Rooftop solar shock for consumers, installers as rebate price falls by one-third

Rooftop solar shock for consumers, installers as rebate price falls by one-third

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Price of rooftop solar to jump 10%, and catch many installers unawares, due to sudden fall in price of rebate certificates after record amounts of new solar in past 6 months.

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Australia’s booming rooftop solar market has hit a potential speed hump, with a sudden drop in the price of small scale renewable energy certificates, pushing up the cost of solar by around 10 per cent for households and small business and catching many installers unawares.

After several years of relative market stability, STC prices dipped by one-third on Wednesday, falling from around $40 to as low as $26, and triggering panic among PV installers who have sold systems to customers on the assumption they would get a $40 (per kW) rebate.

The sudden fall in prices comes down to the failure of market forecasters and regulators to adequately factor in the extent of rooftop solar’s second coming in Australia, which has seen record amounts of solar PV installed on homes and businesses since late last year, in step with soaring power prices.

“The fall in prices has happened because the supply of STCs is substantially outstripping power retailers’ obligations for this year as set by the Clean Energy Regulator,” said Green Energy Markets analyst Tristan Edis on Wednesday.


This is illustrated in the chart above, supplied by Green Energy Markets, which shows the extent to which supply since January this year (shown in the green bars) has significantly exceeded retailer requirements (shown by the red dotted line).

“It’s true that prices for STCs had held up until just recently, in spite of the fact that the oversupply trend was clear some time ago,” Edis said.

“The reasons behind this are a little complex and to do with the fact that the regulator front-loads their STC surrender requirements (35 per cent of the liability is required for the first quarterly surrender) as well as constraints around liquidity (some retailers had plenty of STCs but weren’t necessarily making these available to retailers who didn’t have enough).

“These mean that while the market was clearly going to have an oversupply of STCs overall for 2017, we’ve only managed to reach the point where there was plenty of STCs to go round for every retailer after we got past the last quarterly surrender period in July.

“This has then allowed the price to drop very quickly,” Edis said.

As noted above, one of the main effects of this price drop will be to increase the cost of a rooftop solar system by around 10 per cent, which itself could work to dampen demand.

According to Edis, a drop in the STC price from $40 to $33 equates to a reduction in the rebate the installer can pass onto the customer of about $135 per kilowatt across Sydney, Brisbane Perth and Adelaide and $116 per kilowatt in Victoria and Tassie.

“It shouldn’t kill sales,” Edis said. “But a 10 per cent price increase is still significant in anyone’s books.”

Of greater concern, however, is the potential impact on Australia’s solar installers – already feeling the pinch of wafer-thin profit margins ranging from around 17 per cent to 26 per cent.

As Geoff Bragg, from the Solar Energy Industries Association in Australia, told RenewEconomy in November last year: “Any Aussie installer marking up less will be heading for closure in my opinion.”

Many have in recent years – and the STC price drop could see many more follow.

“This will make many (solar installers) close their door today, with quotes signed and jobs to install in coming weeks worth millions of dollars,” one industry player told RenewEconomy in an email on Thursday.

“If this collapse was to occur in the sugar or fuel industry it would be all over the front page of every paper in the country.

“I have been in the industry for 10 years and never seen a swing like this in a so called commodity price.
Surely this must be raised in parliament today. It seems as if they want the industry to fail.”

Edis agrees that the fall in prices will probably result in a lot of “unhappy customers”, namely solar installers caught unaware that the STC market had been “massively oversupplied” for quite a long time.

“A lot of solar installers have forgotten, or weren’t around, when this happened last time,” Edis told RenewEconomy. “They didn’t know that you can have this volatility in prices.”

“There’s an element to which the more sophisticated players would’ve seen this coming,” he added. “It’s dropped more than probably what we would have though, but we knew it was coming.”

And the lower prices could hang around for a while, according to Green Energy Markets, which currently projects that there will be many million STCs created excess to the Regulator’s requirements for this year, if we maintain year to date levels of STC creation.

“The best guide we have is the forward market where buyers agree to pay a price for an STC a few months into the future. This indicates prices in quarter 4 compliance period for 2017 (which is actually Nov 2017 to Feb 2018) of $30.50 at present,” Edis says.

However, Green Energy Markets notes that the design of the STC scheme means that adjustment of the target next year should ideally lead to a recovery in prices.

“The STC scheme is supposed to self-adjusting each year,” Edis explains.

“This year we’ve all underestimated how many STCs will be created, however in setting next year’s target the regulator needs to base this on a forecast of what is expected to be installed next year assuming an STC price of $40 plus they need to increase it by the amount of the oversupply in STCs this year.”

“If all goes well this means the surplus should get whittled away significantly over 2018 and prices should recover”.

However Edis also noted a word of caution, “A few years ago the large oversupply persisted over several years, as we kept underestimating solar uptake and the regulator target was well below supply. This meant STC prices were noticeable less than $40 for an extended period of time.”

(Please note: This article has been amended from the original because of an error in quotes attributed to Tristan Edis which reflected observations that were made 2 months ago not last Wednesday. The article has been updated to reflect latest information and market prices).

