Should your business still invest in solar? Yes, the RET is here to stay.

The RET is here to stay under the National Energy Guarantee – Should your business still invest in solar?

Key Points:

• There will be no change to the RET under the new Government policy announcement. STCs are still available and LGCs will continue out to 2030. This has been confirmed by the Energy Security Board which provided its advice to the Government that forms the basis of the new policy. Link to ESB advice confirming no change to the RET (see page 5).
• Business can still confidently invest in Solar and enjoy the current benefits that STCs and LGCs provide.
• Planet Ark Power can help eliminate investment uncertainty by purchasing upfront the LGCs expected for the first 3 – 4 years of a large solar generator’s operations.

Discussion:

The Federal Government has announced its long awaited new energy policy – the National Energy Guarantee.

Whilst the full detail is yet to come, we’ve had many clients ask us what it means for their current or proposed solar system investments.

In summary, the landscape has not changed dramatically and if a solid business case for solar exists, the new policy hasn’t affected it.

Here are the 2 reasons why the case for solar remains unchanged…

1. High energy prices are unlikely to come down anytime soon

• The key motivation for a business to consider solar is to save on energy costs that have been escalating at nose-bleeding rates in recent years.
• These costs are expected to remain at high levels in the foreseeable future. Future trading on wholesale prices out to 2020 remain well above prices in 2017 and before.
• There is a general consensus that the NEG will do little, if anything to offer relief to energy prices in the short term. Even the Government has said that households will see only a very modest decline in costs
• There are a number of reasons why Australia has experienced increased energy prices. The two big ones are over-investment in network infrastructure and a reduction in generation investment. The NEG does little to address these issues in the short term. Much more certainty is require for electricity generation to be built.

2. The Existing Renewable Energy Target will stay

The Renewable Energy Target provides incentives to invest in solar systems that are often crucial to the business case. The Government’s Energy Security Board (ESB) on Tuesday 17 October, as part of the Federal Government’s announced National Energy Guarantee released its advice and has confirmed that this RET scheme should remain unchanged.

An extract from page 5 of the advice from the ESB to the Government states this clearly (emphasis added):

“Interaction with the Large-scale Renewable Energy target (RET).

The guarantees are not intended to change the RET scheme. The RET is expected to be met by 2020 and finish in 2030.

This should run its course. Once new investment under the RET finishes in 2020, the emissions guarantee on the retailers will require them to contract with low or zero emission generators to meet their guarantee but only where necessary to meet the emission reduction targets set by the Commonwealth.

Projects financed under the RET would be grandfathered from 2020, and would continue to earn certificates until 2030 as is currently legislated.

The policy could determine whether retailers could use these generators to meet their obligations under the retailer reliability and emissions guarantee.”

This means that systems under 100 kW will still be eligible for Small-scale Technology Certificates (STCs) that can reduce the cost of solar by up to one third.

Systems above 100 kW will still be eligible for Large-scale Generation Certificates out to 2030 (LGCs)

For the industry itself, the ongoing uncertainty in energy and climate policy is nothing new. It’s just another chapter in the decade-long solar-coaster that has unfortunately plagued investment certainty.

Hedge your exposure to LGCs

Planet Ark Power can offer to purchase upfront LGCs for the first 3 to 4 years to help eliminate the uncertainty of investing in large solar rooftop systems above 100 kW. Contact us now to find out more.