2018 Budget Confirms 2020 Cliff for Solar Subsidies, Businesses Hurry to Get Projects in Pipeline

The 2018 federal budget was passed earlier this month and individuals and businesses across Australia have been analysing the impact in recent weeks. While the renewable energy industry as a whole did not feature prominently in Treasurer Scott Morrison’s 2018 budget speech as compared to other issues and industries, the treasurer did confirm that the Renewable Energy Target (RET) will be phased out beginning from 2020 and rejected the notion of a 50 percent renewable energy target by 2030.

An expectation that has been iterated numerous times by the Turnbull government was echoed by the treasurer: “All energy sources should support themselves without taxpayer subsidies.” He then reaffirmed that the Renewable Energy Target (RET) will be phased out beginning in 2020.

While this is hardly news to the solar industry and those who have been following energy, this position concretely affirms the Renewable Energy Target (RET) faces no perceptible future beyond 2020. Solar power stations will still be able to generate renewable energy certificates after 2020, but these will end in 2030.

What this means for businesses hoping to go solar is that they essentially have less than two years to reap the benefits of government funding, in the form of STC’s and LGC’s, for renewable energy projects. With certificates alone covering 40% of a project’s cost in some cases, this is a major deadline businesses are paying attention to.

While the future is ultimately uncertain, given the market volatility (e.g. STC prices suddenly falling 22% last year), analysts are predicting the next 18-24 months to be a key window for securing the highest STC and LGC value.

A recent article in The Guardian revealed that “almost half of Australia’s large businesses are actively transitioning to cheaper renewable energy”, commercial solar installers are facing unprecedented volume as businesses rush in to maximise revenue/savings in this favourable window.

In the last year alone, Todae Solar has seen record-breaking volume, of larger and larger systems. Existing customers like Australian Vintage, Stockland, Wyndham City Council, AstraZeneca, Tacca Plastics, and Accor have come back to either expand their systems, or install additional systems at other sites. New industry milestones for new customers, like the largest C&I single-axis tracker installation and the largest single rooftop solar installation in Australia, are also currently being built.

While the 2018 budget yielded no ground-breaking news for the commercial solar sector, business is expected to continue to boom as savvy organisations get their projects in the pipeline as we hurdle towards the 2020 RET cliff. A strategy of locking in solar projects earlier-than-later will help to avoid delays resulting from heavy volume on DNSP’s and Councils, for example, to process projects.

More announcements related to energy are expected to be made in July when the treasurer receives the report on the Retail Electricity Pricing Inquiry, which is being carried out by the Australian Competition and Consumer Commission (ACCC). Other energy-related takeaways from the 2018 budget included:

  • No money allocated for new coal-fired power station.
  • No extra relief for consumers facing sky-high electricity bills
  • No extra funding for the Emissions Reduction Fund
  • No cuts in funding for Australian Renewable Energy Agency or Clean Energy Finance Corporation.

 

The budget indicates that there are uncertain times ahead for the commercial solar industry even as the government strives to “to improve energy affordability, reliability and sustainability” for energy consumers. However, businesses who are considering solar are in a good position to reap the benefits of solar while the conditions are still certain.

If you are interested in solar power for you organisation, contact Todae Solar for a free feasibility study.

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