Do we really understand feed-in tariffs? Recurring questions and confused looks would suggest a lot of us are still struggling to get our head around it, and for a pretty good reason.
Feed-in tariffs are a simple enough concept, but there is clearly a distinct lack of consistency in the numbers. Even the rules seem convoluted, changeable, and yes, inconsistent.
This particular solar benefit behaves a little like a temperamental machine with a lot moving parts. Of course, it does, it’s a government initiative covered in private sector fingerprints.
Researching, as you do prior to your solar installation, you ask friends and relatives about their experiences. In particular, you ask about the values of feed-in tariffs.
Your friends in Western Queensland, who have had their solar since 2012 may receive a 44-cent feed-in tariff and its locked in to 2028. Their neighbours used to as well until they increased their inverter capacity a little while back and is now getting only 10.1 cents.
Another example from Gold Coast is with Orion Energy where homeowners are getting 7 c/kWh. Their neighbour with an identical solar system is getting 16.1 c/kWh through Energy Australia. This is a lot more, but they say they’re not happy with the overall value of their electricity contract?
Talking to friends and relatives about their solar experience is important. However, comparisons and relativities can be misleading and confusing if taken out of context or without an understanding of feed-in tariff basics.
We want to offer some context in this article. We want to provide some basics to promote understanding. Most importantly, we really want to give you some assurances that feed-in tariffs are still a genuine financial benefit, particularly if you act on solar now.
Let's Look a Little Deeper
With state-sponsored feed-in tariffs, anyone could enjoy not only reduced power bills but no power bills at all. There’s also a potential income due to the clean unused power returned to the coal-fired grid.
In the heady early days of the residential solar incentive schemes, there were significant benefits to be had that reached beyond the benefits of cheap electricity at home.
For the most part, there had to be. Roof-top solar was well off the public radar, and far too expensive anyway.
If the government wanted us to respond to our national carbon emissions reductions program, they’d have to do something to get us on board; cue the panel rebates and feed-in tariffs.
Back in the early 2000’s when the state-sponsored solar bonanza began, the domestic solar industry was still in nappies and barely crawling.
It’s fair to say there was no significant domestic solar industry to speak of. Installing solar panels on your home required a significant financial outlay.
Feed-in tariffs were part of the government incentive scheme to encourage domestic uptake of solar. The tariff sat (and still sits) squarely and proudly alongside the solar panel rebate scheme.
From relatively no solar at the beginning of the latest millennia, 2018 was ushered in with over 1.6 million homes using some form of solar to generate power. There can be no argument. The government incentives worked.
Hang on a moment; are the feed-in tariffs still sitting proudly? Well, they still exist, but there have been changes.
In many respects, and in many Aussie states, these changes amount to a watering down of the returns you can enjoy from feed-in tariffs. Can feed-in tariffs still be viewed as an incentive?
This article is about revisiting solar feed-in tariffs. There’s a lot to know. But what do we need to know? For many of us, the deeper we look into the feed-in tariff incentive, the more we think quantum physics might be a little easier to understand.
Our aim today is clarity via definition and simplification. We want to guide you to a point where you can sift through the volumes of confusion and take only the information you need to make an informed choice about your solar venture.
A quick note for those ready to crunch some numbers and look at savings through feed-in tariffs. We won’t be looking a huge bunch of numbers, e.g., what you’ll receive, or the values of a feed-in tariff for you. The variations are significant, for reasons you will see as you read.
We’ll provide some links and indicative numbers, but the only way you will know an accurate financial benefit figure is via consultation with your electricity retailer and your solar installer. It’s not possible to cover all the permutations and permeations here.
The Difference Between Rebates and FIT’s
Despite the existence of solar panel rebates and feed-in tariffs (FITs) for over a decade now, the two incentives are often confused. Let’s clear this up firstly by defining the solar rebate as concisely as possible.
The solar rebate is federal government funded discount on the purchase of your solar system.
A FIT, or feed-in tariff, is a payment you receive for the excess electricity you generate via a renewable such as solar that is fed back into the central supply grid.
As we’re all about FITs today, let’s explore FITs further.
So Why Have a FIT System Anyway?
FITs are not unique to Australia. According to the Australian Federal Government, there are 65 FIT systems across the globe. Their purpose is 3-fold.
Firstly, the FIT system in Australia is one the two primary incentives implemented by the government to promote the uptake of renewable energy. I.e, solar and wind-generated electricity, including biomass and other methods.
When a new technology hits the market, it’s expensive. Remember when eight gig data storage cost $200? A few years later it is $16.
Solar was the same. In the early days of solar, solar systems were very expensive and less efficient. To ensure consumer uptake of the technology, government incentives were implemented to stimulate demand, i.e. FITs and rebates.
With steady growth in solar demand, the solar industry grows; therefore prices drop and efficiency increases, further stimulating demand.
Secondly, and quite importantly, a FIT encourages a more frugal approach to electricity consumption. Apart from a reduced electricity bill, a FIT offers a further financial incentive for being power conservative.
With a FIT, essentially you can receive an ‘income’ for the renewably generated electricity that you don’t use and subsequently feed-in to the central grid.
Thirdly, FITs were implemented to promote the diversification and decentralisation of electricity generation. With homeowners generating their own power, they no longer rely on the carbon-driven grid.
With solar and renewable power uptake hitting critical mass, the reliance on fossil fuel generated electricity is significantly reduced, and continuous power certainty and security is increased.
Undoubtedly, these above-mentioned motivators are sound. Clearly, these incentives have had the desired effect. Australian individuals, families and businesses have taken up solar, and the numbers are steadily increasing.
