What is a Feed in Tariff

Not sure what the difference between a feed in tariff and a rebate?

You’re looking at getting a solar system for your home, and recently started to learn all these new terms. We understand, there is a lot of jargon within the solar industry, and we’re here to help you understand it all.

A feed-in tariff is a policy that is created to promote the usage of renewable energy resources (Mostly solar). Designed by the government, this scheme allows you to sell your unused solar energy back to the grid. 

This scheme is also known as the “buyback rate” in some areas. 

During your billing cycle, if you end up earning more money than your power bill, most energy retailers apply a credit rather than issuing a refund. That way, they can still keep you on their network. 

Although this scheme is designed for solar, if your home generates energy from any other means (such as wind), most councils in Australia will still allow you to sell unused energy.

How Does Feed-In Tariff Work

For most homes, energy generated during the day from their solar panels goes unused. This is usually sold back to the grid because most people aren’t at home. 

In the evenings when people return home from school or work and begin using electrical appliances, energy will be drawn from the grid again.

When solar first became available, solar feed in tariffs were extremely high in an attempt by the government to incentivise residential adoption of solar energy. As more and more households started adopting solar, and prices for panels dropped, the feed in tariffs dropped as well. 

There are stories of some lucky households that were grandfathered into new plans but kept their old high feed-in tariffs.

Smart meters

Almost all Australian households have transitioned over to Smart Meters. 

If your home still does not have a smart meter, you will need one before your solar system can be active. Don’t worry, your solar installer will be able to help you out with that one.

Difference Between Gross Feed-In Tariff and Net Feed-in Tariff 

There is an important difference between gross feed-in tariff and net feed-in tariff.

Gross Feed-in Tariff

Gross FIT means that retailer pays for the total solar energy your system is generating and then the excess energy put into the grid but charges you separately for the power you used.  Gross FIT pays for every kilowatt hour generated by your solar system. This FIT is mostly common in Australian Capital Territory and Northern Territory. 

Whereas, people in New South Wales mostly have the option between net feed-in tariffs or gross feed-in tariffs. Though there are some eligibility criteria that can limit which sort you are offered.

Net Feed-in Tariff

In case of net feed-in tariffs, retailers only pay for the solar power you generate once your home or business has consumed the power it needs. This tariff is also named as ‘export metering’. An important thing to consider here is that if your solar system does not produce sufficient electricity for your household or business, your retailer will still charge you for the extra power you use. Net feed-in tariffs are commonly used in New South Wales, Queensland, Victoria and Tasmania.

Difference Between Feed-In Tariff and Solar rebate

People often get confused between solar rebate and feed-in tariffs. The payment received for the electricity that is being fed into the utility grid is solar feed-in tariff. 

Whereas, solar rebate (subsidy) is the discount provided by the Australian government to decrease the upfront cost for purchasing a solar panel system. 

Solar rebates often provide the sale discount of several thousand dollars for installations.  But this Australian solar rebate is phasing out over coming years and will end on 31st December 2030.

Feed-In Tariff Rates Across Australia 

Currently, Queensland, ACT, South Australia, Victoria, and NSW; feed-in tariffs are only what power retailers propose and can vary up to 14 cents (per kWh) in South Australia. Following table shows the current FIT rates in Australia

Victoria7.1 cents per kWh
New South Wales7.6 cents per kWh
Australian capital territory7.6 cents per kWh
South Australia8.5 cents per kWh
Queensland6.6 cents per kWh
Tasmania8.9 cents per kWh

Don’t blindly choose retail plan with the highest feed-in tariff

Current feed-in tariffs in Queensland, NSW and in Victoria are only what power retailers offer. Just because a feed-in tariff is high, does not mean it works with your energy use profile. 

When choosing an electricity plan, you should only be looking for a specific electricity plan that offers a balance between high feed-in tariffs, low tariffs usage and minimal daily charges. 

High feed-in tariffs may have created several opportunities for rent-seeking as retailers along the value chain increases system costs to take a share of excess payments. In such cases, generous feed-in tariffs are interrelated with the higher system costs. This results in slowing the process of expanding the industry of renewable energy. 

How To Select The Best Solar Feed-In Tariff

It is not easy to provide the details for a best solar FIT as it depends upon states, retailers and individual circumstances. You need to always compare options before making a decision and choose a plan that suits you best. 

Always keep in mind that retailers may be able to offer you the lowest or highest government feed-in rates.  If the feed-in tariff for solar power is high, see if they charge you more for the power you use. Following points should be considered while selecting a solar feed-in tariff that suits you:

  • What is the solar feed-in tariff rate on offer?
  • How much will I be charged for electricity?
  • How much are the daily supply charges?
  • Are there any other discounts or fees on offer?

Advantages of Feed-In tariff Scheme

In several states renewable energy objectives are termed as ‘Renewable Portfolio Standards’. These standards set an indicated amount of power generated by a utility that must be extracted from renewable assets. 

On the off chance, if a utility company fails to meet these protocols, they face the plausibility of getting heavy fines. FIT permits utilities to offer an alternative to net metering. The advantage for owners in a few regions is that a feed-in tariff can surpass the retail rate (kWh), the utility firm ends up reimbursing you every year. 

References

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