22 Oct 2021
NEWS & INFORMATION
Federal vs. State Which Victorian incentives will give you the best ROI?
You may have read our article on incentives available for energy efficiency solutions, but still not sure which incentives give you the best bang for your buck and return on investment? We can help!
Before we get into the article, we want to stress that the circumstances outlined below are general scenarios and may not pertain to your situation directly. To understand what is right for you, please discuss your requirements with a Cherry Energy Solutions Business Development Manager.
To recap, current incentives include:
If installed before 30th June 2023, claim your LED lighting upgrade or solar PV system installation as an instant or accelerated asset tax write off*, reducing your payback period and increasing your return on investment.
Small-scale Technology Certificates (STC’s) are a federal government incentive offered upfront as a point-of-sale discount, for solar installations under 100kW.
Large-scale Technology Certificates (LGC’s) are federal government incentives for solar installations over 100kW, which are redeemed annually until the year 2030.
Victorian Energy Efficiency Certificates (VEECs), are from the state government Victorian Energy Upgrade scheme and have a fluctuating market value, which is currently at an all-time high. Projects eligible for VEEC’s include;
LED lighting upgrades. Upgrade inefficient lighting, or even old LED lighting, to the latest technology, quality LED lights with a market leading 5-year warranty for free!
Solar PV systems over 200kW. This rebate amount may be offered instead of LGC’s and is a higher value, paid to your business as a lump sum approximately 16-months post installation. Further to that, Cherry may offer a percentage of the rebate as a discount upfront.
First we will need to consider the following to determine the optimal solar system size for your business:
- Your energy usage patterns
- Your electricity tariff
- Available roof area
- And your budget
This will in turn, influence the incentives you are eligible for.
For example, on a typical solar PV systems above 200kW in Victoria, you may be eligible for the Federal Gov’s Stimulus Package and VEECs or STCs (STCs eligible for multi-site installs, each below 100kW). The payback period will be higher for VEECs vs STCs. However, STCs are an upfront point of sale discount taken off the price of your quote, while VEECs are not paid until approximately 16 months after the installation. If less than 200kW of solar is installed across your site(s) – e.g., 2 x 99kW systems, we would recommend the STC rebate, which can be used in conjunction with the Federal Gov’s Stimulus Package to reduce your upfront costs.
For comparison, the higher VEEC’s rebate versus the STC rebate for 99KW of solar is illustrated below.
On a typical solar PV system above 200kW in Victoria, you may be eligible for the Federal Gov’s Stimulus Package and VEECs or LGCs. The payback period will be better for VEECs vs LGCs. Note, LGCs are paid annually until 2030, while VEECs are paid in one lump sum approximately 16 months after the installation.
If you are considering a larger solar PV system(s) or multiple smaller systems totalling to around the 200kW or more, you may be eligible for the Federal Gov’s Stimulus Package, VEECs or STCs.
The below graph highlights the estimated rebate amount and payback for a 500kW of solar in Victoria (which may consist of 1 x 500KW system, or 5 x 99kW systems).
As shown above, VEECs (at current market prices) offer a much larger rebate amount vs STCs or LGCs. The higher rebate amount typically improves the payback period by 12 months more than STCs and 24 months more than LGC payback periods. Despite a higher upfront cost and a delayed rebate claim on a VEEC’s system, the difference in savings and the improved payback period can be a more attractive alternative for customers.
While the price of LGCs can change, they are expected to remain relatively low in value^ and as such, don’t provide similar payback periods to STCs or VEECs. On the other hand, the value of VEECs are at an all-time high, estimated at around 2.5 times higher than LGCs in value and also paid back within 16 months, with a potential 25% offered upfront.
While STCs are an upfront discount on your quote price, they aren’t worth as much as VEECs for multi-site 99KW systems totalling 200kW or more, so we may encourage large scale customers to consider choosing VEECs in this case. Note also, the VEEC’s rebate can be even more lucrative if also undertaking additional energy savings onsite during the 1-year verification period, post install.
If you are ready to install solar or upgrade your lights, you could be eligible to receive some of these incentives and, as a result, your installation may be heavily discounted!
To get a better understanding of which incentives will be the most beneficial to your business, reach out to us for a discussion and receive a customised quote for your business.
Don’t forget, it is recommended to use a Clean Energy Council Approved Retailer, Clean Energy Council Accredited Installers and A Grade electricians to ensure your system is installed safely and up to standard. It’s also important to check your nominated provider understands the rebate options and has experience with processing VEEC’s for solar. To date, Cherry Energy Solutions is the only Victorian company that has successfully completed not just one, but two VEEC’s claims on solar, verified and paid out the rebate amount to customers. Check out our case study on Australian Glass Group with our second case study to be released shortly!
*Subject to terms and conditions. Please speak to your financial advisor or accountant regarding the above information.
^correct as at time of publication.
**The calculations and modelling above are made on certain assumptions that can change the payback and ROI for your specific system.
- The customer has a 17c/kWh combined electric usage rate
- The solar PV system will offset 100% of consumption on site
- The customer is eligible for and will take up the Federal Government’s Stimulus Package
- Average market pricing has been used, which may change depending on external market factors, timing of install, value of rebate, selected products, quality of install and site requirements