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  1. Robert Westinghouse 3 years ago

    The drop in the STC is a signal that the government is truly
    ruled by corporate greed. I am still gobsmacked that the government is doing
    everything (well doing nothing) to undermine renewables and not meeting emissions
    targets. I have written to my member… I may as well have written to the dog…But
    it need every Australian to tell the greedy bastards we are mad as hell and not
    going to take it anymore….we want more subsidies not less….

    • Chris 3 years ago

      What tr#sh are you talking? Solar is cheap enough (as stated on a daily basis by this site) that it doesnt need to be subsidized any more.

      • Robert Westinghouse 3 years ago

        No need to be rude.I would have to disagree. We need more subsidies, so it become widespread. Not everyone is as rich as Turnbull and his mates. I am all for getting PV on every Aussie roof….

        • Eric Seegers 3 years ago

          It’s too cheap now with sales clowns undercutting each other to win jobs. Most install the crappiest gear they can & use sub par labour. As for any after sales service, forget it.

          • Joe 3 years ago

            I live in Sydney and the cowboys are active. Some ads for new Solar PV install I see in the paper like …5kW for $3,000 and I wonder what you get for that.

          • Eric Seegers 3 years ago

            Steaming pile of you know what & no care factor.

          • solarguy 3 years ago

            Yep it’s the bane of the industry cheap systems, some punters think I’m a rip off, not realizing the cheapies won’t be there when things go tits up and they do because those jobs are rushed, use cheap nasty switch gear, sub standard no name inverters, wiring not done to code, panels you never heard of.

            A lot off calls I get from people who use these cheapies haven’t even been connected to the grid and never told it was some thing they had to arrange themselves.

          • solarguy 3 years ago

            P.S. My business always informs the customer that they have the choice to arrange a net meter and grid connection or I arrange that for them. Also some companies have done such bad installs or systems that were to big to be allowed to be connected on a single phase.

          • Roger Brown 3 years ago

            I went through a local sparkie (30yrs in the trade) and had no problems. My 3kw system produced over 11kWh’s today (North facing 26 degrees roof) in qld . He looked at my bill and explained everything and what I had to do. Still happy .

          • solarguy 3 years ago

            Yep, the small guys are a better bet, simply because they give a damn.

  2. Charles Hunter 3 years ago

    As this story notes, the majority of installers seem to quote nett of STCs. That’s certainly my experience when I had my PV system installed a few years ago. Very convenient for me but, as noted here, risky for the installer.

    Earlier this year I replaced an ancient rusty gas hot water system with a heat pump based unit. Not only did this allow me to “disconnect from the gas grid” but it utilises some of my excess PV energy that would otherwise earn peanuts as feed-in. A win-win-win, at least on my side of the meter.

    Ignoramus that I am, it was not until I was researching hot water systems that I became aware that some kinds also attracted STCs. Based on what happened with the PV installation, my working assumption was that I’d get quotes nett of STCs. But it turned out that neither the supplier nor the installer was prepared to quote nett. They made it my problem to claim the STCs. And, I might add, without giving me any hints as to where to begin – Google to the rescue.

    After digging through the web sites of the various offerings, I chose the trader with the simplest form. Given the choice between “simple and straightforward” and “couched in legalistic gibberish plus a page of threats”, I’ll always opt for the former.

    The process of claiming the STCs was very straightforward. In fact, the only challenging bit was working out which supporting documentation was required because some of it varies by state (a small amount of form redesign would help). I submitted the paperwork and a few weeks later the money appeared in my bank account.

    Knowing that STC prices can change at any time I was highly motivated to get the paperwork submitted promptly – the price was locked in as of the date the paperwork was received.

    Given the simplicity of the process, I’m surprised that solar installers don’t mitigate the risk of price volatility by making it the customer’s problem to claim the STCs. Sure, the customer has to outlay a bit more up front but that can always be “spun” as “that’s bureaucracy for you”. It can also be made to sound financially attractive if the installer quotes a very-well-hedged STC price as option A, but gives the customer an option B of making their own claim for a (potentially) better return.

    Installers could help customers by ensuring that all the supporting documentation is provided, and could perhaps even hand customers a signature-ready form. All the customer would need to do would be to sign and stick the form in the post.

    One final word to the wise. Regardless of the type of system being installed, there are usually requirements to photograph compliance plates showing serial numbers. It is always a good idea to grab those photos BEFORE the units are installed. If I had not photographed the compliance plate of my new hot water system before it was moved into position, I would have been, as they say, sh*t out of luck. Some damn fool had positioned the plate on the back of the unit where you’d need the world’s smallest camera to get between the brickwork and the unit.

  3. MaxG 3 years ago

    Well, this will not receive the coverage because it feeds right into the neoliberal agenda: renewables are bad and coal is good for the country.

  4. solarguy 3 years ago

    The system has always been shit, I’ve never been happy with it. I hate having to tell a customer that the STC price has dropped and they have to pay more. They look at you as if you just shot the family dog.

  5. neroden 3 years ago

    I have never figured out how your crazy STC system works. I think the safe thing would be for solar instllers to quote before STCs and tell the buyers how to claim the STCs.

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