What is a solar feed-in tariff?


If you have solar panels, or you’re considering buying some, then you’ve probably heard of something called a ‘feed-in tariff’ (FiT), otherwise known as a ‘buy back rate’ or simply a ‘solar tariff’. But what does this mean? It’s important to understand feed-in tariffs if you want to get the best value from your solar, that’s why in this article we explain everything you need to know, including how to find a good FiT.

What is a Feed-in Tariff?

A feed-in tariff is a rate paid to customers who put electricity back into the grid. Households and small businesses that generate electricity using solar panels, wind turbines, or other small-scale generators, can feed back any unused electricity into the electricity grid for other customers to use. In exchange, the customer receives a small rebate on their bill for every kilowatt-hour (kWh) they export.

For example, a household with solar panels may produce 16kWh of electricity on a sunny day. If the household consumes 10kWh of this electricity, the remaining 6kWh will be exported into the grid in return for a FiT.

FiT rebates – in conjunction with the savings from generating your own power – can dramatically lower your power bill and help you achieve a return on your investment faster. So if you have solar panels, it’s important to factor in both the standard electricity rates and the feed-in tariff.

What are Feed-in Tariff rates?

The majority of feed-in tariffs are retailer funded, offering customers a rate of somewhere between 6c/kWh and 30c/kWh. However, some customers in certain areas that installed solar panels around 2007-2011, may be entitled to higher feed in tariffs in excess of 40c/kWh.

FiTs vary depending on the retailer, state and distribution network. Many energy providers also offer special deals for solar customers that include a higher feed-in tariff, often in exchange for increased electricity rates or lower discounts. You can see the feed-in tariffs offered by different retailers here. While some of these products may be worthwhile for solar customers, it’s important to remember that a higher feed-in tariff won’t necessarily mean a better deal.

Do I receive a Feed-in Tariff if I’m renting?

Yes, if you are renting in a house with solar panels, then you will receive the associated feed-in tariff for the electricity the house exports to the grid. If you live in an apartment or townhouse however, then you’ll need to have an electricity meter separate to the rest of the complex in order to have a feed-in tariff applied. This is so your electricity usage and solar exports can be measured and billed accordingly.

Make sure you read the terms and conditions of your rental agreement just in case the landlord has specifically requested that tenants do not receive a feed-in tariff.

How do I sign up for a Feed-in Tariff?

In order to sign up to a FiT, you must have solar panels or some other renewable generator. Different states also have different size requirements. Usually the generator must be less than 100kW, though most systems are between 3 and 10kW, so you shouldn’t be too concerned by this cap.

Once your renewable generator is installed and signed off, you then need to apply to your electricity retailer to receive a FiT. Retailers will generally require you to complete a solar connection form and produce the relevant paperwork that shows the installation was done by a licenced professional.  Your meter may also need to be upgraded or reconfigured so that it can measure solar exports. After that, all that’s left to do is to sign up to a new electricity contract that suits your home’s new needs.

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Time-varying Feed-in Tariffs

Traditional FiTs are single-rate – that is, you receive the same price for solar regardless of when you export to the grid. However, energy companies in Victoria and rural Queensland are now required to offer what’s called a ‘time-varying feed-in tariff’ or ‘variable rate feed-in tariff’.

Variable-rate solar customers in Victoria receive the highest FiT for exporting in peak demand periods (3pm-9pm weekdays). Customers receive the lowest FiT in off-peak times (10pm-7am). All other times are referred to as the ‘shoulder’. During the shoulder period, customers receive a higher FiT compared to off-peak, but a lower FiT than peak.

Regional Queensland solar customers do not have a shoulder period, only peak and off-peak. Once again, peak time (3pm-7pm) pays the highest FiT, while off-peak times (7pm-3pm) pay the lowest FiT.

It’s difficult to assess whether households are better off on a variable-rate or single-rate FiT as It largely depends on individual usage habits. If you have a solar battery however, then a time-varying tariff could be the best bet since you can store electricity generated through the day and export it during peak times when the FiT is highest.

You can find a more detailed explanation of time-varying FiTs here.

How do I find a good solar retailer?

Feed-in tariffs are important for solar customers who want to maximise the return on their investment. However, as mentioned, a higher feed-in tariff won’t necessarily translate to lower power bills. It may be the case, for example, that a retailer offers a large feed-in tariff, but also has higher than usual usage and supply rates. This means that any savings from the FiT are lost by the fact you’re paying more for power.

If you have a small solar system (around 2-4 kW), then you might not be exporting enough to receive much value from a high FiT. In this case, you might be better off by focusing on cheaper electricity rates. On the other hand, if you have a large solar system, say in excess of 7kW, then you are likely exporting a lot of power and it will be in your interests to focus on finding a good FiT.

As you can see, it all really comes down to your personal situation. The first step is to understand your personal needs. After that, it’s time to shop around, keeping in mind all relevant factors including electricity usage rates, supply rates, discounts, contract periods, conditions, and of course, feed-in tariffs.

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