💰 How the SRES Makes Heat Pumps More Affordable

How the Small-Scale Renewable Energy Scheme Makes Heat Pumps Affordable

Australia’s shift toward cleaner energy isn’t just a national policy—it’s a conversation happening around household dinner tables. For many homeowners considering efficient hot water and heating systems, cost often becomes the first stumbling block. Thankfully, the Small-Scale Renewable Energy Scheme (SRES) softens that blow by turning renewable energy savings into an immediate discount. Let’s break down how it works, what Small-scale Technology Certificates (STCs) are, and how much they can reduce the cost of heat pump systems across different postcodes.

Understanding the SRES

The SRES is a federal incentive established to encourage Australian households and small businesses to install renewable and energy-efficient technologies such as solar panels, wind turbines, and heat pumps. Managed by the Clean Energy Regulator, it rewards energy efficiency with financial credits.

When an eligible product is installed, its expected renewable energy generation or savings over a “deeming period”—currently up to 10 years—is converted into Small-scale Technology Certificates (STCs). The higher the system’s efficiency, the more certificates it generates. Each certificate represents one megawatt-hour (MWh) of electricity either generated or saved.

These certificates hold monetary value and can be sold or transferred to installers in exchange for an upfront discount. That’s how households see savings right away, instead of waiting for rebates down the track.

What Are STCs and How Are They Valued?

STCs operate as a “green currency” in Australia’s renewable marketplace. Their price fluctuates depending on supply and demand, but as of late 2025, they generally trade between $35 and $39 each.

The number of STCs issued for a system depends on three key factors:

• System efficiency – Higher performing systems generate more certificates.
• Location (postcode zone) – Australia’s four STC zones vary by renewable energy potential. For instance, systems in Townsville (Zone 1) receive more certificates than identical systems in Hobart (Zone 4).
• Deeming period – The number of years remaining in the scheme before it ends in 2030. This period reduces slightly every year.

Once STCs are assigned or sold, they effectively lower the installation price of a system. That upfront credit is often worth more to homeowners than waiting for long-term paybacks.

Example: How STCs Impact Heat Pump Costs

To illustrate the financial benefit, below is an example comparing potential savings on a 300-litre heat pump installed in different Australian cities.

A typical installed cost for a modern air-source heat pump sits between $3,500 and $5,000. Thanks to the SRES, discounts of $900–$1,200 are commonplace, trimming overall costs by 20–30%. For example, a Brisbane family installing a $4,200 system could see their cost drop to about $3,100 after applying the STC value.

Why It Works So Well for Heat Pumps

Unlike solar panels, heat pumps don’t generate electricity—they save it. Traditional electric resistance heaters use roughly 1 kWh of power to produce 1 kWh of heat. A heat pump, however, can deliver three to four times that amount using the same input. This high efficiency qualifies it as a renewable technology under the SRES framework.

Australia’s moderate climate further enhances performance. Even in cooler regions like Victoria or Tasmania, modern CO₂-based heat pumps maintain high efficiency levels. That’s why the SRES gives them a comparable financial recognition to technologies that generate renewable power directly.

A Critical Look: Strengths and Shortcomings

The SRES has been instrumental in advancing renewable adoption across households, though it’s not without its imperfections.

• Upfront affordability – Consumers receive immediate discounts without navigating government bureaucracy.
• Performance-based reward – Systems are assessed on tangible energy efficiency outcomes, not arbitrary measures.
• Widespread benefit – Every participating household helps reduce grid demand and emissions nationally.

However, some limitations exist:

• Declining incentive – The deeming period shortens annually until 2030, meaning fewer STCs will be generated each year.
• Regional imbalance – Southern zones receive fewer certificates due to climate-based calculations, even though these areas often require more heating.
• Market fluctuations – STC prices can vary, creating some uncertainty for both installers and consumers.

Efficiency and Energy Equity

The conversation extends beyond personal savings. The SRES fosters energy equity, helping average households join the renewable transition without excessive upfront costs. Every efficient installation reduces collective energy use, eases grid pressure, and supports broader carbon reduction goals. Efficient homes contribute to a more resilient national energy landscape.

Looking Ahead

From 2026 onwards, the available deeming years will keep shrinking, gradually reducing total incentive value. Yet, with additional state-level rebates—such as programs in Victoria and Queensland—combined discounts could easily exceed $1,500 for some households. In the near future, smart heat pump controls, variable refrigerant systems, and time-of-use optimisation will become standard practice, driving further savings and sustainability.

Final Thought

The SRES remains one of Australia’s most effective instruments for turning technology efficiency into everyday impact. It rewards homeowners not just for choosing greener systems but for understanding how energy literacy shapes a sustainable future. In that sense, every efficient heat pump is both a household upgrade and a quiet act of climate leadership.