Why solar feed-in tariffs are dropping (and will continue to fall)

If you have a grid-connected solar system, chances are you export some of the electricity you generate back to the grid. For most Australian solar homes, the feed-in tariff you get for your exports will be much less than the rate you pay to buy electricity back from your power company. 

This is true for all solar households no matter which power company you’re with, unless you’re on a legacy premium feed-in tariff (a scheme introduced by state governments around 10-15 years ago to award early adopters of solar with a high solar feed-in tariff, now closed to new entrants). 

So let’s unpack why feed-in tariffs are dropping and what you can do to maximise the value you’re getting from your solar system.

 

Why are solar feed-in tariffs so low?

While it might feel a bit unfair, the reality is that solar power isn’t valued less than other forms of energy generation. Electricity is valued the same regardless of its source, whether that be solar, coal or anything else. It all comes down to how electricity is bought and sold in the market, and good old supply and demand. 

 

The value of electricity is lower during the day

There are now over 2.5 million rooftop solar installations in Australia. Despite some households using and/or storing some of their electricity, that’s a huge number of solar systems all generating electricity at the same time and feeding it into the grid during the day.

As a result, electricity supply during the day peaks when demand is often low. So the value of electricity is very low (often even negative) at the time you’re selling it back to the grid. 

In this way, the popularity of solar is actually contributing to the decline of feed-in tariffs - it’s a double edged sword. 

In fact, feed-in tariffs may one day be a thing of the past. The Australian Energy Market Commission (AEMC) is already talking about charging solar owners to export electricity because the huge uptake of rooftop solar has made the current system “unsustainable”.

However it’s not just the value of electricity that impacts the price you buy and sell for.

 

How electricity is bought and sold

The price of electricity is made up of a number of costs, including generation costs, transportation costs and risk protection costs.

The cost to generate electricity and transport it from the point of generation to the point of consumption (i.e. your home or business) is always paid for at the point of consumption (i.e. by the person or business using it). This means that when you (or any electricity consumer) buy electricity, you pay for the generation and transportation costs. However when you (or any electricity generator) sell electricity, you’re only paid for the generation portion. 

The other thing you usually pay for when you buy electricity is risk protection. This is a bit like insurance that your power company takes out to protect you from paying excessively high prices when electricity demand spikes and wholesale electricity prices skyrocket. Think of those really hot summer days.

 

So how do you maximise the value you get from your solar investment?

Use your solar power in your home

Even though solar feed-in tariffs are falling, going solar is still one of the best ways to save money on your power bill. With solar panels, you can generate and use your own free electricity and minimise the amount of energy you have to buy. 

This is known as self-consumption and is the key to maximising the value you’ll get out of your solar system.

So run your appliances during the day - if you’re out, most appliances have in-built timers you can use to schedule them to run at the right time. And if you do find you still have plenty of excess solar power being exported during the day, consider investing in a battery. With a battery, you can store your excess solar power and use it later on, rather than exporting it during the day for a relatively low solar feed-in tariff.

 

Ensure you’re on the right energy plan for you - the solar feed-in tariff isn’t the be-all and end-all

Depending on how you use your solar power, you might benefit from prioritising a higher solar feed-in tariff or you might be better off looking for the best usage rate available. The key is to look at all rates in conjunction with each other, rather than just focusing on one in particular. 

Also check out what other value the plan offers - are there any smart monitoring tools you can use to get more out of your solar investment?

At Mojo Power, we offer a range of electricity plans including All Day Breakfast, which prioritises a great usage rate and daily charge, and G’Day Sunshine, which offers one of the highest feed-in tariffs in the market for your first 5kWh per day of solar exports. And both plans come with a smart meter so you get actual bills (no more estimates!) and full use of our app for better visibility and control of your energy usage and solar performance. 

New call-to-action

 

 

Why cap the G’Day Sunshine solar feed-in tariff at 5kWh?

We know that the value of electricity exported during the day is low (even negative) so it’s not possible for any power company to offer an artificially high solar feed-in tariff without also upping their usage and daily rates significantly. 

Plus, we don’t want to encourage new solar owners to buy an oversized system by offering an artificially high feed-in tariff for all exports when they might be penalised for doing so in the future (remember the AEMC’s proposal to charge solar owners for their exports?).

However on G'day Sunshine, if customers do have a bit of extra solar power (which we know many do) they get one of the highest feed-in tariffs in the market for that spill and then our standard feed-in tariff for any extra exports after the first 5kWh.