Energy Target” in 2001, the number of solar systems has increased from a very few (and most of them were off-grid) to over 3.4 million PV systems on Australian roofs by mid-2023.

From this perspective, the incentives and PV rebates introduced over the past 20 years have been instrumental in generating the success of solar adoption. The key reasons for purchasing solar were and still are a reduction in electricity costs primarily and reducing one’s carbon emissions as a 2nd less strong reason.

Also, the number of people employed within the renewable energy industry has increased significantly. According to the Australian Bureau of Statistics, the number of people working in rooftop solar (full-time employment) has almost doubled from 7,000 in 2009 to over 13,070 in 2019. Right now, the number is closer to 20,000 plus staff.

Rebates allowed the industry to grow, encouraging electricians and companies to enter the industry with some certainty and Government backing, taking advantage of the additional support to sell solar.

By growing the industry, the STC rebate also helped to create the skills and experience to design, install and manage solar systems. So the rebates have supported the drive to create thousands of jobs. Both skilled trades, from apprentices to accredited electricians with career pathways, to marketing professionals and specialised distributors and their staff.

From the perspective of the growth of solar installations in Australia, combined with the increase in employment within the industry both Labor and Liberal Federal Government support over the years can be called a success.

Getting towards the end of the rebate scheme

The rebate schemes have evolved, and the rebate amount reduced yearly as the cost of solar products has diminished, and the current rebate model will conclude by 2030. The continual rebate reduction it is argued allows for a smooth transition to a realistic market and competitive industry in only a few years.

The downside of the current solar rebate design

The application of rebates as a standard rate is based on the capacity of the panels. Regardless of their performance, it creates an environment where using the cheapest products available to sell and install for customers is advantageous for unscrupulous companies. The rebates distort the consumer’s decision favouring the more affordable, less reliable products.

Also, while the government incentives have allowed the solar industry to grow over the last 15 to 20 years, this has not necessarily been in the best interests of the quality focused part of the renewable industry. It also did not provide the best renewable output result for the country. So the rebate in solar, like many rebates and Government support schemes had and still has negative impacts on the solar industry.

Who could forget the scandalous pink bats scheme, under PM Kevin Rudd.

The direct government support for the rooftop solar industry has been the Small Scale Technology Certificates (STCs). This was created by installing approved solar panels in a solar system for a home or small business (under 100kw).

The number of certificates created by installing a solar system is determined by a standard calculation of how much electricity the system can be expected to generate from the date of installation up to the year 2030. This makes several inaccurate assumptions on not just the direction of the panels but does not account for shading, quality and longevity of the products used. These “certificates” are created and sold at the time of solar system installation and are not linked to the system’s actual performance over time.

solar panel on roof
Who needs screws , lets use a cheap non UV treated cable tie to hold the isolator safety switch. Cheap, crap solar has been the dominant marketed solar product on Facebook and other social media – and customers buy it, only to be disappointed – Unfortunately!

The rebates make the cheap look even cheaper

For example, if we are to look at a 6.6 kW system, you can see the net buy price of a cheap, low-quality system for under $4,000, while a quality 6.6 kW system may be $7,000 or more. At face value, you pay 75% more for the quality system, so many customers would choose the cheaper option.

After the STCs/rebates have taken into account in our sample the customer received $2750 in rebates for a 6.6 kW solar system.

So, the real cost and value of the solar systems are as follows:

Cheap low quality system $4000 + $2750 (rebate) = $6750

Quality system $7000 + $2750 (rebate reduction) = $ 9750

Which is only a 44% price premium to the quality system rather than the 75% price premium shown net of rebates.

Therefore, rebates distort the relative value of the purchase prices when one compares quality and cheap crap solar. So unfortunately the rebate encourages lower standard solar products to be purchased in bigger numbers.

Another way cheap becomes cheaper

A further aspect of the rebates and the push to lower pricing is that these unscrupulous companies also try to cut costs on installation practices. So best practices and quality of the installation process are not followed, which has resulted in a significant number of systems not meeting installation standards when inspected and regularly being dangerous.

