The sun sets on solar hot water rebates

Image source: yourhome.gov.au

The Government has ended its solar hot water rebate initiative, the Renewable Energy Bonus Scheme (REBS). An announcement was made yesterday that henceforth REBS rebates will only be eligible to those people who have had systems installed, ordered or purchased before 28 February 2012, and lodged a claim before 30 June 2012. Although the scheme was always meant to end on 30 June 2012, this is the first time a purchase cut-off date has been publicised. Besides providing prospective applicants with no prior warning, the closure raises the question of why has the rebate been phased out so suddenly?

REBS was first announced on 19 February 2010 as a replacement for the discontinued Home Insulation Program, (HIP) and Solar Hot Water Rebate (SHWR).The 2010–11 Budget allocated remaining funds from the HIP and SHWR to REBS. This was to be used to finance a series of programs and actions: 

• The Home Insulation Safety Program (HISP), established to perform safety inspections of ‘at least 150,000 homes that had non-foil insulation installed’ under the HIP. 
• The Foil Insulation Safety Program (FISP), established to ‘inspect approximately 50,000 homes that had foil insulation installed’ under the HIP. 
• The Insulation Industry Assistance Package (IIAP), established to support firms that participated in the HIP to ‘meet the cost of insulation stock-holdings, through the deferral of GST payment obligations and a $15.0 million grants program’.
• A new rebate of $1000 for the installation of ceiling insulation.
• A new rebate of $1000 for the installation of solar hot water systems and $600 for heat pump systems.
• An external assessment and review of the REBS scheme.

 However, in response to recommendations from the Review of the Administration of the HIP, Minister Combet decided in April 2010 to remove the insulation rebate component of REBS.

  

Subsequently, two funding cuts have been made to the program:

• On 24 July 2010, the Prime Minister announced a plan to redirect $150 million over two years from REBS in order to fund a new Cleaner Car Rebate program. The Mid-Year Economic Fiscal Outlook of 2010–11 reflected this move, concluding that REBS would now 'provide funding of $328.7 million over two years from 2010-11, in response to lower than expected demand.'
• On 27 January 2011, the Government announced $2.8 billion of spending cuts to fund a flood recovery and rebuilding initiative. As part of this, 'the Government will cap funding from [REBS] resulting in a saving of $160 million over two years.'

The Government has not provided a reason for the sudden closure of the scheme. REBS funding could simply have reached its cap. Given that the program has undergone two significant financial cuts, one of which the Government justified as due to poor demand, it seems likely that it could have exhausted its funding prematurely.

In Question Time today, the Leader of the Opposition queried the Prime Minister, asking her why the scheme was due to close in 2012 when budget papers show that the scheme was funded into 2012–13 to the tune of $24.5 million. Presumably this money has been earmarked for the external assessment and review of the program as announced in February 2010.

The Government’s media release of 28 February 2012 is somewhat confusing. It states that REBS facilitated the installation of 250,000 solar hot water systems, but these figures surely relate to rebates paid since 2007 (see here and here). REBS has only been in place since 2010.