Victoria’s Rooftop Solar Feed-in Tariff Slashed to Near Zero
Victorian households in Australia may soon see a significant reduction in the amount they are paid for exporting rooftop solar energy to the grid. The state pricing regulator has proposed slashing the minimum feed-in tariff from 3 cents per kilowatt-hour (kWh) to a mere 0.04c/kWh, starting in July.
The Essential Services Commission announced this proposal, citing the surge in rooftop PV systems in the state, which is nearing 800,000 installations. The regulator’s rationale is that the proliferation of rooftop solar has driven down daytime wholesale electricity prices to the extent that there is minimal value for solar energy on the grid during peak daylight hours.
Challenges of Excess Solar Energy
This surplus of rooftop solar energy during the day, often referred to as the “solar duck,” has led to record-low demand levels and poses challenges for the energy market operator, AEMO. The regulator’s report indicates that wholesale electricity costs for the minimum feed-in tariff are forecasted to be negative 2.4 c/kWh, significantly lower than the previous year’s estimate of 0.64 c/kWh.
Shift Towards Self-Consumption
While it may seem like solar households are being penalised for reducing energy costs, the move to reduce solar feed-in tariffs underscores a broader shift in the market. The focus is now on self-consumption and storage of solar energy rather than exporting it. The regulator suggests that households can benefit more by using the electricity they generate to offset retail grid power costs, which range from 26 to 35 cents per kilowatt-hour.
The ESC has also proposed time-varying feed-in tariffs, where customers could earn varying credits based on the time of day, ranging from 0 to 7.5 cents per kilowatt-hour. This incentivises exporting energy during peak demand periods when solar supply is lower.
Industry and Consumer Response
The reduction in flat-rate feed-in tariffs has raised concerns within the solar industry and could impact government renewable targets. However, industry experts see this as an opportunity to drive innovation and investment in battery storage solutions. The shift towards batteries and other technologies can help consumers manage energy demand more efficiently and transition to a renewable energy market.
Feedback on the ESC’s draft decision is open until January 31, 2025, with a final decision expected by February 28, 2025. The proposed changes reflect the evolving landscape of renewable energy markets and the increasing importance of self-consumption and energy storage in the transition to a sustainable energy future.
For more information and to provide feedback, visit the Engage Victoria website.
