Can The STC Price Offset Rising Power Bills?
The current STC price of $36 is helping Australian households install solar power to offset rising power bills.
Electricity prices in Australia have been on the rise for the last few years. It is estimated that the electricity cost hikes have added $500 to the annual cost of power for the average Australian household over the last three years. Unfortunately, it doesn’t look like there will be a political solution, at least not in the short term.
The national average for electricity consumption in Australia is 6570 kWh per year or 18 kWh per day, and here’s what it costs in different parts of the country.
Average Electricity Usage Rates (per kWh cost in cents)
So, if you are a homeowner in NSW, you most likely spend upwards of $1500 per annum on electricity, and it can be a lot more for households on time of use tariffs without solar power, as the average cost of power during the peak billing period of 2 pm to 8 pm during the week is now up around 50c/kWh, one of the highest electricity tariffs in the developed world.
While the most significant contributors to your household’s power bill are the size of the home and how many appliances you use daily, the other major pressure point is the air conditioner during increasingly hot summers. With so many hot afternoons now being experienced across the summer, more and more households are looking to install larger solar systems to offset the amount of power an air conditioner uses.
This rising cost of electricity has Australian homeowners thinking about alternatives to grid electricity, and solar power has now been the ‘go to’ choice for well over 2 million households.
What is the STC price and how does it impact the solar rebate?
The Federal Government’s Small-Scale Renewable Energy Scheme (SRES), has for the last several years, encouraged the installation of roof-top solar power systems through a purchase incentive in the form of STCs or small-scale technology certificates.
Small scale technology certificates are issued when a homeowner has a new roof-top solar system installed. STCs are calculated based on the power generation capacity of the solar power system in megawatt-hours (MWh) over a period of fifteen years. The government scheme is set to expire in 2030, which means the number of STCs generated is reduced at the start of each year until the scheme is phased out.
Each STC earned gives the homeowner a rebate on the purchase of the solar system to the tune of the prevailing STC price, and this amount is taken directly off the purchase price of the system.
For example, if the gross cost of installing the solar power system is $8,800 and you are eligible for a total STC deduction of $2,800, you will then pay a net installation cost of $6,000.
And don’t stress, Solaray’s install department make installing a solar system a breeze. We will help you apply for and claim the rebate, and then on the day of installation you simply need to complete an online form to confirm that the system has been installed as per your contract.
It sounds like a pretty sweet deal, but there’s a catch, and that’s the varying STC price.
In 2011, the STC price had fallen as low as $20, while the upper price cap is $40 per certificate.
The Impact of a Fluctuating STC Price on the Cost of Purchase
Each year the Clean Energy Regulator (CER, the federal government body overseeing the implementation of the RET) sets the market price for STCs. The price is estimated based on how many small-scale renewable energy systems (including roof-top solar) the CER expects to be installed in the coming year. So, when supply meets demand, the STC price remains stable.
However, no estimate is a hundred per cent accurate, and STC prices have fluctuated quite a bit in the last three years. In 2018, as STC supply outstripped demand, the STC price fell for the most part of the year after peaking at the start:
When the STC price falls then an increase in the cost of installation is inevitable. A lower STC price means a smaller government incentive, which drives up solar power prices across the industry.
Because of this uncertainty, there are a lot of adverts talking about “Buy now before the prices go up” leaving customers wondering if the STC price is about to fall and how soon?
So, what should you do?
Well the simply answer is to install solar now and lock in the current price of $36. Once you place an order the STC price is locked in, taking away all potential risk of the STC price changing.
Making the most of the current STC price
If you have ever put money in the stock market, you know that you should stay invested for at least a few years to yield good returns. Well, the same goes for investing in a home solar system – you should have a long-term perspective.
In 2018, there was a lot of concern that the government incentive was going to be scraped, immediately sending some buyers and sellers into panic mode. This fear was driven by an ACCC report that recommended winding up the SRES and abolishing it by 2021. Luckily for now, the Federal Government has not taken up the recommendations in the report, however, the government has yet to rule out any action.
Unless something changes, the current phase-out is going to be gradual and will be completed by December 2030. To give you a ballpark estimate of how the phase-out will impact new buyers, the current solar rebate for an average-sized solar system with a $37 STC price in the year 2019 would fetch a rebate around to $3400, whereas in 2020 the rebate will be reduced down to $3100. Waiting until next year to install solar will cost you around $300.
However, this is relatively small compared to the opportunity cost of not installing solar power now and continuing to pay large power bills. You’d still be faced with rising electricity costs for supply from the main grid. According to the Australian Energy Market Operator (AMEO) in the first quarter of 2019, South Australia and Victoria saw the highest ever increase in the average wholesale prices over the quarter. The record-breaking heatwave in Australia this year has led to a peak in consumer demand, while also leading to lower than expected output from hydro generators.
An average 5kW solar power system can save you up to around $500 per quarterly bill, which means that for every year you put off installing solar power, you miss out on a potential $2,000 saving on your power bill, plus you miss out on the current STC price multiplier.
Solar Is Booming, Don’t Miss The Boat
For more information about installing solar power and claiming the current STC price, please fill out the form below. We can help you size up a system and provide personalised pricing based on the best solar system for your home: