The strong demand for the Rudd governments $1600 solar hot water subsidy and the small scale household PV scheme have slashed REC prices, putting at risk billions of dollars in near term investment in major climate change initiatives such as wind power.

The government initiatives have resulted in a much higher than anticipated demand for solar hot water and a strong take-up of household PV. This has flooded the REC market with solar hot water credits water units and the phantom credits created from the 5x REC multiplier for small scale solar installations.

Although major utility scale renewable projects such as wind farms, rely on a strong REC price over the life of the project (up to 25yrs), the drop in the REC price has stalled investment in such projects. This can be seen by the possibility of only two large wind projects reaching financial close by 2010 and the fact that the major wind turbine tower supplier Keppel Prince may have to layoff up to 250 jobs through lack of wind projects reaching the construction stage.

Rob Grant, managing director of PacHydro said “unless there’s a short term fix by the government, there won’t be any investment in large scale renewable energy for the next two to three years”.

See the AFR 27th Oct 09 for the full article, and see the EPi discussion below (26th Oct).