Australian solar owners don’t need no stinking feed-in tariffs. No, that’s not accurate – they are certainly welcome, but a greater focus on solar energy self-consumption without a battery can pay big dividends.
There’s been a bit of buzz in the mainstream media over the last couple of days about less-generous feed-in tariffs, which is boosting interest in solar batteries. The home battery will become a common sight among households with solar power systems in the years ahead. But for many Australians right now, battery storage is simply too expensive and/or battery payback is too long.
Getting a lousy feed-in tariff might feel like a kick in the guts, particularly when you buy back electricity from the grid at a much higher rate and you’re also striking a blow against climate change.
Home solar power in Australia is somewhat a victim of its own success as it has pushed down wholesale electricity prices, and this is what feed-in tariffs are largely based on. There might be some comfort in the knowledge that this benefit, the emissions reduction and jobs associated with the technology have been a great thing for the wider community.
Over in Perth, the feed-in tariff is especially crappy – just 3c. But simple solar payback in Perth can be under 5 years. And with a good system lasting decades (with perhaps a solar inverter replacement mid-way), it’s a lot of time to be reaping major energy bill savings. The situation is Perth is primarily thanks to that city enjoying the lowest prices for solar in the world.
The Difference Ramping Up Self-Consumption Can Make
The key to making the most of solar panels in a low feed-in tariff environment is increasing solar energy self-consumption; in other words, exporting as little to the grid as possible by using it in the home. And you don’t have to install a battery to do this.
I’ve turned to SolarQuotes’ solar calculator and used a system installation in Brisbane as an example. Feed in tariffs in Queensland at the moment are generally around 6 – 12c per kilowatt hour exported; so I’ll use a middle figure of 9c and leave the other settings as they are. But on the results page, I’ll tweak the self-consumption ratio slider up a couple of times and set electricity price inflation to 0%.
The table below shows the results for a 6.6kW solar system (considered “entry level”) at a cost of $6,600 after rebates – so not a cheap system these days.
| Self-consumption | System Payback | 10 year savings |
| 20% (default) | 5 years, 3 months | $12,690 |
| 30% | 4 yrs, 8 months | $14,290 |
| 40% | 4 yrs, 4 months | $15,480 |
In this example, altering electricity consumption behaviour to boost the amount of solar energy self-consumed from 20% to 40% can provide more than $2,790 in added benefit over 10 years – that’s substantial and assumes no increase in electricity prices. It also slashes the payback time by nearly a year. The financial benefit could be more in your situation, depending on the electricity plan you’re on.
Just on that point – bear in mind the highest feed-in tariff isn’t always the best deal. The best plan for a solar owner is one that provides a good balance of FiT incentive, usage and daily rates. If you’re on the wrong plan, it could be costing you a bundle of bucks. You can quickly compare electricity plans here and pick up some tips on switching plans here.
Boosting Solar Self-Consumption Without A Battery
So, how can you increase solar energy self-consumption without a battery? This can start even before the system is installed by ensuring you get the right one for your needs and lifestyle. A 6.6kW system may not be perfect for you, but a good installer will help you make the best selection.
Past that, it’s pretty much just about using devices and appliances when the sun is shining, or even during the “solar window” on cloudy and overcast days, as there will still be some electricity generation. Timer switches can be helpful here, as can products such as the rather clever Catch Solar Relay switch.
On a related note, if you’re currently using gas for water heating, consider switching to electric when its time is done – that combined with a PV diverter (or the Catch Solar Relay) can be particularly beneficial.
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An energy efficient house design and low power use lifestyle mean self-consumption will be rather low and thus feed-in tariffs are the primary means of repayment.
My current solar payback figure is slightly over 7 years (based on 100% export), arguably a lengthy period when compared to the small table in the article. Worse, that period may lengthen given the FiT on offer has crashed ~30% in less than half a year. On the other hand I seem to be producing 15%-25% above the monthly averages I was told prior to the system being installed, and the ~10% I actually self-consume is worth roughly 50% more than the power I sell, so that 7+ year period may or may not change. Barring extensive use of AC over summer, allegedly a heavy power drain but apparently less so on the rare occasions I’ve actually switched the thing on, I don’t see my self-consumption rising much.
I probably ought to look into PV diverters as that’ appears to be my largest single external energy use – sometimes kicking in 3 times a day, especially on cold low solar days. It’s not clear however the capital expenditure will be less than the current expense.
If batteries ever drop low enough in price, or current usage and\or supply charges rise high enough, then going off grid may become the least bad option available. Given I’d like a ROI this hopefully won’t happen for at least a few more years, plus if the 30% or so of Australian homes with solar disconnect from the grid that’ll see prices soar for those who can least afford electricity.
