Oops: Victoria solar rebate brings state's industry to "dead stop"

The Victorian government’s newly announced residential solar rebate has brought the state’s PV industry to a “dead stop”, according to a solar industry insider, as customers hold off on investment until the detail of the scheme is properly laid out.
The new policy – announced by the Labor government just under two weeks ago, ahead of the November state election – pledged $1.2 billion in rebates and no-interest loans to put solar PV on the rooftops of more than 650,000 homes.
The scheme – which is expected to add as much as 2.6GW of rooftop PV capacity in the state –makes the rebate on 4kW systems effective immediately, while the no-interest loans will be introduced if the government is re-elected, and after 01 July 2019.
All this was broadly welcomed as good news for solar and consumers, against a backdrop of federal energy policy turmoil and the ever-present threat of a Conservative-led backlash against both large and small-scale renewable energy.
But as solar industry veteran Nigel Morris told this week’s Solar Insiders podcast, it has – like other such schemes -had an unintended consequence: What should have been a shot in the arm for Victorian solar, has had the perverse short-term effect of “crippling” the industry.
“It is wonderful to see the Victorian state government make the announcement and getting behind solar. That I commend in the greatest of terms,” Morris said.
“However, they weren’t ready with the forms, they weren’t ready with the detail, and what that means is they have crippled the industry.
“This is classic solar coaster …(It’s) the first solar rebate news we’ve had in ages.
“It was announced on a Sunday, which was kind of funky, and of course, what happens every time there is an announcement about a rebate is every potential solar consumer who thinks they might be able to get a slice of that rebate waits.
“So they stop. They don’t buy, they wait. Because what they’re now waiting for is the free money that’s been promised to them.
“It happens every single time.”
For example, Morris notes, it happened when the New South Wales 60c solar feed-in tariff was announced – an “overly generous” measure, he says, that the local solar industry actually argued against.
What happens in cases like this, he explains, is that consumers see it purely as a way to get their tax back, rather than as a way to install cheaper solar.
“The government was going to give me something – I don’t really care why or how – and by god I’m owed it.
“Phones are ringing off the hook. People are ringing up saying ‘How do I get my tax back? How do I get my money? I don’t care about the solar panels. If you have to put solar panels on that’s fine, but tell me how I get that money.’
“So it’s causing a lot of angst … down in Victoria already, and almost a dead stop in solar sales.”
To add to the confusion, Morris says, installers are also experiencing a backlash from customers who purchased before the rebate was announced.
(“They) are now ringing their solar installer saying ‘oh mate, you must’ve known about this, give me my two grand!’
“So, it’s not been managed as well as it could have been managed. And I really, really, really implore the Victorian solar guys – great bunch of guys behind the scheme – but please, get the detail out and get the scheme rolling.
“When you make these announcements, you have to be ready, and you have to roll fast.”
Morris’ comments align with those from the Smart Energy Council last week, which expressed concern that it might create more problems for the industry than benefits, if not managed properly – and particularly with half of the policy dependent on the government’s re-election in a few months.
As Giles Parkinson notes in the podcast, a similar situation arose in South Australia earlier this year with both the Labor and Coalition parties announcing different incentives for battery storage and rooftop solar ahead of that state’s election.
Installers reported a pause in the market – as customers waited to see which way the cards were dealt and if there was a better deal to be had by holding off.
There is also concern in the industry over how the Victorian scheme might affect the prices of small-scale technology certificates, or STCs, which are created under the federal government’s SRES scheme – which the ACCC has proposed closing down early.
As Greenbank Environmental founder and CEO Fiona O’Hehir said in last week’s SEC webinar, this threat is a serious one for the industry, considering the removal of SRES rebate would take a significant chunk out of installers’ already thin profit margins, and force many to readjust their business models.
But creating a burst of new demand in Victoria could also have an adverse impact on STC prices, in a market that is already oversupplied.
These schemes that were “dreamed up overnight,” she said, did not take into account how they might impact the dynamics of the industry down the track.
“There is a whole market that has been created around all this. We’ve got to be very careful,” O’Hehir said. “We need to maintain control of installations. If (policies) are thrown in too willy-nilly… it creates all sorts of problems.”
Warwick Johnston, another solar industry veteran who runs the data analysis outfit SunWiz, agrees that it will be interesting to see what the Victorian scheme does to STC prices, but doesn’t believe the impact of the policy will be all that damaging to the industry in the long run.
“It always happens when you get a government incentive announced before it is available,” Johnston told One Step. “You get the pause before, and then the rush when it’s about to be ended.
“In the interim, there’s a massive boom that no one complains about.”
But Johnston said there were some “valid concerns” around policies like these, including that they could make it easier for new entrants to come into the market, and harder to keep tabs on quality control.
“But because it’s a 10-year (no-interest loan) program (and assuming no other government axes it) the net effect is that if you get through this gap – or even communicate that there shouldn’t be any need for a gap –  you can soon get back into easy sales territory.
“If you were taking this hit in your cashflow …(for no real benefit) that would be bad, but (the scheme) will deliver. Companies might need to pull the belt tight for a little bit.”
As for STC prices, Johnston says that the current softening in that market had been “entirely expected,” and was not connected to policy ructions – state or federal.
“STCs have fallen a little, but that’s nothing to do with the ACCC (as the SEC’s John Grimes suggested last week) … You’ve got a market that is highly oversupplied, and it was always going to be this time of year that that oversupply was going to bite.
But he does concede that the Victorian government incentive will add further stimulus to the market, “and could certainly act to depress the STC price.”
Morris sees that as a concern, too.
“STCs …they’re in the back carriage of the solar coaster that we all know… and they go up and down like everyone else.
“And there are multiple people out there warning, saying, if we see a big surge in solar, which we certainly should see if Victoria gets rolling … (that) some of the speculators out there may say ‘we see there’s going to be huge flood of supply, so why would we pay so much?’
“So a lot of people are saying now, be very, very careful, there’s a chance that the STC price could drop.
“So those of you who may be exposed out there, talk to your brokers talk to your aggregators, talk to specialists in this field, and get some good advice, so that you don’t get caught with a falling STC price.”
It’s another ironic twist that could come of Victorian Labor’s attempts to shore up small-scale solar where the federal government threatens to abandon it.
“It’s not the first time that the states have looked at federal inaction and said, well we’re going to have to do something ourselves,” Johnston said.
“And in Victoria, it could be that the same thing’s happened again – the states taking the lead because the federal government has gone on vacation to some planet where climate change doesn’t exist.”
And therein lies one of the industry’s biggest problems. As O’Hehir put it: “We’re on a merry-go-round of bad policy, no policy, some policy, a bit of policy, and today, more changes again.”