The ‘sun tax’ has been subject to much controversy around how it will change the current crediting system for rooftop solar exports. But just how much of an impact will the sun tax have on households and small businesses in Australia?
This Canstar Blue article explains how the sun tax will work in Australia, how costs will be affected and the impact the sun tax may have on households with rooftop solar.
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What is a sun tax?
Customers with rooftop solar panels may have heard of the proposed sun tax, or solar tax in Australia. The sun tax is a new export tariff for solar customers that’s set to change the way small-scale energy generation operates in Australia, particularly regarding solar feed-in tariffs (FiTs).
The tariff, which was determined to be acceptable by the Australian Energy Market Commission (AEMC) in August 2021, is part of a two-way pricing structure in which solar customers are rewarded for sending exporting the energy produced by their solar panels to the electricity grid at times of high demand. The tariff also penalises solar customers for exporting solar-generated energy at times when the network is overloaded with solar power, such as during the middle of the day. At present, in most cases energy providers pay householders for electricity fed back to the grid in the form of FiTs regardless of the time of day that energy is exported.
The ‘sun tax’ export tariff was proposed as a way to prevent further gridlock on electricity networks. It’s believed that supply disruptions will lessen as households will be encouraged to use their own solar energy first, rather than sending it back into the grid for a bill credit. By encouraging solar customers to change the times they export solar, potentially by increasing home battery uptake, renewable energy wastage will lessen and could instead help to support energy supply for households and businesses on the grid.
How much will the sun tax cost your household?
The sun tax is still in its preliminary stages for most of Australia. However, some distributors in New South Wales and the Australian Capital Territory have already proposed how these costs may look for households and businesses.
According to proposals shared with the Australian Energy Regulator (AER), rooftop solar owners on the Ausgrid, Essential Energy, Endeavour Energy or Evoenergy networks could soon be looking at charges of between 0.94 cents per kilowatt hour (kWh) and 3.6c/kWh for exporting above their set limits.
The limits proposed vary from yearly to monthly and on some networks even hourly or seasonally. Though most reward windows appear to be within late afternoon and early evening hours, as to align with times of peak demand.
| Distribution Network | Export Limit | Export Times | Export Costs |
|---|---|---|---|
| Evoenergy | 5kW/hour | Export Charges: Applicable to exports above 5kW within the hour, between 11am and 3pm Export Rewards: Applicable to all exports between 5pm and 8pm daily | Export Charges: 1.642c/kWh Export Rewards: 4.92c/kWh |
| Ausgrid | 2,500kWh/year or 6.85kWh/number of days in the billing cycle | Export Charges: Applicable to exports above the limit between 10am and 3pm Export Rewards: Applicable to all exports between 4pm and 9pm daily |
Export Charges: 1.18c/kWh Export Rewards: 2.19c/kWh |
| Endeavour Energy | 2kW/month | Export Charges: Applicable between 10am and 2pm Export Rewards: Applicable between 4pm and 8pm on a seasonal basis |
Export Charges: 3.6c/kWh Export Rewards: 11.03c/kWh or 3.336c/kWh |
| Essential Energy | 1.5kW/month | Export Charges: Applicable between 10am and 3pm Export Rewards: Applicable between 5pm and 8pm |
Export Charges: 0.94c/kWh Export Rewards: 13.67c/kWh (residential) |
Source: Solar Citizens, Summary of Charges by NSW Distributed Network Service Providers. Accurate as at May 2023.
Other distribution networks have yet to share their proposed costs for the two-way tariff. Meanwhile, in 2022 Queensland Energy Minister Mick de Brenni issued a statement in response to reports about the sun tax in which he said there was no plan to change FiTs in the state.
Ausgrid has emphasised that the total impact of the sun tax will depend on how retailers factor it into their own pricing structures. If energy providers decide to implement the new tariff in full, it will mean current solar feed-in tariffs will be changed to offer a smaller rebate during peak export hours, and a larger one when demand on the grid is high.
While a couple of cents may not seem like a concerning amount, Solar Citizens, an independent community-based solar advocacy group has estimated that these costs would likely increase electricity bills for households and businesses with systems larger than 3kW. Solar Citizens estimates these costs could initially add more than $30 per year to energy bills for households with a 5kW solar system. This number is likely to increase as the tariff is further integrated.
