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Victorian government debuts $1 billion solar power incentive scheme

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By George Tchetvertakov - 

The Australian solar industry is back in vogue, with the Victorian State Government unveiling a $1.24 billion incentive scheme that will see as many as 650,000 homeowners receive financial incentives for installing roof-mounted photovoltaic solar panels.

The state government said that as of this past Sunday, it would spend up to $4,550 per household to help homeowners install solar panels.

According to senior Victorian policymakers, the scheme would subsidise up to 50% ($2,225) of the total cost of installing a 4kW solar system.

Under current plans, the new scheme will be overseen by a new agency called Solar Victoria and could potentially save the average Victorian household around $900 per year on power bills.

Barely a day later and quite possibly as a knee-jerk response to Victoria’s announcement, NSW Premier Gladys Berejiklian said that NSW’s state government would siphon $72 million from its Climate Change Fund to “help some businesses and households reduce their energy costs”.

Ms Berejiklian has committed $35 million dollars to be offered out to around 250 manufacturing businesses to install energy efficient equipment and meters to track their energy use within the state. An additional $24.5 million will be directed at low-income renters, so they can obtain energy efficient lighting, heating and hot water systems.

The remaining $12.55 million has been purposed for local councils to install LED bulbs in streetlights.

The combined intended effect is to slash power bills by as much as $400 per year for NSW residents and to alleviate pressure on existing power grids that can sometimes struggle to sustain capacity.

Bountiful Australian solar market

As it stands, Australia has the highest average solar radiation per square metre of any continent in the world.

Large-scale solar electricity is rapidly expanding with more than two million Australian households already harnessing solar energy for domestic energy needs.

Australia’s solar energy industry has tried to leverage government money in the past – to extend its popularity (and reduce carbon emissions) over the past decade.

However, high costs and low energy conversion rates have made solar adoption prohibitive for the majority of homeowners; although, meaningful change could be on the horizon.

Technological advances have allowed greater conversion of sunlight into electricity, while installation and maintenance costs have also fallen in recent years.

Examples of current solar technology include solar photovoltaic, solar hot water and solar thermal.

Solar photovoltaic technology converts sunlight directly into electricity using photovoltaic (PV) cells while solar thermal converts sunlight into thermal energy, which can be used for both water or central heating.

Solar hot water systems utilise what’s known as “evacuated tubes” to heat water and has the potential to cut power bills by 60%, according to Steve Wesselink, national sales director at Endless Solar (NSX: ESCLV), an NSX-listed company that’s being backed by Australian-based pooled investment fund Authorised Investment Fund (ASX: AIY).

Solar panels have also become a lot smaller and far more aesthetically-pleasing which has further boosted renewed interest from consumers.

“Both Victoria’s and NSW’s incentive schemes will include solar hot water systems, which means this efficient technology can be deployed to help thousands of households when they come to streamline their energy consumption. Solar hot water systems are typically 4-times more efficient than PV systems and tend to be more durable once installed,” said Mr Wesselink.

“The systems we manufacture are installed with a 15-year guarantee, which makes them ideally suited to what the state authorities have described as ‘low-income’ housing.

“We install our systems for various types of customers and we are considering projects which could deploy solar hot water systems on a larger scale, such as in apartment blocks for example,” added Mr Wesselink.

Solar situation report

Last year, Australia installed a record 3.5 million panels, generating the equivalent power output as that of a small coal-fired power station, producing around 1,000 megawatts of power.

That equates to around 9,000 installations per day.

According to energy broker hub, a fully-installed 5kW system costs around $5,000 to install, although the website does confirm that these initial fixed costs have halved since 2012.

With solar energy now around 50% cheaper compared to six years ago and consumers seeing solar energy from a different commercial perspective, the Victorian Government has decided to set up an incentive scheme to boost solar panel installations, but also, reduce the state’s growing carbon footprint.

Victoria’s billion-dollar solar scheme has the ambitious target of cutting the state’s carbon emissions by almost 4 million tonnes and thereby accounting for 12.5% of Victoria’s 40% target for renewable energy by 2025.

NSW’s scheme is far smaller and will extend to far fewer beneficiaries but will include commercial businesses whereas Victoria’s scheme is only for “low-income” residential housing. Both Victorian and NSW policymakers have cited “low-income renters” as the intended beneficiaries of more efficient energy and solar technology, as far as their funding is concerned.

The only condition is that households must repay at least half the total cost over a four-year period.

According to Labor government, the scheme will also include a $9 million investment to ensure at least 4,500 electricians are adequately accredited to make installations and inspections.

To qualify for the solar incentive scheme, properties must be “owner-occupied”, valued at less than $3 million, with its occupants earning less than $180,000 per year in combined income.

Given current estimates, Victoria’s Premier Daniel Andrews says that around 90% of Victorian homeowners would be eligible to apply.

Under the plan, as many as 650,00 Victorians will be given the chance to apply for the scheme with Mr Andrews claiming that the scheme would help thousands of households save up to $890 dollars a year on their power bills.

“We were promised that privatisation would lead to lower prices, that simply hasn’t happened, every household can tell you that,” said Mr Andrews.

“We know the cost of living is going up and it’s getting harder to make ends meet. That’s why Labor is helping families with their energy bills,” he said.

Political power boost

As a means of promoting sustainable power, but also to raise its own profile with voters, the Andrews government has vowed to expand its solar scheme if it is re-elected at the upcoming state election in November.

Victoria’s state election will elect the state’s 59th parliament; pitting the incumbent Labor government led by Andrews against current opposition front-runner Matthew Guy.

“Victorians will now be able to take control of their power bills. Every Victorian homeowner who wants solar power will be able to afford it under this plan,” said Mark Wakeham, chief executive officer of Environment Victoria, an independent not-for-profit group campaigning for a safe climate, healthy rivers and sustainable living.

Mr Wakeham noted that adding an extra 2,000 megawatts of solar above and beyond previous expectations would likely lower energy bills for all by pushing new clean energy into the power grid.

However, the solar homes scheme has also attracted critics – unimpressed by the Labor government’s multibillion-dollar sustainable energy investment.

Opposition spokesman David Southwick said the Andrews’ solar incentive scheme was yet another gimmick to “splash” money without thinking about the likely social and economic consequences within the industry.

“What we have today is an announcement where we are just going to splash cash without any real thought of how this will work back into the market, with no consumer protection in place.”

“This really is just a vote grab, a cost-of-living package for an election, not for a future. This is a very last-minute thought bubble to try to do something against what is happening in Canberra but there’s no real detail or plan around it,” said Mr Southwick.