Solar owners hit by another fall in feed-in tariffs

The minimum feed-in tariff electricity retailers must pay households for the rooftop solar power they send to the grid in Victoria has been slashed by 32 per cent, from 4.9 cents per kilowatt-hour to just 3.3c/kWh.

The new all-time low for the state’s fixed rate solar FiT – flagged by Victoria’s Essential Service Commission in November last year and locked in by the ESC this week – will come into play in July of this year.

The minimum for the state’s time-varying solar feed-in tariffs have also been reduced to a range of between 2.1 to 8.4 cents per kWh, which is 17 and 47 per cent lower than the corresponding rates for 2023-24.

In a paper detailing the reasoning behind the FiT cut, the ESC concedes that “in general, solar customers were strongly against our decision.”

But it then goes on to note that submissions from cranky solar customers “did not include alternative methodologies or facts” to change its mind.

“Legislation dictates we must base the feed-in tariffs on the value of solar exports,” the report says.

“The increased number of households with rooftop solar has reduced demand and increased supply during daylight hours.

“This has lowered the environmental impact of electricity generation and reduced wholesale electricity spot prices, especially during daylight hours.

“For this reason, solar weighted wholesale electricity prices are forecast to be lower in 2024-25 than they were for 2023-24. This means the minimum feed-in tariffs for 2024-25 will be lower than those for 2023-24.”

This sort of reasoning has set rooftop solar tariffs on a steep downward slide over the past three years, In Victoria taking them from a recommended floor price of 10.2c/kWh in 2022-22, to 6.7c/kWh in 2022-23, and then down again to the current 2023-24 rate of 4.9c/kWh.

What does it mean for the consumer?

Retailers can offer the flat feed-in tariff and/or time-varying feed-in tariffs, using the minimums set by the regulator as floor prices – that is, they can offer more, but not less.

As One Step has reported, FiT offers across the broad range of retailers in Victoria can vary quite a lot, and some of the more generous-looking offers can have small-print conditions that remove some of the shine.

Currently, AGL Energy offers the minimum 2023-24 FiT of 4.9c/kWh for two of its retail energy plans, and up to 15c/kWh for its Solar Saver plan. This is only for the first 10kWh of solar exported each day, though, after which the FiT reverts back to 4.9c/kWh. There are also restrictions on inverter size for this plan.

Origin Energy offers a similarly high FiT, but only for customers who buy their solar through the gentailer and also over a limited time period.

At the smaller retailer level, Indigo offers a flat rate of 7.2c/kWh and RACV’s Arcline offers a flat rate of 6c/kWh.

It remains to be seen what these retailers will do once the new 3.3c/kWh rate kicks in, in July, but if they stick with the popular trend of offering the bare minimum then the imperative to self-consume will be greater than ever.

“Significant savings can be made by using the energy generated by the solar panels, rather than importing power from the grid at retail rates,” the ESC helpfully notes.

“Shifting electricity usage to daylight hours – when solar is producing – is the best way to maximise the financial return on a solar system.”

For those who cannot do that, a home battery may be in order.

‍

This article was first published by One Step off the Grid. You can read it here.

‍

You can also hear why installing a battery this year is a good idea on the next SwitchedOn Australia podcast to be released on Monday 4 March.