For those households concerned about the potential additional costs, it should be noted that the AEMC and AER have also agreed to include a ‘free’ export option for solar customers. This means customers would be free from potential charges for exporting above limits or outside of peak hours. However, it does mean that they won’t be rewarded as highly for exporting at the right times.
Compare solar plans and prices
Here are some of the cheapest solar-specific deals from the retailers on our database. These costs are based on the Ausgrid network in Sydney but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest price first. Annual price estimates assume general energy usage of 3911kWh/year for a residential customer on a single rate tariff. Price estimates exclude solar feed-in tariff credits. These are products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.
Here are some of the cheapest solar-specific deals from the retailers on our database. These costs are based on the Citipower network in Melbourne but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest price first. Annual price estimates assume general energy usage of 4000kWh/year for a residential customer on a single rate tariff. Price estimates exclude solar feed-in tariff credits. These are products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.
Here are some of the cheapest solar-specific deals from the retailers on our database. These costs are based on the Energex network in Brisbane but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest price first. Annual price estimates assume general energy usage of 4613kWh/year for a residential customer on a single rate tariff. Price estimates exclude solar feed-in tariff credits. These are products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.
Here are some of the cheapest solar-specific deals from the retailers on our database. These costs are based on SA Power network in Adelaide but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest price first. Annual price estimates assume general energy usage of 4011kWh/year for a residential customer on a single rate tariff. Price estimates exclude solar feed-in tariff credits. These are products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.
When does the sun tax come into effect?
The new export tariff rule regarding the sun tax came into effect in July 2022, but most households and businesses won’t be impacted until 2025, depending on the state or territory applicable.
This is because all distributors are required to submit a price proposal to the AER demonstrating a need for this tariff before they are allowed to implement it. These processes are reviewed at different times depending on the state or territory involved, although the approval date does not necessarily relate to the implementation date of each scheme.
For example, all three distributors in New South Wales have confirmed plans to implement a two-way tariff in July 2025. However, Ausgrid will introduce the tariff on an opt-in basis from July 2024. This means that Ausgrid customers with rooftop solar can voluntarily move to the tariff by contacting their energy provider and requesting the change to their account. But if a customer does nothing, they won’t be affected by the new tariff until July 2025, when it automatically applies to all solar customers on the Ausgrid network.
Solar Emporium also notes that the potential tariff only applies to areas that are part of the National Electricity Market, so solar owners in Western Australia and the Northern Territory are excluded. And as SolarQuotes expert Michael Bloch wrote in 2022, the AER had been clear in its paper explaining its guidelines around how such two-way tariffs could work: that the pricing must be “carrot and stick, not just stick”, meaning that the intention of the sun tax wasn’t to unfairly penalise solar owners when they exported to the grid at unwanted times without fairly rewarding them when they did so at desirable times.
What will households need to do to make the most of the sun tax?
With the sun tax on horizon, there may be some households and businesses with solar feeling concerned about the ongoing value of their solar system. But there are a few ways in which households can make the most of these two-way pricing tariffs.
Use solar batteries
The first is making the most of solar storage systems, such as batteries. With a solar battery installed, households are able to store their unused solar energy for use at a later time, instead of immediately exporting it. In terms of the so-called ‘solar tax’, having a solar battery can help households and businesses to accommodate the different export times by allowing them to store their energy until a time of high demand, avoiding financial penalty for exporting at the wrong time.
What are the cheapest solar batteries in Australia? Find out in Canstar Blue’s battery buying guide.
Use your EV’s battery
Alternatively, households that have an electric vehicle (EV) with a charger installed at their property may wish to use their vehicle battery to export power to the grid during times of high reward.
Use your excess solar to power high-energy appliances
For homes without a solar battery or EV available to them, it may instead be a case of diverting their surplus solar energy generation to powering their air conditioning, electric pool heat pump or hot water heat pump. This can help to prevent exporting too much power over the limit set by the network distributor.
It’s important to remember that households will also have the option of a ‘free’ export tariff. So, if you are concerned about how the new tariff may impact your solar savings, you can also choose not to partake in the two-way pricing scheme.
In the meantime, if you are a solar household that is looking to make the most of your feed-in tariff today, then be sure to check out our latest Solar Energy Provider customer satisfaction ratings. Here, we reveal the brand that Aussie households have declared top-notch for solar electricity plans, including feed-in tariffs and products. To see this year’s winner, click the button below.
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