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Feed-in tariff for grid-connected solar systems

What are feed-in tariffs?

A feed-in tariff is a premium rate paid for electricity fed back into the electricity grid from a designated renewable electricity generation source like a rooftop solar PV system or wind turbine. At present, feed-in tariff regulations for renewable energy exist in over 40 countries around the world.

Australia currently has no nationalised program, only state run schemes. Here's an at-a-glance look at state arrangements.

Please note: Energy Matters advisers consumers to shop around for solar-friendly electricity retailers when considering accessing feed in tariffs to ensure they won't be penalised in other ways in regards to their electricity bill once they have a system installed. Learn more about the potential issues here and here

State	Current status	Max Size	Rate Paid	Program Duration	Model
VIC	Commenced November 2009	5 kW	60c (credit/cash)	15 years	Net
SA	Commenced July 2008	10 kW	44c+	20 years	Net
ACT	Commenced March 2009	under 10 kW - premium rate; over 10kW - 80% of premium rate; over 30 kW - tbc	50.05c/kWh up to 10kw capacity and 40.04c/kWh up to 30kW capacity	20 years	Gross
TAS	Commenced	tbc	20c	tbc	Net
NT	Incentive is available for 225 rooftop PV systems in Alice Springs.	tbc	45.76 c/kWh. Capped at $5 per day, then reverts to 23.11c per kWh.	tbc	Net
WA	To commence July 1 2010	tbc	tbc	tbc	Net
QLD	Commenced July 2008	10 kW	44c+	20 years	Net
NSW	To commence January 2010	10 kW	60c/kWh	7 years	Gross
view grid connect solar power specials for your state or get an instant, obligation free online quote for home solar power!

Germany sets the feed in tariff example

Possibly the most famous and successful feed-in tariff laws would be those introduced in Germany over the past 15 years. In 1991 the German government introduced the Electricity Feed Act, legally regulating the feed-in to the grid of electricity generated from renewable resources such as solar power. This Act required utility companies to purchase electricity generated from renewable resources such as domestic solar power systems at set rates (feed-in tariffs).

The scheme, originally introduced in 1991, was expanded and enhanced in 2000, and has been responsible for the dramatic growth in Germany’s renewable energy market, particularly the solar photovoltaic industry. In the five years from 2000, the quantity of electricity fed into the grid from eligible sources has more than doubled, with a seven-fold increase in installed solar photovoltaic (PV) capacity to over 1,500 MW by the end of 2005. By comparison, at the same time Australia had in the order of 7MW of grid-connected solar power, or less than 0.5% of Germany’s capacity. Germany has continued to grow it's solar market and currently has around 2,500 MW of solar power capacity.

Based on exchange rates as of mid-February 2009 and under the new tariff structure introduced in 2004, the base level of compensation for grid connected solar power installations on homes and buildings is up to AUD$ 1.12 per kWh.

Austrailia's solar market share

Australia is lagging behind other countries such as Germany who, while having half the sunshine of Australia, have 200 times the solar production capacity of our country due to a generous feed in tariff program.

Gross vs. net feed in tariff

A net feed in tariff, also known as export metering, pays the PV system owner only for surplus energy they produce; whereas a gross feed in tariff pays for each kilowatt hour produced by a grid connected system. It's a very important difference.

Is an income from a feed in tariff taxable?

At this point, there doesn't appear to be any specific taxation legislation dealing with income derived from feed in tariffs. Whether it is assessable income depends on the income producing nature of the activity. If it can be demonstrated that the system was installed with a view to making a profit, then receipts under the feed in tariff would be considered assessable income while all expenses associated with the income generating activity would be deductible (eg depreciation).

In most cases, systems installed at domestic sites would not be taxable as they would be considered personal use / hobby (i.e. not in the nature of a business or profit making scheme). If the system is installed at a commercial site, it will most likely be considered taxable. However, system owners should consult their accountant for advice.

Feed in tariff income and social security

We have been advised that payments from feed in tariffs would be counted as income for social security purposes. For a person's pension to be affected their total assessable income would have to exceed the relevant income test free areas. The pension income free area from 1 July 2009 is $142 a fortnight for singles and $248 a fortnight for couples combined. People who may be affected should consult with their local Centrelink Office for clarification.

Is GST payable on feed in tariff revenue?

Individuals will not need to pay/remit GST from their feed in tariff income. The reason being that selling electricity back to the utility providers is considered an enterprise but you need to receive $75k per annum from this source to be required to register for GST. However, businesses will need to pay/remit GST for their feed in tariff income.

