What are the benefits of solar?
The main benefit of solar panels is the savings you can make on your bills. When you generate your own electricity, you won’t need to buy as much electricity from your retailer.
As an added benefit, most retailers offer a “feed-in tariff” for any unused electricity that you generate and export to the grid. In NSW, retailers can choose whether or not to offer solar feed-in tariffs to their customers.
Who sets the solar feed-in tariffs?
Retailers can decide that level of the solar feed‑in tariff that they offer.
You can compare retailers’ feed-in tariff offers on the Australian Energy Regulator’s (AER) Energy made Easy website.
What is IPART’s role?
To help customers understand the value of their solar exports, each year we publish:
- An “all-day” solar feed-in-tariff guide (see previous reviews)
- A guide for the value of solar exports at different times of the day
- The offers that are available in the market at a point in time.
These guides can help customers understand whether the offer from their retailer is reasonable.
Why is the feed-in-tariff lower than the retail rate customers pay per unit of electricity supplied?
Households are paid for the wholesale electricity that they provide into the grid. We forecast that this is worth 7.7 to 9.4 c/kWh in 2023-24.
However, when this electricity is supplied to other households, retailers must pay charges on each kilowatt hour recorded by their meter. The main charges are to the network operator for using the energy grid. This can be more than 10 c/kWh.
Retailers also have to recover other costs, including:
- around 2.3 c/kWh for their environmental obligations to purchase renewable energy, demand reduction certificates, and paying into the climate change fund
- the difference between wholesale costs when solar is exporting to the grid and their average wholesale costs, which are higher.
- the costs of their billings services and running their call centres, and other operations.
When these costs are added up, the retail price of electricity is significantly higher than just the cost of the wholesale energy supplied into the grid by households.
(Sources for these figures include the networks’ price lists (see Ausgrid, Endeavour Energy, Essential Energy), and the AEMC’s 2021 price trends report).
Why has my feed-in tariff decreased?
As wholesale prices have increased, IPART’s feed-in tariff guide has increased over the last 2 years, up from around 5 c/kWh in 2021-22.
However, retailers are not required to offer feed-in-tariffs in line with our guide. We have observed that there are fewer retailers offering feed-in tariffs above our guide than there were in the past, and some retailers are offering feed-in tariffs that are lower than our guide. You should discuss changes to your feed-in tariff with your retailer.
While the value of solar exports has increased since 2021-22, retail prices have increased by even more. This is because a large portion of the increase in retail prices is being driven by significantly higher wholesale costs in the evening when there is very little electricity being generated from solar panels. Wholesale costs in the middle of the day have increased to a lesser extent, which means that the value of solar exports has not risen by as much as wholesale costs (and retail prices) overall.
Where can I find more information?
Our 2021 report provides further information on:
- Bill savings of customers as a result of having solar panels
- Analysis of financial outcomes for customers who install batteries in addition to their solar panels
- Bill outcomes for the different offers available in the market in 2021.
The NSW Government provides a lot of useful information about what to look out for when installing panels, and the things to consider before installing a home battery.