The much awaited Renewable Energy Target (R.E.T.) review has been released and a summary can be viewed here. In many ways the review comes as little surprise to the solar industry who have been very vocal in raising the potential risks for the solar industry in terms of potential job losses and business closures should the R.E.T. be scrapped or changed significantly.
What The Review States In Relation To Small Scale Solar
The (SRES) or ‘Small-scale Renewable Energy Scheme’ has been the driver of solar uptake in Adelaide over the last few years and creates the ‘mechanism’ for essentially ‘subsidising’ the cost of a solar system installation. Potential changes to the SRES are closely watch by the solar industry. The R.E.T. review states, in relation to the SRES the following:
“Options for reforming the Small-scale Renewable Energy Scheme (SRES)
Small-scale renewable energy systems supported by the SRES generated or displaced around
6,400 GWh of electricity in 2013, which is above the original expectation for the SRES of
achieving a minimum of 4,000 GWh of annual generation by 2020. Based on information
provided during the review, the Panel considers that the significant cost reductions of
small-scale solar PV systems combined with the increase in retail electricity prices means that
the small-scale renewable energy industry is becoming commercially viable. Additionally,
the cost of the CO2 -e emissions reductions achieved by the SRES is very high, in the order of
$100-$200 per tonne and at least two or three times that of the large-scale scheme.
Given these factors, the Panel considers that there is a strong case for winding back the SRES,
through either closing the scheme immediately or accelerating the phase-out of the scheme.
Modelling indicates that repeal of the SRES would have an immediate effect of reducing the
install rates of rooftop PV by at least 30 per cent and the number of solar water heaters by
around 16 per cent. However, by the early 2020s, the rate of small-scale solar PV systems
installed each year would recover to a rate similar to that if the SRES was left in place.”
It is interesting to note the modelling claims that solar installations would decrease by at least 30 percent should the SRES be scrapped. Prices for solar systems would possibly increase by around 70 cents per watt meaning substantial short term price hikes to a solar system installed in Adelaide (and around the nation generally). The report indicated that long term, the rate of installations will essentially ‘revert to the mean’ or slow significantly but then recover.
Pay Back Periods For Solar Systems Would Increase
Obviously if solar systems prices rise should the SRES go, then system prices will increase and the ‘payback period’ meaning the time that the savings on power bills take to recoup the installation cost of the solar panels system, will increase. What a ‘new’ payback period would look like is dependent on the size of the solar system (1.5Kw, 3Kw, 5Kw etc), your pattern of electricity usage, how much of the solar energy produced by the system is used in the home and how much is exported back onto the grid etc. Estimates of payback period should the SRES be removed and solar system prices increasing range from 4 to 8 years. Solar systems should work reliably and produce at least 80 percent of their rated power, for around 25 years. This is obviously dependent on purchasing quality solar panels, solar inverter and getting a ‘quality’ solar company to not only do the installation, but provide back up should it be required. Given a ‘life expectancy’ of 25 years for a quality solar system, even a 7 or 8 year payback period looks reasonable. Should electricity prices in South Australia increase, then the ‘payback period’ decreases.
We Await the Governments Response To The Renewable Energy Target Review
Tony Abbott today (29 August 2014) said that the government would study the R.E.T. review before making any decision over the ‘next few weeks’. We will watch with interest. It is possible that people who have been thinking about installing solar systems may move now to get the system in a ‘preemptive’ move against possible price increases should the SRES be scrapped.