How Australian Solar Incentives Change by Region

19 September 2020

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The Small-scale Renewable Energy Scheme provides upfront cash incentives for solar power systems up to 100 kW. The incentive is based on estimated electricity production between the installation date and the end of 2030, which means it increases in the sunnier parts of Australia.

The Australian solar incentive program awards one Small-scale Technology Certificate (STC) for every 1,000 kWh of estimated production by 2030. These STCs can be sold to energy companies who have obligations under the Renewable Energy Target, and their typical price is between $34 and $40.

  • For example, if a solar power system has an estimated output of 500,000 kWh during the incentive period, it will get 500 STCs.
  • When these STCs are sold, they will result in a cash incentive of $17,000 – $20,000.

Australia gets plenty of sunshine in general, but some parts of the country are much sunnier. The solar incentive program has four different rates for STC calculation, which change depending on where the project is located. This article will provide a simple comparison, assuming that four 100-kW systems are installed in the following cities:

  • Alice Springs, NT
  • Darwin, NT
  • Sydney, NSW
  • Melbourne, VIC

The Australian Government Clean Energy Regulator created an STC incentive calculator, which is based on your ZIP code and project information. This article will compare the incentives estimated by this tool, considering the four cities above.

Solar Incentives in Australia: Comparing Four Project Locations

When the STC incentive is calculated for the cities above, the following results are obtained. For an equal comparison, all estimates were based on a 100-kW solar system installed in 2020:

  • Alice Springs – 1784 STC
  • Darwin – 1689 STC
  • Sydney – 1520 STC
  • Melbourne – 1303 STC

Located in the Outback, Alice Springs is one of the sunniest towns in Australia, and this results in the highest possible incentive. On the other hand, Melbourne is much less sunny, and this is reflected in less STCs awarded. Darwin gets slightly less sunshine than Alice Springs, while Sydney falls roughly in the middle between Alice Springs and Melbourne.

Note that the incentive drops slightly each year, since the calculation is based on the years left before the end of 2030. Solar power systems installed in 2020 are getting an incentive based on 11 years, and those installed in 2021 will use a 10-year calculation.

Assuming an STC price of $38, the following cash rebate would be claimed in each case:

  • Alice Springs – $67,792
  • Darwin – $64,182
  • Sydney – $57,760
  • Melbourne – $49,514

All solar power systems in this example have the same capacity and installation date, but the incentives show a wide variation. Due to the difference in sunshine, a 100-kW solar installation in Alice Springs gets a 37% higher incentive than an identical system in Melbourne.

Installing a Solar Power System: Additional Factors to Consider

Cash incentives can greatly improve the business case for going solar, since they shorten the payback period and they increase the return on investment. However, there are other important factors to consider:

  • Shadows can greatly reduce the electricity output of solar panels, even in a sunny location. Also consider that shadows move during the day, as the sun’s position in the sky changes. Before installing solar panels, you must ensure your building has a large enough unshaded area.
  • Solar panels are affordable in Australia, but there can be significant variations in price depending on the provider and project location. The installed price per kilowatt tends to be higher in remote parts of Australia, since providers have higher delivery costs and their installation technicians must travel to the site. Alice Springs get the highest incentive in the example above, but higher installation costs can be expected due to the remote location.
  • Local electricity prices are also important for the financial analysis, since they determine the value of each kilowatt-hour produced by your solar panels. For example, 10,000 kWh of solar generation are worth $4,000 for a company that pays 40 cents/kWh, but only $2,500 for a company paying 25 cents/kWh.
  • Feed-in tariffs must also be considered, since they determine how much you are paid for surplus generation from your solar panels. When these tariffs are high, it makes sense to use a larger solar array and sell surplus electricity.

Another important decision is how you will pay for solar power. You can purchase the complete solar power system, or you can sign a Power Purchase Agreement to pay only for the electricity delivered, avoiding the upfront cost.

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