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Victorian solar rebates will drive quality but struggle with quantity

At a CEC workshop last week, members of the Distributed Energy Directorate met with the new CEO and Chief Operating Officer of Solar Victoria, Stan Krpan and Jonathon Leake, to discuss details of the rebate program design and the solar and battery sector development strategy that will accompany it.

The monthly cap and on-line application process will be the most visible and closely watched part of the program. With 3333 rebates released per month, buying a solar system will become a bit like trying to buy good seats at a Kylie Minogue concert. Customers will be hovering over their keyboards at 9.00am on the first of the month, hoping to snap up a rebate while they last. This approach is intended to manage excess demand for rebates within a fixed budget without the pain of shutting down the program for nearly three months, as happened this year. It remains to be seen whether this approach works. The CEC had suggested reducing the income threshold as an alternative way of managing excess demand within a constrained budget, but the government was committed to implementing the income thresholds it promised during last year’s state election.

The battery program is very modest, with a total of just 1000 battery rebates available over the next 12 months. This is well under the 5000 batteries that were installed in Victoria last year without support from any rebate program. The battery rebates will be targeted at 24 postcodes in high-growth, high-PV penetration areas, including the outer suburbs of Melbourne, Geelong, the Mornington Peninsula, Ararat and Avoca.

Zero-interest loans will be available from 1 July, removing the up-front cash barrier that prevents some households from investing in solar. Loan repayments will not exceed $23 per month and will only be available if the business case shows a better than $23 per month benefit to the customer.

Victoria will also be the first state to roll out a major program supporting solar installation in rental homes. Rental housing is a large untapped market for solar and if the program succeeds, landlords and their renters will be much better off. An innovative proposal allowing renters and landlords to jointly enter a zero-interest loan agreement will not be available immediately because changes first need to be made to the Residential Tenancies Act.

A strong feature of the program is the intention to improve standards in equipment, retailing and installation. There will be support for training and apprenticeships, with government-subsidised courses for CEC accredited installers and several recommended certifications that are expected to become mandatory in future. Inverters are required to have ‘smart’ features that provide grid support, while batteries must be capable of participating in a virtual power plant. From 1 November 2019, all participating retailers must also be part of the CEC’s Approved Solar Retailer program

Overall, the program design is strong when it comes to quality and will exclude poor performers. However, the Solar Homes Program will struggle when it comes to quantity. There simply won’t be enough money in the budget to meet demand for the rebates at their current levels. In the long run, the government will need to reduce the value of the rebate, reduce the income eligibility threshold and/or increase the budget to avoid the frustrations of a stop-start monthly boom and bust cycle.