Solar sector rejects claims rebates are hurting renewable energy market

The solar hot water industry has said the Federal Government should not make any irrational cuts to the sector’s rebates as debate rages over whether the stimulus has contributed to an oversupply of renewable energy credits.

Opponents to the scheme say a rise in demand for solar hot water has contributed to an oversupply of RECs in the market, which is driving down prices and taking work away from projects in other sectors such as wind farms.

The Federal Government increased its rebate for solar hot water pumps from $1,000 to $1,600 as part of its economic stimulus package, but reversed the decision last month due to higher demand.

Climate change minister Penny Wong has said the issue will be discussed in a Council of Australian Governments review this December.

But Ecosmart corporate affairs manager Romano Bolzen says the market is adjusting after a “bubble” and the Government shouldn’t base its decision on a month of irregular sales.

“Solar hot water heating experienced a bubble in July when sales tripled, and that bubble has now well and truly burst. That was created by the confusion of that rebate finishing, because so many people received mixed messages about what would happen.”

“The industry experienced a flood of inquiries into the market, and solar hot water businesses like ours experienced enormous growth and since the end of that rebate an enormous decline. The data most people are seeing is based on the growth of that bubble, and not the decline.”

Rheem corporate affairs manager Gareth Jennings says a number of factors have contributed to the decrease in REC prices, and also agrees the spike in demand for solar hot water equipment has passed.

“There are a number of things that have impacted the demand of solar hot water pumps. When the legislation was being negotiated, the decision regarding the eligibility of commercial heat pump installations had an impact on the market.”

“Then the Government dropped the pump portion of the rebate from $1,600 to $1,000, and since that time the market for heat pumps has substantially dried up – there has been a 70% decline in pump sales, and they were making 50% of RECs.”

Jennings says the decision to alter the solar hot water rebate should be made in light of overall demand, and not just an “unnatural” spike in activity.

“Do we need to address this rebate given the market has changed so quickly? I understand there are some concerns about the overhang, but markets are about psychology… maybe with a drop in prices people will become more bullish.”

“But in regards to this point that a low REC price isn’t a good thing, well I disagree because lower REC prices just means we’re producing more renewable energy for a lower cost… isn’t that a good thing?”