Ok. This is pretty easy to understand. Basically, we need FITs working in concert with solar system rebates to ensure renewables are integrated into our national power generation network and practice. So why did we suggest that FITs have become more complex and less of an incentive than they once were?
Before we look at the FITs current situation, let’s have a closer look at how the system works.
How Feed-in Tariffs Work
FITs while part of the Federal Government carbon reduction scheme are administered by the states and Territories. They all take a different approach to FITs and even have different terminologies such as solar bonus schemes or solar buy-back schemes.
Add to this the numerous electricity retailers, the mechanism by which FITs are facilitated, and you have a genuine recipe for confusion. More on that later.
Firstly, to be eligible for FITs your solar system must meet certain eligibility criteria, including but not limited to system size, location and the credentials of your solar installer.
Secondly, an application must be made to the relevant authority. This could be a government-based authority or your electricity retailer.
With I’s dotted and T’s crossed you will likely enter into a fixed term agreement that is less than flexible. Terms vary, but a contract up to 20 years is not uncommon. You will also enter an agreement under a net feed-in tariff or a gross feed-in tariff. Click here for a great definition of gross and nett FITs.
Important Note: Net feed-in tariffs vs gross feed-in tariffs are a source of controversy. There are arguments to say that net feed-in tariffs are a "fake feed-in tariff". This is an article unto itself and would be a sidetrack here. Follow this link for an overview.
The agreement has some pretty stringent rules. You must stay at the same address, and you must remain with the same electricity supplier for the term of the agreement to retain the benefits of your contract.
If you make improvements by modifying your system, by adding several more panels, for example, this power will not be eligible for a FIT. Upgrades in generation capacity will not attract the FIT.
A Concise Explanation of How the FIT Physically Works
Customers with a roof full of solar panels will take power from the grid generally in the evenings, dawn and dusk and when the sun's intensity is at a low.
They will export energy back to the grid during the middle of the day when the sun is at its most intense, consumption is low, and panels are working at peak.
Generally speaking, the exported electricity is credited against the consumer’s electricity account in the form of a bill reduction or credit.
Another aside: There is an interesting conundrum with this system, and it may further impact the nature of FITs in the future. Essentially, the majority of renewable power is being supplied to the grid at times of low electricity demand. This green power goes unused. It can be argued; the tariffs are really paying for nothing. Check this article for some further research.
Let’s Visit the Confusion. If Only Briefly
The confusion factor shouldn’t come as any surprise. Keeping in mind that people have confused the rebate with FITs anyway (hopefully clarified now).
Add the involvement of federal and state governments and various departments from each, and then a bunch of power retailers with big fingers in the power pie. This is enough to suggest things might get confused.
Now we need to consider the ever-changing power retail market. Solar is now in higher demand, so incentives are being slowly wound back. Things also vary depending on your postcode and retailer, and of course, whatever government is setting policy. The situation is fluid, and moving goalposts are part of the game.
This is not likely to change any time soon, and it is difficult to see what the future might hold in terms of FITs. The only certainty you get is when you are locked into an agreement with a particular retailer.
It’s retailers; however, it could be argued, that they are the reason consumers get confused in the first place.
FITs. What You Need to Know
Let’s look a Queensland. The Queensland state government does not require power retailers to offer FITs. There is no mandated FIT rate.
For example, Brisbane, the Gold Coast, and the Sunshine Coast as far north as Noosa are covered by the Voluntary Retailer Contributions. They don’t have to pay you anything for your solar injections if they don’t want to.
However, for regional Queensland it’s different. They enjoy a fixed FIT that is set at a buyback rate of 10.102 cents for the 2017-2018 financial year.
You can scratch your head all you like about that one, that decision will never seem particularly understandable, we dare not try to explain it here.
Fortunately, most Queensland electricity retailers offer FITs in some form. This is the tricky part. FITs are combined into retail power packages, and there are significant variations between providers. You may find, that the best feed-in tariff does not necessarily offer the best total power value overall.
You can add to this that there are variations across the state and that the information you received from talking to a friend may not apply to you in any way whatsoever.
Here are feed-in tariff prices offered by some Queensland retailers*:
- AGL currently offers 10.6 c/kWh (excl. GST)
- Energy Australia currently offers 16.1 c/kWh (excl. GST)
- Origin currently offers 7 c/kWh (excl. GST)
- Alinta Energy currently offers 11 c/kWh (excl. GST)
- Amaysim currently offers 14 c/kWh (excl. GST)
- Click Energy currently offers 8-16 c/kWh (excl. GST)
- Diamond Energy currently offers 12 c/kWh
- EnergyLocals currently offers 12.1 c/kWh (incl. GST)
- Red Energy currently offers 6-11.5 c/kWh (incl. GST)
- Powershop currently offers 12.2 c/kWh (incl. GST)
*Prices are as stated by energy providers as of May 2018 and are subject to change.
Feed-in tariffs are still available. While they don’t hold the same value and therefore incentive of 5 or so years ago, they still have value. They will still make a significant contribution to arresting the exponential growth of your electricity bill. In anybody’s language, that’s fantastic.
We fight excessive power consumption and expenditure by whatever means we can, however small. Feed-in tariffs still offer a genuine contribution to reducing power consumption and costs.
With the growth in the uptake of solar steadily increasing, government incentive is likely to decrease and not increase. The suggestion is that the time is ripe for installing solar at your house.
Get the best incentive you can by acting now. And it’s this fact that you really need to know.
If you want to see how much solar or battery storage could save you over the next 5 years, then take our solar saving calculator quiz below!
Or talk to an Instyle Solar expert about the best solutions for home energy storage or PV-panels.
Otherwise, head back to the solar blog to find even more great educational content.
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