UPDATE: Following this and numerous other stories on the subject, the Australian Financial Review reported on Monday the 14th May 2012 that a spokesman for Climate Change Minister Greg Combet said that there were “no plans to change the scheduled reduction of solar credits support to take effect on July 1 this year”.
Although this is a not a guarantee, it is a strong sign that perhaps the Government does understand the implications of dropping from 2 to 1 on very short notice, and that we may be safe from such a change.
Along with many others, I have worked hard over the last few months to seek confirmation from the Government that the STC multiplier would change from 3x to 2x on July 1st 2012, as scheduled.
This change represents a decrease in up front discount on 1.5kW PV systems of around $744, assuming an STC price of $24.
Unfortunately, the relevant departments have not made a public, firm commitment although they continue to privately state that “there is no current intention” to change from the current plan of 3x to 2x multiplier.
I would suggest that the language so far – and timing as we edge closer – has been “slightly odds on” that things would stay on plan at 2x. However, the pressure on the Government from all quarters is increasing significantly, not for any rational reason I stress, but for purely political ones.
A prime example comes from former NSW Premier Kristina Keneally who wrote on The Drum today ”Whether it’s good policy or not (the carbon price) is now irrelevant: it is completely bad politics,”
This stark admission from our former Premier which confirms that the decisions of Government are driven by the desire to stay in power, not the desire for the greater good.
So as much as I hate to say it, when it come to the impending STC change, I’d say the odds have shifted to “odds off” now that it will stay at 2x and may go to 1x.
Ironically, dropping the multiplier earlier, dumping the RET and even dropping the Carbon Price will have the least impact on electricity prices, the source of much of the aggravation. The impacts are demonstrated (again) in the graph below using data from the AEMC’s report on electricity prices.
As if to further demonstrate how this non-issue is being made an issue for the Government, a report released today demonstrates that our cost of living has actually got better, not worse. The report highlights that discretionary spending is the problem, not necessities.
Its a pity the Government can’t seem to get that message out.
The numbers
What does this mean to consumers and industry?
Using ORER’s published Out of Pocket Expenses records, we can calculate that at the 2012 Q1 average net market price of $2552/kW, the average system price will increase 19% from June 1st (assuming 2x multiplier and $24/STC)
We took a look at some samples of current market prices and could see a range of around plus or minus 30% on this average price, which has interesting ramifications because:
> those who sell cheaper systems will see their net prices increase by 37%
>those who sell more expensive systems will see their net prices increase by 13%
So for those at the niche/high price end, there will be potentially be a little less pain.
However, IF it drops to 1x on July 1st 2012:
> the average net price will increase by 39%
>those who sell cheaper systems will see their net prices increase by 73%
>those who sell more expensive systems will see their net prices increase by 26%
ORER’s data also shows that in real terms average system prices have been relatively stable since January 2011, however, adding in an assumed Q2 2012 price (ORER hasn’t published one yet) and a change to a 1X multiplier shows that we would expect to see average system prices rise by 54%.
I am hopeful that the Government will not repeat the same mistakes it has made in the past with the sudden ending of schemes under misconstrued polling pressure.
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