There’s been no shortage of media coverage regarding the Turnbull government’s recently proposed plan to tackle Australia’s rising electricity bills (see here, here, here and here). But what does the National Energy Guarantee (NEG) mean for homes & businesses thinking about going solar?
We’ve been receiving a huge amount of traffic to our site – an an associated uptick in customer enquiries – on the back of NEG-related news. It’s evident that people are spooked about what it all means for solar incentives, which is understandable considering the sort of dramatic changes that renewable energy policy in Australia has seen over the last decade. In this article we’ve attempted to break it down in (hopefully) easy-to-understand terms.
The Renewable Energy Target would remain as-is
Australia’s Renewable Energy Target (RET) is the country’s primary incentive scheme still remaining for renewable energy systems small and large – including rooftop solar panels. For systems smaller than 100 kilowatts (kW), the RET provides what is essentially an up-front discount (sometimes erroneously referred to as a ‘rebate’) on the out-of-pocket cost of purchasing a system.
As we understand it, the RET and associated incentives would remain untouched under the National Energy Guarantee. While this is certainly not terrible news (we still have flashbacks from when the Abbott government tried to abolish the scheme entirely), it’s also not fantastic news for those who were hoping for a bolstered RET or an extension of the scheme beyond the 2020 target.
It’s important to note that although the RET reaches its goal in 2020 – with a bit over 20% Australian electricity coming from renewables – the program will remain in effect until 2030. Basically, the target ‘plateaus’ at this high point for a decade – at which point it stops altogether unless a new government comes in to revitalise it.
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Solar incentives will continue their gradual decline
When it comes to solar incentives, the biggest news regarding the NEG may therefore have to do with what’s not going to change. The RET encompasses two separate schemes for large-scale (>100kW) & small-scale (<100kW) renewables.
Small-scale solar
When you install a small-scale solar system, the incentive you get comes in the form of small-scale technology certificates (STCs). It’s a bit complicated, but STCs are created on the basis of a ‘deeming period’ – which is basically how many years remain in the RET – up to 15 years. So if you install a system in 2017, you get 14 years’ worth of STCs; if you install a system in 2018, you’ll get 13 years’ worth (check out the Clean Energy Regulator’s STC calculator to see the numbers for yourself).
In this way the incentive is gradually reduced, but in all likelihood solar PV technology prices will also decline in tandem, resulting in at the very least stable solar installation pricing over the coming decade plus (no sharp increased or drops). To make things more complicated, STC values themselves can and do fluctuate. (You can read more about this topic in our article: Is the federal solar incentive ending?)
Large(r)-scale solar
When you install a larger solar system or solar farm, the RET incentive comes in the form of large-scale generation certificates (LGCs). Unlike STCs, LGCS are created on an ongoing basis – every month or quarter. Instead of acting as a discount on the upfront cost of having a solar system built, they are an additional revenue stream that comes in on top of any earnings made from selling the solar electricity itself.
Like STCs, the value of LGCs fluctuates in response to supply and demand – and demand is currently set to go off a cliff from 2030. In the interim, it’s not yet clear what’s going to happen, but LGC values could decline as the scheme reaches its end date and there is a surplus of certificates on the market without demand to soak them up.
Electricity prices might go down a little bit thanks to the NEG – but probably not much
The Energy Security Board, which did the NEG modelling & costings for the federal government, estimates that under an implemented NEG the average household could end up saving about $100 per year on average in the period between 2020 and 2030; the annual savings could actually be lower in the early years. That amount is a drop in the bucket when it comes to recent years’ electricity bills, and you might as well say that the NEG (if successful at all) will stop electricity prices from spiralling even more crazily out of control than they already are.
Now is a great time to go solar, but there’s no need to ‘panic buy’ a system
If you’re in the market for a small-scale solar system (as most of the people who visit our website are), we can tell you that solar is a great investment and it will continue to be a great investment for the foreseeable future. Keep this in mind in case you are approached by anyone trying to hard-sell you a solar system: There is no pending government incentive cutoff that constitutes an imperative reason to get solar installed.
That being said, the federal incentive for systems under 100kW does step down slightly from 1 January 2017 (14 year deeming period to 13 year deeming period for STCs), so it wouldn’t hurt to look around. So while you’re here, why not get a free, instant comparison of solar & battery quotes from installers in your area?
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If you’re considering a larger system (e.g. for a business or other large organisation), on the other hand, it’s probably about time to get the ball rolling for having a system installed – after some serious and careful consideration, of course. Solar Choice manages tenders for a range of commercial solar projects, making it easy to make a well-informed choice at arms’ length from salespeople.
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Infographic via The Conversation.
© 2017 Solar Choice Pty Ltd
He is now the communications manager for energy technology startup SwitchDin, but remains an occasional contributor to the Solar Choice blog.
James lives in Newcastle in a house with a weird solar system.
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I suppose making a panic purchase isn’t too healthy and would eventually lead to the all too familiar emotion of buyers remorse – but that consequence dims in the light of the real environmental threat that our power choices pose. Someone needs to get uneasy about these things anyway. Great resource by the way.
The SRES is definitely under treat with the NEG. Homeowners and small businesses seeking too mitigate their costs and gain control over bills need to be concerned. The NEG was an announcement not a plan and has no details upon which to make a judgment at all! There is very reason too think that SRES is in the firing line.