As for climate change, well some of us remain skeptical about that so the only blow that matters is to our pockets, not alleged blows to Mother Earth, Gaia, or the biopsphere. : )
George Kaplan,
You state: “As for climate change, well some of us remain skeptical about that so the only blow that matters is to our pockets, not alleged blows to Mother Earth, Gaia, or the biopsphere.”
Insurance premiums are being driven to unaffordable levels by the impacts of climate change.
https://www.abc.net.au/news/rural/2020-07-16/climate-change-blamed-for-farmers-rising-insurance-costs/12455052
An excerpt from the Australian Academy of Science report titled The risks to Australia of a 3°C warmer world includes (on page 9):
https://www.science.org.au/news-and-events/news-and-media-releases/risks-australia-warmer-world
Three out of the last five years (up to and including 2020) were more than +1.2 °C (for 12-month average) global mean warmer than Holocene Epoch pre-industrial age.
See Figure 2 at: https://mailchi.mp/caa/july-temperature-update-faustian-payment-comes-due
James Hansen, a climate scientist who shook Washington when he told US Congress 33 years ago that human emissions of greenhouse gases were cooking the planet, is now warning that he expects the rate of global warming to double in the next 20 years. As Hansen puts it, humanity’s Faustian payment is coming due.
http://www.climatecodered.org/2021/09/renowned-climate-scientist-warns-rate.html
George, it seems to me you are only going to learn the hard way, by experiencing insurance premiums that you won’t be able to afford leaving you exposed to increasing risks of storm damage you probably don’t have the resources to recover from, and/or food supplies likely becoming scarcer and much more expensive. And that may be sooner than you think.
I call to point about “less generous” and “lousy” Feed-in-tariffs. I wouldn’t say they’re less generous or lousy, they’re indicative of the reaction and impact that solar is having on the wholesale prices and causing it to fall. Solar is a victim of its own success. The mass uptake is what’s driving the prices down for wholesale and FiT rates. That “less generous” or “lousy” FiT is not the fault of the retailer, they are simply reflecting the cost of avoiding buying from a big generator and paying the smaller generator (your rooftop solar system) roughly the same wholesale price. The price differential is from other charges. Amber Electric and Powerclub clearly shows why we will never get 1:1 FiT. They are “wholesalers” and they reflect your tariff against the AEMO’s 30mins spot price (or now it’s 5 mins spot price) and then pile on all the other charges they have to and must pay various entities (GST, DNSP, Green schemes, etc).
The higher “buy back” or import tariff is made up of at least 5 components.
1. Wholesale price (affects FiT)(variable from -$1 to $15 per kWh).
2. Market/environment schemes (energy saving schemes, etc) (usually about 3-4c/kWh).
3. DLF (distribution loss) (usually about 6%)
4. DNSP usage tariffs (kWh) and not to be confused with daily supply charge (different between each of the state’s DNSPs (anywhere between 4c-30c/kWh depending on tariff).
5. GST (10%)
FiT is influenced by one item only – the wholesale price. There is no way a retailer can pay a solar exporter 10% GST but that’s a complicated matter for the tax office. The retailer can’t pay the solar exporter the DNSP usage rate since DNSPs don’t generate energy, they distribute. So, you can instantly see how the gap widens between FiT and Import tariffs. We are dealing with 5 entities that charge for each kWh. FiT only relates to the generation component (the wholesale price). Everything else does not contribute to FiT. Which is why we will never see 1:1 voluntary. Some overseas schemes do pay 1:1 but this would be socialised across all electricity account holders. That means for that to happen here, the cost would mean non-solar owners contribute to solar FiT. Hardly fair. I wouldn’t like it.
This is very simplified but working backwards from a typical rate of 25c/kWh tariff (GST incl).
Let’s say general supply rate is 25c/kWh
10% is GST = 2.27c – paid to the government
That leaves 22.73c for the retailer but the retailer must pay DNSPs for each kWh that was imported by the customer.
DNSPs = 10c (paid to distributors e.g, Ausgrid or Endeavour but varies)
That leaves 12.73c for the retailer but retailer also pay for the following
Green/Market schemes = 3c (paid usually to mandated state schemes)
That leaves 9.73c for retailer but losses must be paid for as well.
DLF = 6% = 0.36c (paid to distributors for the loss of distributed energy)
That leaves 9.37c for the retailer, wait, there’s more, the retailer has yet to pay for the generated electricity from the NEM (either contracted or real time price)
Wholesale price = 6c
That leaves 3.37c/kWh to the retailer as margin/markup. This is only 13% of the retail price that the retailer made). Not much is it?
