The amount of Solar Credits you receive for installing a new solar system may be reduced in the later part of 2010, ahead of schedule.
According to the Office of the Energy Regulator’s (ORER) website, the Regulator has the power to adjust the Solar Credits multiplier, and œthe Government will consult on draft regulations to implement this arrangement later this year. The website goes on to explain that œit is the intention that solar credits for small generating units (SGUs) would be reduced if the¦Regulator determines there is systemic evidence of relatively small or no out-of-pocket expense to owners of SGUs. However, what the Government deems as a œsmall expense might translate into significant savings for new customers who install before a possible reduction in Solar Credits take place.
The Solar Credits multiplier
Our earlier article, RECs”what are they and how are they calculated, provides an explanation of Renewable Energy Certificates (RECs). Essentially, RECs are a type of credit given for installing Solar, Hydro, or Wind electricity-generating units. A rooftop entry-level 1.5 kW solar system may receive around 30 RECs, depending on the zone in which it is located. The REC price for home solar will be set at $40 per REC from January 2011, but will fluctuate at market rates until then.
As discussed in The REC Market, the Solar Credits multiplier was created in 2009 to encourage the expansion of home solar units. RECs were to be valued at five times their market rate for the first few years, then phased out by 2015. So 30 RECs valued at $40 each, and multiplied by five, would result in savings of $6000.
Obviously, as the multiplier decreases, your potential credit would also decrease. If the multiplier is reduced from say 5 to 3, your savings would only be $3600 rather than $6000.
Part of the logic behind the Solar Credits multiplier is to reward early uptake of solar panels, and to taper off the incentives as the Government gets closer to its Renewable Energy Targets. While periodic review is necessary to ensure that the program remains on track, both the Federal Govt and the Regulator will hopefully be appreciative that sudden changes in policy may result in instability for home consumers and the market.
We would hope that any terms of reference provided by the Govt to ORER to reduce Solar Credits would recommend a reasonable transition period of 2 to 3 months, especially if doing so ahead of the schedule listed in the Regulations. This transition period would protect the investments made by consumers awaiting install who entered into installation contracts based on the current 5 times REC multiplier.
Written by John Yurasek
Solar Energy Consultant
© 2010 Solar Choice Pty Ltd
Office of the Renewable Energy Regulator (2010)