The Government announced changes to the STC multiplier yesterday. What does this mean for you and solar power prices? We explain it all - and no, the STC multiplier is not a fancy handtool you would find at Bunnings!
What is the STC multiplier
When a solar power system is installed it generates STCs or carbon credits which can be sold for cash (commonly referred to as a solar rebate, even though it really isn't). Under the solar credits program, persons installing solar power systems are eligible for 5 times the carbon credits on the first 1.5kW of solar power they install. So instead of receiving 27 STCs for a 1.5kW solar power system (installed in Melbourne) you receive 135 STCs, or 5 x 27 = 135.
The multiplier will drop to 3x from 1 July
Under the changes announced yesterday, the STC multiplier will drop from 5x to 3x from 1 July 2011. Following on from the example above, instead of receiving 5 x 27 = 135 credits, from 1 July 2011 you will only receive 3 x 27 = 81 credits. Big deal you say? Well, assuming STCs are valued are $30, 135 STCs are equal to $4050, whereas 81 STCs are only equal to $2430. Put another way, by installing a solar power system before 30 June 2011, you could save $4050 - $2430 = $1620 compared to if that system was installed after 30 June 2011.
Why has the Government reduced the STC multiplier?
The STC multiplier was always going to drop from 5 to 4 from 1 July 2011, but the bringing forward of this additional drop mainly comes down to supply and demand. The last few weeks has seen the price of STCs crash as the supply of STCs far exceeded demand. One reason for the excess supply is the NSW Premium Feed-in Tariff, which was far too successful, and saw many people install rooftop solar and consequently create STCs. By reducing the number of STCs that can be created, the supply of STCs is limited and the price of STCs should recover.
Is that the real reason?
Other theories as to why the Government has prematurely dropped the multiplier include political pressure from state and territory government who are experiencing a backlash over rising electricity prices, despite the fact that solar power only has a very minor impact on the cost of electricity. Power prices are not going up because of solar - they are going up because of rising network costs.
Where does it leave the industry and consumers
We are of the view that the reduction in the multiplier isn't such a bad thing. First, it gives industry and consumers certainty around pricing. Second, it should help the STC price recover (though with the supply of STCs still forecast to outstrip demand by 10 million this year, the recovery could be measured in cents, not dollars). And third, it will help to shake-up the solar industry and hopefully some of the dodgy players will exit. Those companies who have been in the solar industry for a while (like Neco) are used to these sorts or changes, and are well placed to help our customers navigate throguh the immediate uncertainty.
You can still get the 5x multiplier with Neco
Because we're highly organised, Neco is still taking orders now for installations in June. That's right - if you order by 31 May 2011, we'll guarantee the installation of your solar power system by 30 June 2011, meaning you'll still get the 5x multiplier (only applies to Victorian customers). So beat the price rise and call us today for a price on a solar power system that is unlikely to be repeated for some time to come!
