The program
The Queensland Solar Hot Water Program (the program) offers a standard installation, greenhouse efficient solar hot water system or heat pump for $100 to eligible pensioners and $500 to all other eligible households.
To qualify for the program, Queenslanders must also be eligible for the $1,600 Federal Government’s Solar Hot Water initiative and assign Renewable Energy Certificates (RECs) to the installer.
Applications for the program opened on 1 July, following the initial announcement of the program prior to the Queensland state election in March. Installations have since begun, following the appointment of Conergy by the State Government as the program’s first supplier in October.
Queensland Minister for Natural Resources, Mines and Energy Stephen Robertson said the Bligh Government has entered into a Standing Offer Arrangement with Conergy Australia, while negotiations continued with other shortlisted suppliers.
He said that the Invitation to Offer process will be regularly reopened to provide companies with new opportunities to become involved in the program.
Conergy Australia will provide product warranties on systems installed under the program and installation guarantees, the same as those offered to customers in the open market.
Industry response
However, members of the solar hot water (SHW) industry have raised concerns surrounding the policy, primarily that the program will create expectations of an unrealistically low price for SHW installations; distort the market by cutting out those in the industry who are not selected for the program; and devalue the price of RECs.
Speaking to EcoGeneration in July and August, solar installers said that demand for SWH installations decreased dramatically after the program was announced, as customers waited to see if they were eligible for the government program.
Solar Guys Director Dane Muldoon commented that the program sets the dangerous expectation that SHW systems should cost $500, a price that is not viable for many within an industry made up mostly of small businesses. He also said that there would be no diversity in the market under the program.
Mr Muldoon said that the program has over emphasised the price of installations, thereby diminishing the importance of other aspects critical to the longevity of the industry, such as the quality of the technology and products used in installations, and associated warranties.
Meanwhile, clean energy industry leaders expressed concern over potential devaluation RECs as a result of the extra six million certificates that will be created as a result of the policy.
Greenbank Environmental CEO Fiona O’Hehir expressed these concerns in a letter to Anna Bligh in April, following the election commitment.
“This extra volume of RECs could act like a feedback loop, forcing their price down, which in turn reduces the contribution to the financial mix and further increases the burden to industry,” she said.
However, Conergy Managing Director Rodger Meads said that the Queensland program will only have a small impact on the broader solar hot water market, as it only targets only a small slice – notably the considered purchase market – of the market, excluding emergency replacements, new housing, commercial or normal replacements, and gas or existing solar or heat pump hot water systems.
“The devaluation of RECs has been driven by a whole range of factors, including solar hot water and heat pump rebates in general,” said Mr Meads adding the Queensland program could not be singled out as the only contributor.”
Queensland Government response
Announcing Conergy as the program’s first supplier, Mr Robertson said “This has been a challenging program to deliver, particularly in an environment where the price of RECs have been declining over the past few months.”
He said that negotiations are continuing with other companies and that he is hopeful that more suppliers will be joining the program soon.
Responding to the industry concerns, Queensland’s Office of Clean Energy told EcoGeneration that the program aims to create a new market of demand that will target early replacement of electric hot water systems which will not compete in the solar and heat pump hot water markets for new housing, emergency replacements, commercial or normal replacements, and gas or existing solar or heat pump hot water systems.
A spokesman for the Office of Clean Energy, Queensland Department of Employment, Economic Development and Innovation said “Under the program, the Queensland Government is not intervening in the market for solar and heat pump hot water systems through any kind of bulk purchase arrangement.
“Rather, the Government, through standing offer arrangements, will act as facilitator to increase the installation of solar technology hot water systems and to prepare industry for the total phase-out of electric storage water heaters in all areas of the state from 2012.”
