Solar feed-in tariffs

Electricity retailers in NSW are not required to set their solar feed-in tariff offers within IPART’s benchmark range. They can also choose to decrease or increase their solar feed-in tariff offers at any time. 

If you’re electricity retailer lowers their solar feed-in tariff, you can email or call them to ask why. When electricity retailers lower their solar feed-in tariffs, it is generally a good time to see if there is a better offer are available on the Commonwealth Government’s Energy Made Easy website.

IPART’s solar feed-in tariff benchmark for 2024-25 is lower than our benchmark range for 2023-24. The reason our benchmark range has fallen is that wholesale electricity prices rose sharply over 2022-23 due to rising energy input costs from coal and gas. This resulted in a high forecast of the wholesale price of electricity for 2023-24. Since then, wholesale electricity prices have come down, particularly during the middle of the day when solar is exporting to the grid. These prices have fallen mainly due to increasing solar penetration from rooftop solar and large-scale renewable projects. In addition, coal and gas prices have declined since their peak. This has resulted in lower forecast wholesale electricity costs for 2024-25 and a lower solar feed-in tariff benchmark range.

Households are paid by their retailer for the solar electricity they export to the grid. However, when this electricity is supplied to other households, retailers still must pay charges on each kilowatt hour they supply. 

The main charges are those paid to the network operator for using the energy grid. These can be more than 27 c/kWh. Retailers also must recover other costs, including:

• the difference between wholesale costs when solar is exporting to the grid and their average wholesale costs, which are higher
• their environmental obligations to purchase renewable energy, demand reduction certificates, and paying into the climate change fund
• their billing services, running their call centres, and other operations.

When these costs are added up, the retail price of electricity is higher than just the cost of the wholesale electricity supplied into the grid by households.

Network charges for solar exports, or export charges, are a new type of tariff. The Australian Energy Regulator has approved these tariffs being introduced from 1 July 2024. 

Customers can choose to opt-in to a network charge for solar exports from 1 July 2024. Existing customers will not be assigned to a network charge for solar exports until 1 July 2025.

These tariffs aim to send price signals to consumers about when it is beneficial (and not beneficial) to export excess energy to the grid. The charges consist of:

• Export rewards, offered during times of the day when energy is most needed. Export rewards will be in addition to solar feed-in tariff payments.
• Export charges, which may apply when solar users export large amounts of energy into the electricity network during times when energy is not needed
• A basic export level – an export threshold up to which customers can export to the grid without charge.

Network charges for solar exports aim to send price signals to customers about when it is beneficial (and not beneficial) for the grid to receive energy generated.

IPART does not regulate or set export charges. You should contact you Distributed Network Service Provider (Ausgrid, Endeavour Energy or Essential Energy) to learn about the network charges for solar exports that will apply in their network.

Electricity retailers in NSW are not required to set their solar feed-in tariff offers within IPART’s benchmark range. They can price above or below IPART’s solar feed-in tariff benchmark range.

However, if we set a higher solar feed-in tariff and electricity retailers followed this, it would mean electricity retailers would need to cover this cost by charging customers higher overall prices for electricity. 

This means that customers who don’t have solar panels would end up paying more overall. Many of these customers are unable to install solar because they rent or live in an apartment.

We set our solar feed-in tariff benchmark ranges equal to our forecast of what it would cost electricity retailers to buy electricity from the National Electricity Market at the times that solar is exporting to the grid. Solar is generally exported to the grid between 6am to 5pm.

To calculate our benchmark ranges, we:

• Forecast wholesale electricity prices for 2024-25, using futures contract data from the Australian Securities Exchange (ASX). We use short- and long-term data to create a range for our benchmark.
• We adjust this benchmark range to account for the fact that wholesale electricity prices are likely to be lower than the average wholesale price at the times when solar exports occur.
• We increase the benchmark range by an avoided loss factor. This is because when electricity is purchased from the National Electricity Market and flows through the transmission and distribution networks, some of it will be lost. Because solar exports are located closer to where it will be used by other customers, less needs to be purchased by retailers to meet the same level of demand.
• We then add back National Electricity Market fees and ancillary service charges. Retailers avoid paying these charges when they supply customers with other customers’ solar exports

Because the retail price of electricity is higher than a solar-feed tariff, the biggest benefit of solar panels is saving on your energy bill when you use solar electricity to power your home instead of buying this electricity from your retailer. We estimate a typical consumer in NSW, can save around $520 per year on their electricity bill using the solar electricity they generate. 

As an added benefit, consumers are also paid a solar feed-in tariff for the excess electricity they generate that is exported to the grid. We estimate that a typical consumer in NSW, with a 5-kilowatt solar panel system, could save a further $210 off their annual electricity bill through solar feed-in tariffs.

These savings are for a typical consumer in NSW. You’ll need to consider your own electricity usage and solar panel system to calculate your annual savings. 

The Australian Government’s Solar Consumer Guide provides free information on the benefits of solar panels and can help you understand if they are right for you.

While there are many benefits from solar panels and batteries, including lower electricity bills, cleaner energy and the ability to store energy which can help during blackouts, there are a range of things you need to consider. These include your own electricity usage, whether your roof is suitable, the size of the solar panel system and the cost total cost of the system and installation.

SunSPOT, a not-for-profit entity, provides a free calculator that you can use to estimate the savings from solar panels and batteries for your home.