Bigger home batteries may get smaller rebates in urgent tweaks to red-hot household storage market

Industry should brace for imminent changes to federal Labor’s Cheaper Home Batteries rebate, the Smart Energy Council has warned, as it consults with the government on urgent steps to make the scheme more sustainable and avoid a “boom-bust” scenario.

In an interview with Renew Economy’s Solar Insiders podcast this week, the chief advocacy officer of the Smart Energy Council (SEC), David McElrea, said concern is mounting in the industry that the enormous success of the rebate has become unsustainable and could lead to its early closure.

“That’s always an option for government, and that would be … dramatically bad for the sector,” McElrea told the podcast in an interview published on Thursday.

“It would leave a lot of [businesses] in trouble, but it would also be bad for the Australian community, because [adding a battery is] the best thing you can do to bring your to bring your energy bill down and affect your cost of living.”

McElrea is confident this is not the way federal energy minister Chris Bowen is headed, particularly given the enormous “latent demand” for home batteries demonstrated by the huge success of the rebate in just six months.

But he is also adamant that now is the time to make a number of urgent tweaks to the scheme to make it work better – and longer – for government, industry and consumers.

“The expectation is … that [the current budget for the rebate] is going to be exhausted well before time, and probably sometime next year, on current trends,” he tells the podcast.

“So if we want to extend the scheme, we need to go to the government and say, ‘please put more money into this scheme.’ And if we do that, we have to then do it in a responsible manner. 

“At the moment, I think we have a particularly sort of acute issue, which is that the scheme is running so hot that it might exhaust itself before people expected it to,” McElrea says.

“In that case, you might need to adjust some of those settings reasonably urgently to make sure the scheme continues and survives and is politically and financially sustainable.

“That means more money into it as well – so that’s the first setting. But I think we’re also learning as we go that we need to probably just keep looking at how the … scheme is running.”

McElrea says one key change that the SEC is recommending – following discussions with industry during the week – could include the introduction of a sliding scale rebate, where the size of the discount decreases as the size of the battery increases.

As McElrea explains, this could mean that batteries closer in size to the pre-rebate average of between 11-15 kilowatt-hours would get the full rebate while batteries sized up around the 50 kWh ceiling might get a “20, 15 per cent [of the rebate], something like that.”

This would help address growing concerns – backed by recent data – that the first $2.3 billion allocation of federal funding for the rebate is being eaten up by systems sized at 50 kWh and above, as household take full advantage of the one-off, per-kWh discount.

According to industry statisticians, SunWiz, the 50-75 kWh and the 30-50 kWh market segments grew by 71 per cent and 58 per cent, respectively, in November – much more than any other segment.

“From the perspective of the government… they pay a higher rebate for larger batteries, and therefore the more …of the larger batteries that are sold then the more of a cost to government, and the quicker that they exhaust the funding they had originally set aside.

“So again, that just has to be, I think, realistically confronted by the industry in engagement with government.”

McElrea says tapering the rebate is a preferable outcome for industry than drastically lowering the cut-off for maximum battery storage capacity, because it means businesses can adjust more smoothly.

The timing of any changes will also be crucial.

“Our strong message to government is, and has been, that we need sufficient notice as an industry of any changes, because …there are people …who are waiting for their March installation, or something like that, and have been quoted prices.

“[This is] a responsible sector that wants to do the right thing, that recognises that this is a good program and wants it to continue, and is prepared to engage, you know, rationally and responsibly with government around that.

“[The rebate] is running extremely hot at the moment, but if you’re going to taper that off … just ease out of it. And that also means no abrupt changes, sufficient notice for installers to ideally fill out their order books for wholesalers and retailers, hopefully not to be left with stranded … stock.

“Certainly that was a loud and clear message from the industry [on Wednesday] was they don’t want a boom-bust cycle, and they need adequate notice.

“We think, you know, if we could get three, four months notice from the government … that won’t satisfy everyone, but for most people that should do the job,” McElrea says.

“And [to industry], I just say that you should be cautious about long-term plans… You know, it’s four or five months, because it is possible some of these settings will change.

“So if you are making orders or offering quotes or something like that, you should just bear that in mind when you’re doing that, because I think … there’s a reasonable chance that some settings might change, and if they do, you don’t want to be left stranded.”

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