Now, let’s reverse it and say the retailers pay 1:1 FiT = 25c and what this could cost a non solar customer with the same retailer
“Wholesale Price” in lieu = 25c (not paying the real wholesale price of 6c)
DLF = 0.36c (based on the original 6c)
adds up to 25.36c
add Green/market schemes + 3c = 28.36c
add DNSPs charge +10c = 38.36c
add retailer margin + 3.73c (from above) = 42.09c
GST 10% = 4.209
Total = 46.299c/kWh just to pay 25c FiT and all the other charges to be paid and the customer (either solar/non-solar) would have to pay this as import to cover 1:1 FiT
See the problem? increasing the FiT higher than wholesale prices means the retail price must go up to cover it. Somebody has to pay for that.
Higher FiT plans will normally have higher import tariffs. Basically, one is subsidising their own FiT to chase higher Solar FiT. Otherwise, non solar customers subsidise this cost, the retailer is not going to pay it and is that fair on non-solar customers?
Since the DSNP (distributors) don’t buy energy for consumers, DNSPs doesn’t care what the FiT rate is since it does not pay solar exporters. The retailers pay FiT since retailers avoid paying the big generators (eg. coal FF generators). No retailer will want to pay FiT that is much higher than wholesale prices, if they did, they would avoid solar customers (and some do by deliberately saying they don’t offer FiT or it’s so low, it’s not worth it). If I was a retailer paying 5c wholesale prices, why would I pay a solar exporter more than 5c? I would say, not interested in your solar exports and shove off. Some retailers are bit generous they offer higher FiTs, but maybe because of their scale of economies allows them to do that (eg., AGL or Origin for example, since they are both retailer and generators. Only they know how the economics work in their favour to offer higher FiT, probably by having higher charges on the plan, or spread it across all their customer base to pay some generous FiT to some of its customer base).
The only retailer that pays the true wholesale price of FiT are the wholesalers like Amber Electric and Powerclub, there, they pay the spot price but this also exposes the solar customer to negative prices (up to -$1/kWh) and also up to $15/kWh to import. But they do provide price protection averaged out over a year so that it doesn’t exceed the DMO.
The ad nauseum argument “I get less for solar export than I pay for import” rip off is getting a bit old now. People should understand by now that voluntary FiT is influenced by wholesale prices, not the distribution charges or the retailer margin.
If one doesn’t like the “less generous” or “lousy” FiT, they are free to become a market participant and offer their solar exports directly to the NEM. But good luck with that trying to bid measly kWhs every 5 mins against the might of the MWhs in the market. You would be outbid everytime. Plus, the associated costs in the bidding process and administrative overhead involved. I don’t think there’s anyone with a house rooftop solar system would have the perseverance or time to do that.
The moral of the story is to self consume one’s solar as much as possible. Battery system improves the self consumption ratio much higher as you can use the battery at night to avoid grid import.
But it’s time to put to rest the argument why FiT is low. The solar system is doing what the market is reacting to. Lowering the price of wholesale for everyone. With regards to distribution and retailing costs, entirely different ballgame and not dependent on the generation side of things.
This is the reality of the situation. That is how it works basically. We wanted a free market, we got it. Don’t like it, well we can go back to fixed price control and possibly no chance of connecting a solar system on the roof. There are some states in the USA that do this. Solar is not available for grid connections on domestic homes. Not one iffy chance of doing it. At last read, there are several states that don’t allow it and illegal to have a solar system. In those states, the regulators ensure that homeowners can not have solar (the irony is that is in the most sunny states in the states that have this rule). Of all places in a free market country like the USA, they block home solar. So much for their concept of freedumb and freemarket economics.
No apologies for the wordy article but people need to understand why FiT can never match 1:1. Not possible for voluntary FiT. Now mandated FiT is different story, it’s different in each state but a bit more complicated how they work it out. But most states have abandoned it and existing schemes closed to new entrants.
PS: I do not work in the energy sector or have any bias. Just looking at the facts why FiT is low. Just take a look at Amber Electric and Powerclub how they structure their prices, there you will see why FiT will never be 1:1.
Thank you. A very clear explanation of the FiT situation, which we have never understood. We put our solar on three years ago and love the fact we are producing our own power. I think we manage our daily usage quite well to consume/maximise our own generated electricity. You have explained the battery situation too, so thank you for that.
One major tool to enhance self-consumption is EV with a smart EVSE that can limit EV charging to excess solar. SolarEdge, Fronius & SMA all offer inverters capable of only charging with surplus solar.
Ice batteries for areas that use a lot of AC are an alternative to electric battery storage. (Icebear 20 & 30) CA offers nice rebates to customers who install ice batteries.