Sustainability

What is a solar feed-in tariff?

solar rooftop panels

RACV

Posted June 14, 2024

Many Victorians now know about solar systems for households. But what is a solar feed-in tariff, and how could it benefit your energy bills?

Australia is a global leader in solar power. The Clean Energy Council reports that rooftop solar now accounts for 11.2 per cent of Australia’s total electricity supply, with an estimated one in three households and businesses having installed rooftop solar. That makes solar Australia’s fourth largest source of electricity generation, and its second largest renewable electricity generation behind wind energy.

"It’s clear that Australians are becoming familiar with rooftop solar panels, as well as solar batteries," says Greg Edye, General Manager Energy at RACV. "But solar system owners, and those considering getting one, may be a little more confused on the concept of a solar feed-in tariff. In light of the premium solar feed-in tariff scheme ending this year, it's important to learn about these tariffs and how they can work for you."

Here’s what you need to know about the solar feed-in tariff (FiT), sometimes known as a solar buy-back scheme or solar bonus scheme.

Solar feed-in tariffs explained

What is a solar feed-in tariff?

Sometimes your solar system will produce more solar electricity than your household can consume. If you don’t choose to store excess energy in a solar battery, it can be sent into the energy grid. The maximum allowable export on a single-phase supply, up to 5kWh, is based on energy market regulations for distributors.

A solar feed-in tariff is a payment for this excess solar electricity fed back to the grid. The payment is made in cents per exported kilowatt-hour (c/kWh) and usually appears as a credit on your electricity bill.

 

solar panels on a house

Solar feed-in tariffs may allow you to sell excess power back to the grid. Image: Matt Harvey

What is the minimum solar feed-in tariff?

Solar feed-in tariff rates differ from state to state in Australia.

The Essential Services Commission (ESC), Victoria’s independent regulator, sets minimum feed-in tariff rates each year. This is the minimum rate that energy retailers must pay you for electricity exported from eligible solar systems into the grid.

Energy retailers can, and often do, offer customers a solar feed-in tariff rate above this minimum.

The solar feed-in tariff is different from the premium feed-in tariff (PFiT), a scheme that was set up in November 2009 for early adopters of solar systems and which ends in November 2024.

What is a single-rate versus time-varying solar feed-in tariff?

Energy retailers often offer their solar customers a single rate or a time-varying rate when it comes to solar feed-in tariffs.

  • Single rate – the same tariff rate, regardless of the day or time
  • Time-varying rate – a different rate depending on the time of day your excess electricity gets exported to the grid.

Check the details of your current plan or contact your energy retailer to understand which type of tariff is of greatest benefit to your household.

 

RACV Solar installing rooftop solar panels

Rooftop solar panels can generate a lot of energy. Image: Matt Harvey

What is the minimum solar feed-in tariff in Victoria?

Between 1 July 2023 and 30 June 2024, the minimum solar feed-in tariff in Victoria was:

  • Flat rate – 4.9 cents per kilowatt-hour (4.9c/kWh)
  • Time-varying rate – between 3.9c/kWh and 11.3c/kWh.

The Essential Services Commission has announced reduced feed-in tariffs from 1 July 2024. The new minimum solar feed-in tarriff is:

  • Flat rate – 3.3 cents per kilowatt-hour (3.3c/kWh)
  • Time-varying rate – between 2.1c/kWh and 8.4c/kWh.

Under the time-varying rate, energy retailers have two rate options:

Option 1

  • Overnight (10pm-7am every day) – 7.6c/kWh
  • Day (7am-3pm and 9pm-10pm on weekdays; 7am-10pm on weekends) – 2.8c/kWh
  • Early Evening (3pm-9pm on weekdays) – 7.0c/kWh

Option 2

  • Shoulder (9pm-10am and 2pm-4pm every day) – 4.1c/kWh
  • Off-Peak (10am-2pm every day) – 2.1c/kWh
  • Peak (4pm-9pm every day) – 8.4c/kWh.

Again, energy retailers can offer rates above this minimum.

Why has the minimum solar feed-in tariff decreased?

There have been many schemes to encourage Victorians to install solar panels, including the premium feed-in tariff (PFiT) scheme (see below).

But as the number of households with solar panels has increased, so too has the amount of power going back into the grid during the day – when demand is usually lower – which means the value of these solar exports is now lower.

The FiT is going down mostly because daytime wholesale prices are forecast to decrease, and most solar exports occur during daylight hours.

Early evening and night-time wholesale electricity prices are also forecast to decrease in 2024–25. This has also led to lower early evening and overnight feed-in tariff rates than in 2023–24.

What is the premium feed-in tariff scheme? Is it ending?

In November 2009, Victoria set up the premium feed-in tariff (PFiT) scheme. Under this scheme, eligible households have been paid 60 cents for every excess kilowatt hour of energy fed back into the state electricity grid. The scheme closed to new applicants at the end of 2011.

The PFiT scheme is due to end on 1 November 2024, which will affect more than 88,000 Victorian households, small businesses and community groups who are currently on the PFiT scheme.

"If you are on the PFiT scheme, you may have an older and/or relatively small solar system," Greg says.

"A new solar system may benefit your household, since it will be in line with the latest technology and better matched to your current energy needs. It will also come with updated warranties. If your current or future energy needs include a solar battery, electric vehicle charging, or all-electric appliances such as induction stovetops, modern solar systems can be designed to accommodate."

 

birds eye view of solar rooftop panels

You can store excess solar power in a solar battery. Image: Matt Harvey

How do I receive a solar feed-in tariff?

Each retailer or network area has their own conditions and network requirements which will determine the maximum amount of electricity you are allowed to send back to the grid. Typically a pre-approval process is carried out before installation to determine the amount.

After your system is installed, an application is submitted to your electricity retailer for a solar feed-in tariff to be applied to your electricity bill. Each application is specific to the property in which the solar has been installed.

Energy retailers offer different packages and terms and conditions, so it's important to shop around. Check out Arcline by RACV for competitve solar feed-in tariffs.

What should I do with my excess solar power?

The best use of your excess solar power is to put it to use by running major appliances like dishwashers, washing machines, and dryers during the day - especially on sunny days, when your solar system will be performing best.

You could also consider installing a solar battery. In fact, it may be financially better to store excess electricity in a solar battery rather than feeding that energy back to the grid.

A solar battery can store your excess electricity generated from your solar panels during the day. You can then use ‘solar’ energy at night, or to supplement your energy demands if they outstrip what your solar panels can supply during the day.

Contact our expert consultants at RACV Solar to discuss your options to install or upgrade solar systems and solar batteries.

 

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