The Climate Change Minister is expected to announce another scaling back of the solar credits scheme — the second such move by the government in six months — which will see the average rebate to households installing a 1.5 kilowatt system in Sydney, Melbourne, Perth or Adelaide fall from $6200 to $3720.

Today’s announcement, which comes as the government becomes increasingly concerned about the impact of rising cost-of-living pressures on its electoral stocks, is expected to save householders between $25 and $35 next year. This is on top of changes announced last December that were expected to save $12 a year.

This will be achieved by lowering the amount of high-cost power that electricity retailers must buy under the government’s renewable energy target. As it moves to confront cost-of-living pressures, the government will also today announce it will ask state and territory governments to make sure their feed-in tariffs “do not impose an unjustifiable burden on electricity consumers”.

Mr Combet will argue the scale-back was vital in light of continued growth in the industry and its impact on power prices.

But the government will honour existing written contracts to install small-scale solar panels made under current arrangements. Solar panels are granted renewable energy certificates based on the amount of power they produce. Electricity retailers must purchase the certificates at $40 each under the government’s amended RET.

Under the solar credits scheme, householders are eligible for an upfront payment worth five times the value of certificates their solar panels will produce.

That was to have been scaled back to four times from July 1 under changes announced in December but the scale-back will be deepened today when the government declares the multiple will be cut to three from July 1.

The move will hasten the phase-out of the scheme. The multiple will fall from three to two from July 1, next year and then revert to one from July 1, 2013.

Mr Combet will argue that strong demand for solar panels had continued despite December’s announcement, fuelled by declining system costs, the strong Australian dollar and economy as state and territory feed-in tariff schemes.

He will also argue the generous support for solar panels has contributed to a fall in the installation of solar hot water heaters. The drop in the multiplier will help reduce the oversupply of renewable energy certificates.

Under the solar credits scheme solar panel installation has ballooned. The number of installations supported by the RET grew from 15,000 in 2008 to more than 60,000 last year and 120,000 last year.

The Australian also understands the government has been concerned that the solar panel scheme was favouring affluent home owners, while renters and lower-income earners were subsidising the scheme through higher power prices.

The output varies depending on an array of factors including climate, shade, direction the panels are facing and the panels themselves, as well as the inverter – the techie part that converts the sun’s power into electricity a house can use.

A typical Australian house consumes about 18 kilowatt hours (kWh) per day.”We recommend most people probably need about a 3-4 kilowatt system to make a serious dent or wipe their bill, depending on the feed-in tariff arrangements,” Edgecombe says.

Chivell says many competitors are either now quoting their July 2011 pricing or are offering a 30-day installation promise with the bait of a  $200 discount if the 30 days is not met. “I’m sure we can all see what the strategy here is,” he says.

A spokeswoman for the Office of the Renewable Energy Regulator confirms there has been “an increase in installations of solar panels” since the beginning of the year.

How it all works

The whole solar credits thing can be a tad confusing. Basically, when you install solar panels you are eligible for certificates from what is now known as small scale renewable energy scheme (SRES).

These are credits that you can either sell to your panel supplier, or keep and sell yourself through a clearing house. Most people just assign them to their supplier in the form of a discount off their purchase price.

You may also hear the credits being called RECS, or renewable energy certificates, which is what they were known as until the beginning of year.

The reason for the name change was a glut in the market of RECS was pushing their price down, and potentially putting back projects such as wind farms because the companies creating wind farms need the certificates to be worth $45 or more to attract investment. At the end of last year RECS were worth about $30 – $32.

Now the government has split RECS into two – certificates for big installations, and certificates for small installations.

Depending on where you live, installing a 1.5 kilowatt system would normally earn you 26 small-scale technology certificates (in Melbourne and Hobart), or up to 34 small-scale certificates (in sunnier Darwin). These would be worth $1040 – $1360.

For systems up to 1.5 kilowatts, though, the federal government multiplies the number of certificates you get. Until July they will times them by five. On a 1.5 kilowatt system, that makes the certificates worth $5200 – $6800.

After July the multiplier will fall to four, and each successive July after that it will drop by one until no multiplier applies.

July 1 2010 – June 30 2011,    5

July 1 2011 – June 30 2012,    4

July 1 2012 – June 30 2013,    3

July 1 2013 – June 30 2014,    2

July 1 2014 – onwards,            1

After the solar credits scheme ends, you’ll still get energy certificates for putting panels on your roof, but there won’t be any multiplier effect. The government’s argument is that demand should have reached a point to significantly reduce the price of panels.

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