The feed-in tariff is the amount that your energy company pays you for power you export to the grid. Energy companies are not allowed to pay you less than the minimum feed-in tariff we set.
Minimum feed-in tariff review 2023-24
- Draft decision20 December 2022
- Consultation closed30 January 2023
- Final decision27 February 2023
Overview
We have completed our review of the 2023-24 minimum feed-in tariffs.
From 1 July 2023, retailers will be able to offer solar system owners a single rate feed-in tariff, or two time-varying feed-in tariff options, or both.
Key facts about our final decision
The 2023-24 'flat rate' minimum feed-in tariff is 4.9 cents per kilowatt hour
The flat rate feed-in tariff applies regardless of the time of day or day of the week.
There are two 'time-varying' minimum feed-in tariffs options
Under the time-varying feed-in tariff option 1, customers are credited between 4.4 cents and 11.3 cents per kilowatt hour of electricity exported, depending on the time of day.
Under the time-varying feed-in option 2, customers are credited between 3.9 cents and 10.6 cents per kilowatt hour of electricity exported, depending on the time of the day.
Wholesale prices during daylight hours are falling
Wholesale electricity prices are on average are increasing. This is driven by high wholesale prices at night. This is increasing the overnight and early evening feed-in tariffs. However, wholesale prices during daylight hours, when solar customers send their electricity into the grid, are decreasing. This means the flat and day feed-in tariffs are decreasing.
Minimum feed-in tariffs for 2023-24
The table below shows the draft minimum feed-in tariffs for 2023-24. Retailers can offer solar customers a flat feed-in tariff and/or time-varying feed-in tariffs for electricity exported to the grid.
|
Flat FiT rate |
Time-varying FiT rates (cents per kWh) |
||
|---|---|---|---|
|
All times |
Option 1 | ||
|
Overnight Weekdays: 10 pm to 7 am Weekends: 10 pm to 7 am |
Day Weekdays: 7 am to 3 pm, 9 pm to 10 pm Weekends: 7 am to 10 pm |
Early evening Weekdays: 3 pm to 9 pm Weekends: n/a |
|
|
4.9 c/kWh |
11.3 c/kWh |
4.4 c/kWh |
9.3 c/kWh |
| Option 2 | |||
|
Shoulder Everyday: 9 pm to 10 am 2 pm to 4 pm |
Off-peak Everyday: 10 am to 2 pm |
Peak Everyday: 4 pm to 9 pm |
|
|
5.5 c/kWh |
3.9 c/kWh |
10.6 c/kWh |
|
The inputs to the minimum feed-in tariff model have been updated since we released the draft decision in December 2022. This reflects the most recent data available to us at the time of our final decision. Compared to our draft decision, solar weighted wholesale electricity price forecasts increased very slightly.
The proposed single rate minimum feed-in tariff for 2023-24 is lower than for 2022-23 due to lower daytime wholesale electricity prices.
The proposed overnight and early evening tariffs for 2023-24 have increased significantly compared to those for 2022-23. This is due to a forecast of significant increases in night-time wholesale electricity prices. As for the single rate feed-in tariff, the day rate has decreased due to lower wholesale electricity prices during daylight hours.
What's driving changes in the 2023-24 minimum solar feed-in tariffs?
Why the minimum feed-in tariff changes each year
The minimum feed-in tariff changes each year mostly because of changes in wholesale electricity prices. Wholesale electricity makes up around half of the costs covered by the minimum feed-in tariff.
We estimate the wholesale electricity prices using the latest information available at the time of publication of each decision. In recent years, wholesale electricity prices during the middle of the day when most solar is exported have been going down.
The wholesale price is set in a competitive national market, based on the supply of and demand for energy. The wholesale price is not set by government or a regulator.
How can the feed-in tariff decrease when retail prices are going up?
Average wholesale electricity prices have gone up recently and are forecast to go up further. In the evening when electricity demand is highest, wholesale electricity prices have increased significantly due to a combination of high fuel prices, generator outages and weather conditions.
However, growth in installations of rooftop, and utility-scale, solar has decreased demand for and increased supply of electricity during the day. As a result wholesale prices at the times when solar exports happen are lower, leading to a lower feed in tariff.
Why the minimum feed-in tariff is different to the retail electricity tariff
The minimum feed-in tariff is a payment you receive for generating electricity.
When retailers provide electricity to their customers, they must cover costs including:
- transporting electricity (the poles and wires connecting customers to electricity generators)
- operating a retail business (for example, billing and revenue collection systems, information technology systems, call centre costs, human resources, finance, legal services, regulatory compliance costs, licence costs and marketing)
- the ‘spot price’ of energy in the national energy market paid to generators
- hedging costs to provide a guaranteed price to their customers
- complying with environmental programs.
These additional costs mean the minimum feed-in tariff will always be lower than the retail electricity tariff.
Also, the retail price of electricity covers the cost of supplying energy at all times of the day. Because retailers must supply energy 24 hours a day, they must also pay for high cost electricity during the night (when wholesale electricity prices are higher). On the other hand solar exports happen during the day, when wholesale electricity prices are lower. So the wholesale prices in the feed-in tariff are lower than those for retail prices.
How we calculate the minimum feed-in tariffs
Legislation controls how we regulate the minimum feed-in tariff. The costs we must include are set out in the Electricity Industry Act 2000. By no later than 28 February each year, we must set the minimum feed-in tariffs to apply for the next financial year.
We calculate the minimum feed-in tariff by forecasting the wholesale price of electricity for the year ahead. This has the following affect on the minimum feed-in tariffs:
- The forecast includes wholesale electricity market information available up to the time of the decision. This means that for each decision effective from 1 July, the forecast wholesale prices is based on market information up to February of that year.
- Any changes in wholesale electricity market after the publication of the final decision in one year are included in the next decision. This means any changes in the wholesale electricity market after the final decision will be incorporated in the wholesale electricity price forecasts for the feed-in tariffs for 1 July of the next financial year.
The wholesale price varies across different times of the day due to changing supply and demand. As solar panels generally export power between certain hours of the day, we only use the forecast wholesale price for electricity during these ‘solar hours’.
In our calculation, we also include:
- avoided transmission and distribution losses: the value of energy saved by not transporting the energy long distances from large scale generators.
- other fees and charges: the value of market fees and ancillary service charges that retailers avoid when energy is produced by solar customers.
- environmental benefits of renewable energy: the value associated with reducing greenhouse gas emissions when energy is produced by solar customers. It is currently set at 2.5 cents per kilowatt hour (c/kWh).
For more information about our methodology and review process for the minimum feed-in tariff 2023-24, see our final decision paper.
Tips to make the most of your solar
The enduring value for solar customers is avoiding paying retail prices for their energy use.
- Where possible, run your power-hungry appliances - washing machines, dishwasher - during the middle of the day to avoid higher evening peak prices charged by retailers. Any leftover energy is then exported to the grid and you get paid via the feed-in tariff.
- Consider any advantages to 'time of use' feed-in tariffs when working out which energy retailer meets your needs.
- Plan your daily energy usage to be met during daylight hours when your solar is hard at work.