New Years 2025 will ring in many exciting updates and changes for Australians across all walks of life. One change is neither exciting nor something the solar industry has been looking forward to. As it has done each year since its inception, Small-scale Technology Certificates (STCs) will be reduced again. Let’s explore what this means for Australian homes and businesses.
What are Small-scale Technology Certificates?
STCs are incentives under Australia’s Small-scale Renewable Energy Scheme (SRES), designed to encourage the adoption of renewable energy systems. When eligible systems are installed, such as solar panels, solar hot water, or small-scale wind and hydro systems, they generate STCs.
Key features of STCs:
1. Value representation: Each STC represents the environmental benefit of one megawatt-hour (MWh) of renewable electricity generated or displaced over a system’s expected lifetime (up to 15 years).
2. Tradable certificates: STCs can be sold or traded, providing financial returns to system owners. They effectively lower the upfront cost of renewable systems.
3. Market Value: The value of STCs fluctuates, depending on supply, demand, and market conditions.
4. Eligibility Criteria: To generate STCs, the installation must meet specific criteria, including compliance with Clean Energy Council standards and approval by the Clean Energy Regulator.
If you install a solar PV system, the system’s capacity and location determine the number of STCs it generates. A larger system or one in a high-sunlight area generates more STCs. This mechanism reduces the upfront costs of renewable systems, promoting Australia’s transition to clean energy.
Why are STCs reducing in 2025?
STCs will be reduced in 2025 because the SRES operates on a declining scale as part of Australia’s broader renewable energy policy. This reduction is tied to the legislated phase-out of the scheme by 2030.
Reasons for the reduction:
- Step-down approach: The number of STCs created by a system is based on its deeming period, which represents the years of energy generation it is expected to provide. Each year, the deeming period decreases by one year until the scheme ends in 2030.
- For example, a solar PV system installed in 2024 generates STCs for 7 years (2024–2030), but in 2025, it will only generate STCs for 6 years.
- Policy design: The reduction incentivises early adoption of renewable systems. As more Australians transition to renewable energy, the scheme gradually phases out its support.
- Market maturity: Solar PV and other renewable technologies are becoming more affordable due to technological advancements and increased uptake. The SRES reduction reflects the decreasing need for government-backed incentives.
- Government transition goals: The Australian Government is shifting its focus to broader renewable energy initiatives, such as large-scale renewable projects and grid integration.
What will the reduction of STCs mean for the price of solar and other renewable technology?
The reduction of Small-scale Technology Certificates (STCs) in 2025 will likely lead to higher upfront costs for solar and other renewable technologies, as STCs directly reduce the initial purchase price of these systems. Here’s how it impacts pricing and adoption:
1. Increased upfront costs
- Fewer STCs mean less financial incentive, resulting in a smaller discount on the purchase price of eligible systems.
- For example, if the number of STCs drops by 15%, the overall price of a typical 6.6 kW solar system could increase by $500 to $1,000, depending on the location and STC market value.
2. Potential slowdown in adoption
- Higher prices may deter some consumers from installing renewable systems, especially in lower-income households.
- Businesses with tight budgets may also delay or downsize installations.
3. Greater reliance on other incentives
- Consumers will need to explore state-specific rebates and federal tax benefits to offset the reduced STC value. For example, rebates in Victoria or the City of Adelaide may help soften the blow.
4. Pressure on system providers
- Solar retailers and installers may face challenges in convincing consumers to invest at higher prices. This could lead to increased competition and innovation to offer better value.
5. Market adjustment
- Over time, advancements in renewable technology and economies of scale may reduce manufacturing costs, helping offset the price hike.
- Installers might offer financing or leasing options to make solar systems more accessible.
The long-term outlook for the Australian solar industry
Despite the STC reduction, renewable energy remains a cost-effective investment due to long-term savings on energy bills. Additionally, rising electricity prices and a growing focus on sustainability continue to drive demand for solar and other renewable systems.
The SRES has also achieved its goal of driving research and development, as well as innovation, in the industry. This has resulted in drastically cheaper and more efficient products available for Australian homes and businesses. Even with the reduction of STCs, solar will still be more affordable now than 10 years ago.
Can I purchase a system now, install it in 2025, and get the STC amount for 2024?
STCs are generated at the point of installation, which means that purchasing a system now will not lock in the STC value. With 2025 fast approaching, it may not be possible to install solar before January 1st. However, we encourage you to request FREE quotes ASAP if you want solar installed now.
Click the button below to request FREE quotes for solar, batteries, and more. Energy Matters works with a network of installers across Australia who will provide you with tailored, no-obligation quotes.
