Understanding Solar Quotes

Solar quotes can be difficult to understand. To start with, there are so many different products of varying quality that you really need to be an expert to know if what you are being quoted is fit for purpose. It is extremely important to trust the salesperson and make sure they know their stuff. When you start considering the federal and state based incentives and rebates and the different payment options it can all become overwhelming.

For this post, we will focus on how to understand what you are actually going to be paying for your new solar system. This sounds like a trivial task but we are constantly meeting clients with competitor quotes that they don’t really understand what they are up for!

The first thing to look for in a quote is the Total System Price. This is the cost of the system before any incentives have been deducted. This includes GST which must make up 1/11th of this price. If the Total System Price was $11,000 then the GST must be $1,000. If it’s not shown or is a lesser amount, through the quote in the bin; that retailer will not be in business for long!

In Australia, there are federal incentives called Small Scale Technology Certificates (STCs) for all new systems under 100kW. That covers all residential systems and small to mid size commercial solar systems but we will only discuss residential here as there are some tax differences.

You usually sign over these STCs to your solar retailer in exchange for an upfront discount. Your retailer will usually fix the price they will pay per STC but read the fine print; some will pass on the market value at the time of installation. This might give you a better return but exposes you to risk. Prices can fluctuate. They will never exceed $40 each (just trust me!) but have dropped to around the $17 mark in the past.

The number of certificates created is based on the capacity of the solar panels, the geographic location and the installation date. The more panels installed, the more STCs are created. (Note that it is not based on your inverter capacity). Systems in sunnier locations generate more energy so are given more certificates (based on postcode). Certificates are based on the expected generation of the system until the scheme ends in 2030. If installed in 2020 it’s based on 11 years, 2021 – 10 years and so on. That means next year the STCs drop by 1/11.

You can calculate the number of STCs a system is eligible for here: https://www.rec-registry.gov.au/rec-registry/app/calculators/sgu-stc-calculator. Your quote should have listed exactly how many the system is eligible for and what value they will offer you per STC. There is no GST on these so they simply reduce the amount you pay.

If there are no state rebates (eg. WA), then once you subtract the STCs from the Total System Price you are left with the Net System Price. This is the actual amount you are expected to pay.

If there are state rebates, you must also subtract these too. For example, in Victoria, you may be eligible for the solar panel rebate under the Solar Homes Program. At the time of writing, this is worth up to $1,888. It is paid directly to the solar retailer so can be treated as a discount and the Net System Price will reflect this.

Just a side note: This kind of fixed rebate skews buyers towards cheaper or smaller systems as they can appear much cheaper. As an example, if a system was $1,000 “upfront” its true cost could be $8000. Another system might cost $2,600 upfront but its true cost could be $9,600. It appears to be 260% more expensive but is really only 20%. The upfront difference may seem huge, but paying a bit more could save heartache later.

Perhaps the trickiest part is when partial loans are involved. In Victoria, there is a loan option as part of the Solar Homes Program Solar Panel Rebate. It is also worth up to $1,888. However, it is an interest free loan so needs to be repaid. The upfront cost of the system is reduced but you are still paying the full amount. Depending on the retailers quoting system, the Net System Price might show this lower figure but it should be clear if they have applied the loan or not. If comparing quotes, its probably easier to just ask them not to apply the loan to the quote. You can compare quotes knowing that you are comparing the amount you will actually pay (in the end).

You might also be using finance to fund the difference. If you are offered interest free finance, understand that you are paying a premium for the service. You should consider the total cost of using standard finance (with interest) on a competitors quote and see what works out cheaper in the long run. Solar retailers generally aren’t registered financial agents. The solar retailer should forward you to a registered financial agent to discuss fees and charges and your ability to service the loan before you proceed.

When you look at the quote breakdown, it should look something like this:

  • Total System Price (including GST)
  • Less STC incentive
  • Less State rebate (if available)
  • = Net System Price

OR

  • Total System Price (including GST)
  • Less STC incentive
  • Less State rebate
  • Less interest free loan (to be repaid over x years at y rate)
  • = Net System Price

Never compare the Net System Price of the first type with the second. The second will seem cheaper but it has the loan which still needs to be repaid. To compare them, add the loan amount to the second Net System Price and you will be comparing the actual costs of the systems. If the quote doesn’t show this breakdown, again throw it in the bin as they won’t be in business for long. One way to minimise dealing with these type of businesses is to ensure you only deal with Clean Energy Council Approved Solar Retailers.

You also need to check when payments are required. A deposit or inspection fee may be required. Payment may be required in full before installation, on installation or some time after installation.

There is still a lot more to understanding quotes but at least you should be able to understand what the cost of the system really is and what you are actually paying and when.

Once you have decided to go ahead, you should not pay a deposit or inspection fee or any other fee until you have been approved for a rebate as getting it back can be difficult. You should not pay for any preparation works you would not have otherwise done until the rebate and network pre-approvals have been granted. If you are rejected for any reason it can be costly.

Just a final note; the Total System Price is the amount you would have to pay for the system without any incentives. If you ever need to replace the system entirely (it happens too often), this could be what you are required to pay next time. Some incentives are on off so it makes sense to get the best you can afford and plan for the long term.

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