How I prospered after the solar rebate collapse
Thursday, February 9, 2012/
Dewayne Montey is one of many Australian entrepreneurs attempting to make a living in the solar industry. And in 2008 he won a major contract with the Queensland Government to install new solar hot water systems as part of a $3 billion initiative.
It died soon after, leaving the company in the lurch. But Montey was able to keep the business kicking on with revenue of $17 million by working with a local council to create his own campaign.
The solar industry has seen a number of changes to rebates and subsidies. How have you been affected?
With the [Federal] Government making some substantial changes to the renewable energy legislation back in April last year, it all reared off a cliff. The multiplier the Government used to calculate solar credits went from five to three, but it was predicted to go from five to four. The market had been far too hot under the five multiplier and created too much demand.
So the Government had to make a move there and an aggressive announcement to pull it back. That effectively meant that in the short-term, prices hadn’t adjusted. So there was a huge gap between the prices when the multiplier dropped.
Can you describe what happened with your own program?
So this is what happened. We were working with the Logan City Council through the Queensland Government to install hot water systems and solar panels within the council. It was part of a $3 billion program, and we were one of the winners of that project. That project ended up dying.
But we went straight back to the Logan City Council, and they agreed to support the running of another bulk buying program. We had to mitigate a very large contract with a small contract.
You came up with a pretty clever solution. What did you do?
What we did was just run the program under our own name, and then put it through communities on behalf of the council. We were able to do this because of the work we’d done. The community trusted us, and we had built up a lot of demand as a part of the original project.
How were you able to just go back and make a new campaign?
In this case, it was understanding the rules of the game. It’s all about procurement with local government, and we had to understand how to bypass those large tender programs. We already had that relationship with them.
Council has the ability to make a decision of up to a certain amount of money without needing the three quotes. We turned the bulk buy program from a tender, into a community education program with a sponsorship.
We ended up hosting information sessions, we took registrations of interest, and then we were able to get our obligations met. We leveraged that whole program to get half a million dollars’ worth of promotion and support.
And how has the program been since then?
We’ve kept the bulk buying program going as long as we can. The numbers fell off through the first and second quarters of last year, but we’ve seen a major correction in pricing. The cost of switching to solar has now come down to parity with the cost of rising electricity, which is a good sign for the industry.
How badly did you have to restructure the business?
We had to let a lot of jobs go, which was gut wrenching. We let about 60 contractors go, and about 12 staff. A lot of those people were highly dependent on our progress, so a lot of people were affected. And we needed that project.
What do you think is the biggest lesson you’ve learnt from all this?
Anyone can build a business on Government subsidies, but you need to be able to sustain it. The number of shifts in policy that we’ve seen has brought the industry to its knees, and that’s not politician bashing, it’s just a suggestion that perhaps the Government needs to have a long-term view on these things.
And from a growth perspective?
Don’t over-commit your resources, I think. We’ve stayed local despite our desires to grow rapidly. We’ve been vindicated by that, in not getting too excited.
I think we’ve been able to take massive body blows to the industry by not growing rapidly. We’ve stayed local, although we could have gone national, and because of that I think we’ve been able to adapt.