Budget crunch forces Australia to withdraw solar rebate

The rebate plan, which provided discounts on solar power systems, received unprecedented popularity and generated more than 30,000 applications last month. The government, which had allocated $123.3 million for plan, decided to annul it three weeks before the closing date, as the costs escalated to about $616.5 million.

The Ministry of Environment had allocated an additional budget of $178 million last month, but the funding was utilized to fulfill orders for applications last month. The sudden announcement gave solar power retailers only eight hours to process applications.

The industry was in a flurry of activity, with many retailers extending working hours to accommodate last-minute applicants. The scheme became so popular that retailers were not able to keep pace with demand. About 63,000 households that have already applied will benefit from the old plan.

A new plan, offering lesser incentives, has been proposed and will be made available to all consumers. The earlier plan was applicable only to households with annual income less than $82,200.

Applicants will now be required to apply for the new rebate under the Renewable Energy Target (RET) program. The RET aims to generate 20% of Australia's total power demand through renewable energy sources by 2020. By that time, the RET will enforce a four-fold expansion of the existing Mandatory Renewable Energy Target, which has been in effect since April 2001.

The RET will combine territory and state renewable targets into a common national target.

As per the new rebate proposal, solar power systems installed in households after June 9 will receive "solar credits" instead of rebates. Households will be provided with Renewable Energy Certificates (REC). The government will encourage the installation of rooftop solar systems by providing discounts on installation cost or cash payment for the value of REC.

As an additional incentive, households will be paid five times the final value of certificates during the first three years of operations.