The federal government has revealed that the Cheaper Home Batteries scheme had been facing a bill of around $14 billion, before changes announced last week cut the likely cost of the four-year scheme by nearly half.
As Renew Economy has reported, the stunning success of the scheme has defied all expectations, averaging up to 1,500 applications a day and headed to a total of 175,000 valid applications by the end of 2025, according to the Clean Energy Regulator.
The success meant that the Cheaper Home Batteries scheme had been chewing through its budget, with the $2.3 billion allocated in July expected to run out before the first year was out.
Data shows the funds are largely being eaten up by systems sized at 50 kWh and above – some of them offered at knockdown prices of just a few thousand dollars – as promoters and households take full advantage of the scheme’s design.
To address this, the Albanese government last weekend announced it would tip nearly $5 billion more federal funding into the rebate, taking its total budget to $7.2 billion, while also adjusting its settings to make it last longer and go further – including by gearing it towards smaller systems.
In its Mid-Year Economic and Fiscal Outlook (MYEFO), the federal government said the changes would ensure support was “aligned with contemporary battery technologies and household needs while continuing to provide cheaper batteries.”
But most importantly, the changes were “expected to decrease payments by $6.7 billion over the four years to 2028–29,” the MYEFO documents say, compared to under the current settings, where the initial budget was expected to increase by $3.4 billion in 2025–26 and $11.6 billion over the four years to 2028 – 29.
Show me the savings
The key change to the rebate, which will come into play in May 2026, addresses the big battery problem. It tapers the size of the discount a household gets relative to the size of their battery – reducing the amount once a system gets above 14 kilowatt-hours, and then reducing it again – this time, significantly – once it goes over 28 kWh.
The hope is that this change will address a trend that few saw coming when the rebate was first launched: the rush to install super-sized home battery systems.
When the rebate originally launched, offering a roughly $330 per kilowatt-hour (kWh) discount on usable battery storage capacity from between 5 kWh and 50 kWh, including for a system sized up to 100 kWh, the message from many installers and retailers was to “go big” to take full advantage of the one-off savings.
Almost immediately, the average Australian home battery size jumped from around 10 kWh to more than 20 kWh. And then it kept going.
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. And the vast majority of these huge systems – more than 90 per cent – are going into homes.
As the Smart Energy Council (SEC) chief advocacy officer, David McElrea told Renew Economy last week, on the Solar Insiders Podcast, the fact that households have been going big on their batteries is not necessarily a bad thing, in light of the trend towards electrification and bigger solar systems.
“Provided you get all the engineering right and you can adequately draw down on it, it’s not a bad thing at all,” he told the podcast.
But concerns have been emerging in the industry that some households are being sold systems much bigger than they actually need, with storage capacity they are unlikely ever to be able to put to use. Further, there have been concerns that some installers aren’t getting the engineering right.
“You hear a common concern that maybe inverters, people are being up-sold on battery size and down-sold on inverters,” McElrea told Solar Insiders.
“That’s anecdotal. I don’t know how much of that is true, but that’s that’s certainly something that was raised [at an industry briefing on the Cheaper Home Batteries settings, held by the SEC last week].
“That’s the sort of thing you might look at once you get some of these other settings right,” he said.
Getting the settings right – at least to ensure the hugely popular rebate lasts its full four years and is shared across the optimum number of Australian households – is what federal energy minister Chris Bowen hopes to have done, with the changes and extra funding.
From May 01 2026, for batteries up to 14 kWh (inclusive) the small-scale technology certificate (STC) factor which determines the rebate amount – currently at 9.3, but reducing to 8.4 on January 01 – will be applied at 100 per cent.
For every kWh greater than 14 and up to 28 kWh (inclusive) the STC factor will be applied at 60 per cent, and then for every kWh greater than 28 and up to 50 kWh (inclusive) the STC factor drops significantly, to be applied at 15 per cent.
“I think from the perspective of the government being realists … they pay a higher rebate for larger batteries, and therefore the more of the larger batteries that are sold then the more of the cost to government, and the quicker that they exhaust the funding they had originally set aside,” McElrea says.
“It’s also about spreading the benefits of this consumer energy solar revolution to as many people as possible, so that as many people get to benefit from it.”
So far, the response from industry seems to be mostly positive, with many keen to see the sliding-scale discount switch the focus back to right-sizing battery systems for a household’s needs.
“Adjusting how rebates are phased and tiered by battery size means the program is better calibrated to deliver the right battery, for the right home, at the right cost, while ensuring long-term program viability,” Plico CEO Robbie Campbell said during the week.
“That’s a sensible evolution, not a retreat.
“By lowering the upfront cost of batteries, the program accelerates the rollout of storage that reduces peak demand, eases pressure on the grid and defers expensive network upgrades.”
Dean Williamson, the country manager of GoodWe Australia says the rebate has helped his company to scale up and bring advanced solar storage products to the local market.
“The willingness of Australian homeowners to add batteries is globally significant and a huge success,” he said last week.
“But, we do agree that ensuring the ongoing viability of the scheme is essential and support calls to adjust the program. We need time and sensible adjustments, but believe the industry would rather have this than a sudden end.”
Editor’s note: From January 01, the STC factor will also start to diminish – and then again in May and then every six months from January 2027, and by a steeper amount. This is part of the original design of Cheaper Home Batteries, in keeping with the settings of the Small-Scale Renewable Energy Scheme (SRES), through which it is delivered. Solar Quotes has some very helpful tables here showing how this is likely to affect the $ rebate amounts offered over the four-year period.
