Increased solar uptake and low daytime wholesale prices drive dip in flat feed-in tariffs but consumer energy savings remain strong
20 December 2022
Victoria’s independent economic regulator says a combination of increased solar generation and continued low wholesale electricity prices during sunlight hours is driving the decrease in its proposed minimum solar feed-in tariffs for 2023-24.
The Essential Services Commission today released a draft decision on the minimum feed-in tariffs that energy companies will pay Victorian solar customers from 1 July 2023.
It proposes a minimum flat rate feed-in tariff of 4.8 cents per kilowatt hour (kWh), down on the current rate of 5.2 cents/kWh, while overnight and evening tariffs would rise significantly to 10.8 cents/kWh and 9.0 cents/kWh respectively.
Executive director of pricing, Marcus Crudden says feed-in tariffs were historically higher due to much lower levels of solar generation in the market.
“With Victorians now embracing the environmental and economic benefits that solar power offers, the increased supply of low-cost solar energy to the market is keeping wholesale electricity prices down during sunlight hours,” Mr Crudden said.
“Average electricity prices have increased in recent months off the back of higher prices in wholesale energy markets. This is reflected in our proposed overnight and evening tariffs. But wholesale electricity spot prices continue to remain low during sunlight hours when solar generators kick into gear.”
Mr Crudden explained that daytime solar exports can flood the market and even exceed electricity demand, tracking a pattern of demand known as the duck curve, which is pushing down daytime wholesale electricity prices.
“The duck curve is the drop in electricity demand during the middle of the day driven by increased roof-top solar generation. The surge in solar causes electricity prices to drop in the middle of the day and then increase as the sun sets and electricity demand ramps up into the evening,” Mr Crudden said.
Mr Crudden says there are many ways Victorians can make sure they’re getting the most out of their solar.
“The enduring value of solar is avoiding paying retail prices for your electricity. That means using your solar electricity as it is generated. Run your power-hungry appliances – your dishwashers and washing machines – during the middle of the day to avoid paying higher evening peak prices charged by retailers.”
Mr Crudden says the commission sets the minimum tariff to protect solar customers from being paid too little for the power they’re providing but some retailers may offer good deals.
“Keep a lookout for offers that consider time of use feed in tariffs to take advantage of higher prices in the late afternoon. Plan your daily energy usage to be met as much as possible during the daylight hours when your solar system is hard at work. Any leftover energy is then exported to the grid, and you get paid via the feed-in tariff.”
The commission is inviting feedback on the draft minimum solar feed-in tariffs. Submissions can be lodged on the Engage Victoria website up until 5pm on 30 January 2023.
The final decision must be published by 28 February 2023.
Chart showing the drop in electricity demand and electricity prices during the middle of the day, driven by increased roof-top solar generation, and increase in demand and prices into the evening as the sun sets.
