Industry insiders hope that the plan will bring balance to the marketplace and avoid a boom-bust scenario that commentators have been speculating about over the past weeks.
Under the Small-Scale Renewable Energy Scheme (SRES), the government provided additional Solar Credits as support for those installing small-scale solar panels by multiplying the number of certificates that these systems would usually be able to create under the Renewable Energy Target (RET) scheme.
The Solar Credits multiplier from July 1, 2011 will be reduced to a factor of three, and to two on July 1, 2012 and then be reduced to one on July 1, 2013. It was already reduced from a factor of five last December when the government first recognized the issue.
The two-year wind back will take the level of subsidy from a peak of a little over AUD$6,000 (4,315) down to about AUD$1,200 (863) for a basic 1.5 kW system after July 1, 2013.
In a statement released today the Minister for Climate Change and Energy Efficiency, Greg Combet, announced that the adjustments to the Solar Credits arrangements were made in light of continued progress in the industry, the impact of this on electricity prices, and the impact of the Solar Credits support on demand for other clean energy technologies.
Combet said that the action was taken to help stimulate growth in areas of the photovoltaic industry that had been adversely affected by the legislation, making particular mention of the lowering number of solar hot water systems that are being installed.
"Strong demand for solar panels has continued, fuelled by declining system costs, the strong Australian dollar and economy, as well as incentives such as Solar Credits and the State and Territory feed-in tariff schemes. The generous support for solar panels has also contributed to a decline in the installation of solar hot water heaters," Combet commented.
"By taking this action the costs of the SRES on electricity users are likely to be around half of what they otherwise would be in 2012, while at the same time still providing considerable support to households taking action on climate change," he added.
The government will also work with state and territory governments to ensure their feed-in tariffs "do not impose an unjustifiable burden on electricity consumers either through cross-subsidy mechanisms or their impact on the SRES," he continued.
The action is consistent with the governments attempts to control the rising cost of electricity in the country, which the Energy Supply Association of Australia (esaa) suggested had placed an unfair burden on lower income earners who were not taking part in the scheme.
"Someone has to pay for the high cost of solar PV installations and current government schemes mean that this is other consumers, including those least able to afford to do so, said Brad Page, essa’s chief executive officer.
The Clean Energy Council in Australia said it had developed concerns for the stability of the solar market after a period of sustained growth. 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.
"We acknowledge a reduction in the solar credits multiplier for next year will help create longer-term certainty for the industry," council chief executive Matthew Warren said to the Australian Associated Press.
"This decision has nothing to do with rising electricity prices and everything to do with supporting an industry of the future. So it’s a necessary change but it will hurt."
Australian Solar Energy Society chief executive John Grimes also said this move was one that would help mitigate concerns about a potential boom-bust scenario.
"Solar companies have had enough of the roller coaster ride brought about by constant policy changes. The roller coaster ride needs to slow down and stop. Governments need to provide long-term policy directions," he said in a statement.
It is intended that existing written contracts to install small-scale solar panels made on the basis of a Solar Credits multiplier of four and where a deposit had been paid prior to today, will be preserved. Transitional arrangements will be put in place to ensure the level of support provided through the SRES is maintained according to the current regulations.