According to Climate Spectator, the government is dropping hints that it may have backed away from slashing incentives for residential and small-scale commercial solar projects.
In a talk with Climate Spectator’s Tristan Edis, representatives from Environment Minister Greg Hunt’s office suggested that changing the eligibility requirements for up-front incentives under the Small-scale Renewable Energy Scheme (SRES) would be too onerous, and that the government would not pursue it.
What could happen to incentives for small-scale solar?
In particular, it appears that the Coalition will not seek to reduce the SRES’s upper capacity limit from 100kW (enough to meet the electricity needs of a medium-scale business) to 10kW (roughly enough to meet the electricity needs of a large household).
In its current form, the SRES portion of the embattled Renewable Energy Target (RET) provides up-front incentives for systems up to 100kW in capacity in the form of Small-scale Technology Certificates (STCs), which are a kind of renewable energy currency.
Currently, the ‘discount’ that STCs provide works out to approximately 60-70¢ per watt, depending on where the system is to be installed.
A 5kW solar system in Sydney, for example would be eligible for a discount of approximately (5000W x 70¢ =) $3,500. The same maths apply to systems up to 100kW.
The government has thus far been relatively clear that incentives for ‘household solar’ are not on the chopping block.
However, given that system sizes ranging from 1kW to 100kW share the same incentive scheme, there were big questions about whether the structure of the SRES would be changed, putting Australia’s thriving commercial solar industry in jeopardy.
According to Mr Edis, a spokesperson from Mr Hunt’s office was quoted as saying:
“Household solar will continue unchanged, as part of the Coalition’s commitment to renewable energy.
“Solar up to 100kw is proposed to stay in the SRES due to the red tape that would be involved if it moved into the LRET.”
Although they do offer some relief, these words do not necessarily mean that the scheme is safe.
As we’ve noted previously, changes may be wrought that do not require approval through Canberra’s unruly legislature, but could instead by changed by ministerial decree.
Instead of reducing the 100kW cap, for example, the government could reduce the STC deeming period from 15 years to 10 years, for example. This would reduce incentives for small-scale solar by 1/3.
Whether the government would implement such an unpopular measure, however, is unclear.
Ongoing concerns about incentives for 100kW+ systems
While massive campaign efforts on the part of the solar industry and its supporters seem to have swayed the Coalition on its view of the SRES, the government has still held firm that it wants to slash the overall target by about 40%, down to a ‘real target’ that reflects the recent trend national of falling electricity demand.
Systems larger than 100kW still receive an incentive under the RET in the form of Large-scale Generation Certificates (LGCs).
Because LGCs are created based on a system’s actual power output after it has been commissioned, they do not contribute to reducing a system’s up-front costs.
A reduction in the target could easily hurt the investment case for these larger projects.
But the industry is already suffering, even without any changes to the RET having eventuated.
Hitherto fruitless negotiations on the future of the RET between Labor and the Coalition have left much of Australia’s renewable energy industry in a painful limbo, with billions of dollars worth of investments spilling out of the country amid the regulatory uncertainty.
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