The use of poor-quality substandard panels, inverters, isolators and other solar system-related products has also seen that these products have not performed as expected and, in many cases, failed.

This has created an issue where systems have had to be removed. In many cases, they were replaced without achieving the environmental savings intended by the rebates awarded at the time of purchase.

Lack of scrutiny did not help

Further to this, the structure of the STC and rebate scheme and the lack of proper scrutiny by Government agencies also allowed for these crap solar systems to be replaced and the rebates to be claimed again and again. Effectively double and triple-dipping, putting a quality solar system at an enormous disadvantage. So the environment loses out. 

With the failure of poor-quality products used within the scheme many bright and cheerful solar companies that have installed solar systems with these low-cost offers have gone out of business. The reason is that they have not been able to financially support warranty issues with the lower quality products as the original manufacturers have disappeared, leaving them liable to replace the units under Australian consumer law.

As a result, many homeowners have found that they have a cheap solar system that is not operational. It has often failed without recourse for repair or replacement under its warranty entitlements. Therefore such owners are forced to cover the cost of any repair or removal from their pocket. It comes back to the old saying – pay cheap, pay twice – or you get what you pay for. 

A negative stigma for cheap solar – but then again, Australians are gamblers by nature

The above situation has created a negative stigma for the solar industry. It has created a perspective that the solar industry is a scam and does not provide actual value and benefit to the environment or financially. However, the negative aspects are not necessarily related to a rebate but to how it is calculated and administered.

A rebate offered for the electricity created over time would have been more beneficial. As it is awarded based on the actual value of what the solar system has provided.

However, this type of support would not have been as effective in attracting households to solar as the PV system would have been more expensive to purchase upfront.

The rebate scheme’s management had room for improvement

The administration of the rebate scheme and accountability could have also been better managed to ensure quality. Still, the Federal Regulator has stayed silent for decades on this issue and any potential recommendations. Only in the past years , after 800 cheap and cheerful companies sold crap and then closed their doors and did a runner, did the regulator and the CEC started to act. By then the horse had bolted. 

This silence has been seen to unfairly advantage the use of poorer quality, cheaper equipment as in the eyes of the rebate creation schemes, all solar panels and all solar installations are equal.

In hundreds of thousands of instances, these cheapies broke down and had to be turfed or recycled well before they created the green electricity for which they earned rebates. There are many cases where they even broke down before they generated the amount of energy it took to make them in the 1st place. So ironically, the solar rebate has contributed in the case of cheap solar to more climate gasses.

As a result, the rebate and cheap solar earned a reputation for not providing the advertised and intended benefits.

The verdict

While the Government support comes from good intentions. the rebate schemes’ current design is obsolete and does not provide the best result for the industry or the consumers.

While removal of the STC scheme would increase the initial cost of a solar PV system to consumers from a value perspective. it will provide them with a clearer view of the relative value of the product and performance in comparing cheap, poor-quality solar against quality products.

A scraping of the solar rebate would lead to more reliable, better-performing solar systems and potentially drive the cheap and cheerful solar players from the industry.

As a consumer, in our recommendations, one should always prioritise a good quality product over a cheap and cheerful one. If this means a higher initial cost, it is still worth it in the long run. As the consumer will save more electricity via a longer-lasting PV system. We prefer a solar system that performs at a high level for decades rather than a cheaper system that needs replacing in 5 years.

A final word

It is essential to strike a balance between promoting affordability and ensuring quality to maintain the long-term sustainability and reputation of the solar industry in Australia. Maybe now is the time to scrap the solar rebate and replace it with a battery rebate, as we need more batteries soon to assist grid stability and EV charging. 

Should you consider purchasing solar, batteries, or other renewable energy products, we recommend engaging with a qualified local supplier or installer to provide you with extensive advice. To find the right partner try our company finder and ask our recommended experts to assist you. Using a Your Energy Answers Authorised Partner will give you a well-vetted, experienced, reliable, and trustworthy company to serve your 

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