Why are solar feed-in tariffs declining?

Many homeowners might be scratching their heads at some of the changes occurring right now in the energy industry. If you’ve already made the move to solar, you would know that most feed-in-tariffs (FiTs) have been decreasing every year, even though we are all encouraged to choose more renewable sources of energy.

Back in the early days of residential solar in Australia, governments at all levels were incentivising consumers to install panels through the introduction of high feed-in-tariffs, grants and rebates. Solar panels were far more expensive then, so it was still the early adopters who jumped on aboard.

Now that residential solar panels have greatly reduced in price, more customers are installing them, meaning there is more excess electricity to export back into the grid and the payback period for the solar panels has reduced. Subsequently, the majority of FiT payments have begun dropping (and government rebates reducing or ending) and in some cases, the daily supply charges have increased.

This trend has left some homeowners questioning whether solar is worth it for their homes? The trend has also resulted in more interest and demand for solar batteries and questioning by consumers on of how energy retailers are structuring their solar FiT rates.

In this blog, we will explain the recent trends surrounding FiTs, provide insights into why solar is still a beneficial option for your home and highlight the role of solar batteries.

What are my options?

The good news is that solar energy isn’t going anywhere anytime soon. The key to future proofing yourself against regulatory changes is to rely less on the grid and rely more on your own consumption. As we’ve mentioned in previous blogs, the most effective way to achieve this is by adding a solar battery system to your solar system.

How can I be more self-sufficient?

The goal of self-sufficiency is being able to manage your power as it moves back and forth between your home and the grid. We’ve generated three residential home scenarios that details how solar has evolved, and what a solar battery and VPP connection can do to help you move away from total grid reliance.

What has changed with feed-in-tariffs?

If you were someone who adopted residential solar panels more than 10 years ago, you would have enjoyed the seemingly “greater” benefits of FiTs. That’s because it would have reflected the average price of wholesale electricity at that time and the more generous government rebates and incentives for this “new” avenue of technology. Additionally, the industry has seen a marked change in grid demand, especially during the middle of the day where more households are relying on solar energy and less on the grid.

In response to these changes, the feed-in-tariffs offered by retailers have needed to adapt to the increasing number of installations across Australia, changing grid demand and level of surplus energy being exported to the grid. There’s even been talk of a ‘solar tax’, where residential solar customers could soon be charged for the export of their surplus energy back into the grid.

According to the Australian Energy Market Commission, this surplus solar is also causing ‘traffic jams’ in the electricity grid. When you think about it, households used to only receive energy from the grid, but today the flow is working in both directions (and often at the same time of day when demand is not as high) and this is placing a strain on the grid management.

Interestingly, as highlighted in an ABC News story in March 2021, energy authorities in South Australia were forced to remotely switch off thousands of household solar panels in 2020 to prevent widespread blackouts and protect their interconnecting links to other state’s electricity grids due to this ‘strain’. While the South Australia example is not typical of what’s happening in other states due to its high renewable penetration and limited transmission links to other states, it does demonstrate issues the industry is dealing with in managing the stable distribution of two-way flow of energy across the day.

Energy companies are working within this environment to continue attracting new customers for solar installation, solar FiTs and battery options. The goal is to develop energy solutions and plans that promote energy demand at the optimal time of the day, improved self-consumption and better wholesale energy management. You would also have read about Virtual Power Plants and their role in grid management.

Residential Home 1: Solar panels only

This residential home has a traditional solar setup and may have originally invested in solar when high FITs were still around. Solar energy would have been stored in real time (during sunny or bright days) and then used during the day (often when demand was not high in the household). However, due to the general decline in FiTs, residential home 1 is less likely to offset the cost of energy they buy from their provider.

Residential Home 2: Solar and battery system

This residential home was an early adopter of solar and has been watching the falling FiTs rates over recent years (although would have more than paid off their investment.) They have added a battery as a long term solution to harnessing the energy generated via their solar panels. This allows the owner to be more self-sufficient and greatly decrease their reliance on the grid or the decreasing FiTs.

Residential Home 3: Nectr solar and battery, plus VPP network connection

This residential home installed a solar system in the past few years. After seeing how much surplus energy is being exported to the grid, they chose to install Nectr’s buy-now-pay-later Home Battery Add-On plan that includes VPP participation. This owner generates solar energy during sunny or bright days and harnesses the excess energy stored through the battery. They also know that they will see an immediate saving in the energy bill due to reduced reliance on the grid and the VPP bill credit.

The difference between residential home 3 and 2, is that this owner 3 will earn a $10 monthly bill credit for allowing Nectr to access to their stored energy a number of times per year - as part of their participation in Nectr’s VPP.

Ready to learn more about our Battery AddOn?

If you already have solar and want to find out about the Nectr Home Battery Add-On, simply complete this linked form. Our solar energy consultants will be in touch.