NSW worried about risks of multi-billion solar loans program

New details have emerged about the design of the NSW Government promised loans program for household rooftop solar installations, including that the government now hopes to make the first zero-interest solar loans available in the coming summer, and that the Clean Energy Finance Corporation has been approached as a potential funder.

RenewEconomy revealed in June that the NSW government had scrapped a previously announced virtual power plant initiative so it could redirect $50 million in funds to the zero-interest loan program, but little by way of actual detail has emerged about the replacement program has been made available.

Departmental budget documents obtained by Greens NSW MP David Shoebridge have revealed additional details about the potential design of the scheme, including concerns raised by the Department that the market may not be equipped to cope with a rapid surge in uptake of solar and battery systems.

Additional concerns raised by the NSW Department of Planning and Environment include the possibility that it may be incentivising households to take out loans for solar and battery systems without having sufficient means to pay off the debts.

“There is significant reputational risk with the program encouraging the uptake of an uneconomic asset and enticing medium to low income families into a loan they may not be able to pay back”, the internal budget documents say.

The details have been revealed through internal budget documents seen by RenewEconomy, that were prepared ahead of the NSW Government’s 2019 budget released in June.

By supporting the use of zero-interest loans under the Empowering Homes program, the NSW Government hopes to unlock up to $3.2 billion in additional private investment in clean energy.

The documents reveal that the NSW Government has approached the Clean Energy Finance Corporation to see if the federal government’s investment arm can provide the capital to be used as the loans.

The CEFC has previously provided support for solar and battery loan programs, including making funds available for use via RateSetter’s National Clean Energy Market loan program.

However, RateSetter’s loans are charged a rate of interest, albeit lower than can often be provided by other loan providers, such as banks.

The budget documents reveal that the $50 million in funding allocated by the NSW government to the Empowering Homes program will be used to cover interest foregone through by providing the loans at zero-interest and to cover the costs of potential loan defaults.

The NSW Government aims to support the installation of 300,000 new solar and battery installations over 10-years under the Empowering Homes Program, but the budget documents highlight the risk that the market may not be ready for a rapid surge in installations.

The Department of Planning and Environment warned that there is a risk that “high installation rate with an unprepared workforce, poor training, poor auditing scheme leads to injury/death/reputational damage”.

A spokesperson for the NSW Department of Planning and Environment downplayed the risks, saying the documents were early draft documents related for the Empowering Homes program, and that sufficient safety and financial protections will be in place for households.

“The document referenced appears to be a preliminary draft of a very high level assessment of potential program risks, standard practice for Government in the early development of programs such as this,” the department spokesperson said.

“These issues are flagged at the earliest stage of program development to enable agencies over time to consult, test and build into the final design ways to address the issues.”

“Safety and affordability are critical priorities for this program and so the Government has invested time and effort since these early drafts to lock these factors in.”

“All applications to the loan fund will be subject to strict loan assessment criteria to make sure loans are not being provided to those who cannot meet the payments.”

“We are also working with the Clean Energy Council to leverage their accredited industry program to ensure appropriately trained and qualified installers are used to meet strict safety standards.”

Greens NSW MLC David Shoebridge has called on the NSW Government to ensure that sufficient safety measures are in place to protect households having solar and battery systems installed, as well as protecting households who may be taking on additional debts in the form of loans they may not be able to pay off.

“This is the only program this government has proposed for renewable energy, and it turns out that it’s policy on the run with real risks and minimal benefits,” Greens MLC David Shoebridge said.

“The government’s plan is for private installers and private finance companies to deliver the loans, with all the risks from debt traps and safety that this brings.”

“Proper investment in publicly owned renewable energy would create thousands of good steady jobs. Instead from the NSW Liberals we get dodgy and dangerous harebrained schemes that put workers at risk and households in debt,” Shoebridge added.

Concerns about the design of the Empowering Homes program are likely to be heightened due challenges that have emerged in the recently re-launched Victorian Solar Homes Program.

While most governments have phased out the provision of cash rebates for the installation of rooftop solar systems, the Victorian Government is offering rebates to up to 770,000 Victorian households.

In an attempt to stagger the availability of rebates under the Victorian program, making a small number of rebates available each month, the government has inadvertently created a situation where monthly quotas for rebates are being exhausted within days of becoming available.

Solar industry associations, including installer groups, have called on the Victorian Government to rework the design of the program, out of fear that it may see a return to the volatile ‘solar-coaster’.