The unfortunate death of solar feed-in-tariffs

Each year solar feed in tariff credits that homes get paid to export their energy declines in price. Eventually it will reach zero and many homes will lose out on the extra savings they've had.

Since we're still riding on a high from New Years, I'm capturing this moment to bring a hard truth for 2024 and beyond. It's the beginning of the end for the solar feed-in tariff. Though its not all doom and gloom for solar.

The unfortunate demise of the feed-in-tariff

To sum up, as solar power continues to become more prolific on Aussie rooftops, there is no longer a need to incentivise more solar installations. Solar energy is becoming an abundant resource during the day, and now the grid is shifting towards prioritising energy storage.

There are now discussions about charging homes who export solar energy during peak times because the grid will be over-saturated with solar energy. In some parts of the country, this can already happen on wholesale-priced plans.

The hard truth is so many people optimised their solar systems for feed-in-tariffs and the sun's path that now we have a huge boost of energy for the mid-day sunny hours.

To fix this...

A rooftop should optimise the solar system arrangement to produce energy at peak usage times for the home, but more on that towards the end. Alternatively the home can look into batteries to try and capture as much of their own energy as possible, rather than exporting it.

Let's break down some history and then the numbers for tariffs across the country.

A quick solar tariff history lesson - don't fall asleep

I'll make this snappy to save us from both nodding off.

Leading the charge back in 2008, QLD implemented a quite favourable tariff program, the Solar Bonus Scheme, whereby new solar owners could lock in a tariff rate of 44¢ per kilowatt until 2028.

Not to be overshadowed, pun intended, in '09, Victoria took the tariff charge by implementing a 15-year program, which will expire this year, where new solar owners could have a feed-in-tariff of 60¢ per kilowatt. Compared to energy rates today, where grid energy now costs around 20¢ to 30¢ a kilowatt in VIC, we can see how huge this incentive was and is.

Shortly thereafter, and not to be eclipsed by QLD and VIC, NSW, the ACT, and SA all jumped in with their own programs, all of which have come in and out of fashion over the last fourteen or so years.

If you find this particularly captivating stuff, then take a look at this table which outlines most of these historical programs from around the country.

The important takeaway is that at the beginning of the tariff program, the tariffs were so high that it made sense to try to optimise a solar setup for as much solar production as possible because the tariff we earned was far more lucrative than trying to offset our own actual energy usage.

In some respects, with the feed-in-tariff now a mere fraction of what it used to be, this sentiment of optimising for the solar tariff still lives on.

Reaching the bottom of the down under

If we take a look at a few tariff programs and take into account a few world events, we can see the real story of the tariff.

Below I tracked the minimum feed-in-tariff price for Victoria since 2017. It doesn't take much to see how things are trending for Victoria. Once the leader with the most generous tariff program in the country, it's now leading the charge in the opposite direction.

Some of the more astute NSW residents might say, we have quite a stable feed-in tariff that has gone up recently! To which I would say, I don't think it will last.

If we take into account the war in Ukraine starting in early 2022, which increased gas demand and, ultimately, electricity prices, the variable tariff rate of NSW only increased to compensate for the gap in energy supply, but historically, before the war, the rate was already trending downwards.

The NSW rate since 2018...

• 2018 -19 the rate was 6.9 to 8.4

• 2019 - 20 the rate was 8.5 to 10.4

• 2020 - 21 the rate was 6.0 to 7.3

• 2021 - 22 the rate was 4.6 to 5.5

• 2022 - 23 the rate was 6.2 to 10.4

• 2023 to 24 the rate was 7.7 to 9.4

The rate will soon return to its downward trend, much like in Victoria. You'll have to take more word for it, but over the last decade, the rest of the country has followed the downward trend as well.

It's quite clear that the feed-in tariff is on its way out, not this year or even 2025, but that reliable credit will no longer be there for solar owners to depend on someday.

How to weather the tariff-pocalypse

For the 66% of homes in the country that still don't have solar, I have great news. You are being bestowed the valuable gift of hindsight.

To cut it plainly, feed-in-tariffs are an outdated incentive you shouldn't care too much about.

A quick example: let's say our home energy costs around 23¢ a kilowatt when we use grid electricity. If we're lucky, our feed-in tariff is 8¢. Every time we create a kilowatt of feed-in-tariff credit, we lose 15¢ in potential savings.

For about 99.9% of Australians the cost of grid energy is always higher than the feed-in-tariff export, it will always be a losing balance for the homeowner when comparing the solar feed-in-tariff to the price of energy.

Using free solar energy is better than exporting it to the grid. In the long run, we save more money.

Besides the lucky few on the QLD and VIC programs, almost everyone in Australia generating feed-in-tariff credits is losing potential savings, with the exception of the few early adopters who have invested in battery storage. We sell our energy to the grid for a fraction of its worth, and then that same energy is sold to your neighbour at full price.

The answer is simple, if you are installing solar, optimise the solar system to generate solar energy according to your personal energy needs.

If your home uses most of its energy at 4pm, then face the panels west and north west to skew the solar energy at 4 pm. Use a lot of energy in the mornings? Aim the panels east and north-east.

It's time to optimise solar systems for the homeowner and their energy usage throughout the day, not the grid and feed-in-tariffs. Gone are the days of 44¢ and 60¢ programs; it's time to get smart about the solar setup on your roof.

For the solar owners already out there

For the 34% of Australians who already have solar installed, there are ways to store your energy when it's abundant, like installing heat pumps to store hot water and home batteries or using smart washers and dryers to time the cycles with the energy generation.

Using solar energy to your own personal advantage is really the goal; there's nothing wrong with looking after your own home first, after all your paid for the system!

Hello - is it me you're looking for?

This is a quick pitch about helping homeowners understand future solar system installs...

I'm about to launch an energy analysis tool that can remotely read a home's energy usage via the energy meter and then use that data to model the perfect solar system for the home, and it will be free!

I have been working on coding this for quite a long time.

To do this I don't have to visit the home or connect a device to get the data. It's all done digitally, but your home must have a smart meter. In Victoria this is 99% of homes, in the rest of Aus its around 35%.

This energy-usage solar modelling tool is the first of its kind in Australia, possibly anywhere. Let's chat if you want to try it out and see what the perfect solar system would look like for your home!

Reply to this email or reach out to me and we can chat.