IPART sets solar feed-in tariff benchmarks each year. We often hear that IPART’s benchmark should be for a longer period, as solar panels are a long-term investment and this would allow people to better assess the financial value of their solar panels.
We set a benchmark range each year because the price of electricity can fluctuate significantly from year to year, and it can be difficult to predict several years in advance. As a result, most retailers change their retail prices (including their solar feed-in tariffs) at least once a year, rather than locking them in over the longer term. This means that IPART needs to provide an up-to-date guide of what solar exports are worth.
However, there are some clear trends emerging that mean that solar feed-in tariffs are likely to stay relatively low over the medium term.
Solar exports are likely to be worth half of what they were over the last few years. This is because wholesale prices in the middle of the day – when solar is exporting to the grid – are likely to be much lower, as solar penetration continues to increase. Analysis from the Australian Energy Market Commission (AEMC) shows that prices in the middle of the day are expected to fall to around 2 c/kWh in the next few years, down from around 8 c/kWh in 2018-19.
Even with the falling value of solar exports, solar panels are still likely to remain a good investment for many electricity customers. Customers can significantly reduce the amount of electricity they need to buy from their retailer by generating it themselves. However, they should put less weight on the revenue from exporting excess electricity to the grid when they are not using it.