Victoria net feed in tariff

Victorian households with solar power systems will be paid a feed in tariff from November 2009. Legislation for the Victorian feed in tariff was introduced on March 10, 2009; then revised and passed on June 25, 2009.

Under the program, Victorian households, community organisations and small businesses who consume less than 100 megawatt hours of electricity a year will be credited a minimum 60 cents for every unused kilowatt hour of power fed back into the state electricity grid. Some electricity retailers may offer a higher amount.

While electricity companies are only obliged to offer the 60c rate and as only a 12 month credit, some are now offering cash payments at higher rates:

	FiT offer inc. GST	Availability	Cash or Credit?	Payment frequency and method	Additional fees
AGL	68c	All premises	Cash	Payment can be received annually via EFT	$10 admin fee
Origin	66c	Primary residence and eligible business and community organisations	Cash	Once annually when in credit for more than $50 via cheque	None
Country Energy	66c	All premises	Cash	Payment can be made every billing period via cheque	None
Energy Australia	66c	Primary residence and eligible business and community organisations	Credit only	NA	None
TRU Energy	66c	Primary residence and eligible business and community organisations	Cash	Case by case basis (generally when over $100 credit) via cheque	None
Red Energy	66c	Primary residence and eligible business and community organisations	Cash	1 free refund per year via EFT / cheque	$10 admin fee after annual refund
*As at December 9 2009. Information obtained through sales consultants and data from official company websites

The tariff will only be available until a total capacity of systems participating reaches 100 megawatts total capacity.

PV systems larger than 5 kilowatts in size and other renewable energy systems up to 100 kilowatts in size remain eligible for the standard feed-in tariff.

PFiT vs SFiT in Victoria

In Victoria, electricity distributors (upstream from electricity retailers) Powercor and Citipower have created confusion regarding FiT issues by introducing their own terminology – PFiT and SFiT, which stand for Premium Feed In Tariff and Standard Feed In Tariff.

These are simply acronyms these distributors are using to describe the following.

Essentially, PFiT and SFiT are two different options offered to solar power system owners with different rates for electricity consumed, depending upon usage pattern. However, both options still offer the premium feed in tariff for power generated and the amount paid varies between retailers; the minimum being 60 cents per kilowatt hour for surplus electricity exported to the grid per government legislation .

PFiT vs SFiT - what should you choose for consumption?

Bearing in mind the PFiT and the SFiT options have been imposed at the electricity distributor level, the general rule of thumb is:

If you have more than one meter and it’s being used to operate appliances during daytime such as dual element electric hot water, underfloor slab heating or an air conditioner, then you are likely best to choose the standard feed in tariff option (SFiT)
If you have two meters & one applies to a single element HW system you will likely benefit most from the premium feed in tariff (PFIT) option.
If you have one meter, then you would likely be best to opt for a premium FiT (PFiT)

Which distributor should you choose?

Unfortunately, you have no choice. A distributor is assigned to specific geographic areas:

Citipower
CitiPower distributes electricity to Melbourne's CBD and inner suburbs.

Jemena
Jemena Electricity Networks distribute electricity to the north-west greater metropolitan region of Melbourne.

Powercor Australia
Supplies electricity to Melbourne's outer western suburbs and regional and rural centres in the central and western areas including Ballarat, Bendigo and Geelong.

SP Ausnet
Supplies electricity to eastern metropolitan Melbourne and eastern Victoria.

United Energy Distribution
Supplies electricity to south-east Melbourne metropolitan area and the Mornington Peninsula.

Which retailer should you choose?

While you cannot change distributors, you can switch retailers.

At the electricity retailer level, whether it is Victoria or any other state, we always suggest for people to shop around – some retailers are far more solar friendly than others and will offer better rates, higher payments for the power your system produces and/or better arrangements regarding your account generally.

Further details on Victoria's Feed in Tariff

View solar power specials for Victoria.

South Australia net feed in tariff

From July 1 2008, qualifying South Australian residents will receive $0.44 per kilowatt-hour. The feed in tariff program is available to all qualifying South Australian residents, regardless of the electricity company that provides power to their premises.

View solar power specials for South Australia.

ACT gross feed in tariff

In July 2008, legislation was passed in the ACT's Legislative Assembly for a gross feed in tariff to be implemented, which will pay 50.05c/kWh for systems up to 10kw capacity and 40.04c/kWh for up to 30kW capacity, with a system capacity cap at this point of 30kW. The system cap may also be increased later in 2009. The program was rolled out on March 1, 2009.

View solar power specials for Canberra and the ACT.

Tasmania net feed in tariff

The current feed in tariff rate for Tasmania is $0.20 per kilowatt-hour

View solar power specials for Tasmania.

Northern Territory net feed in tariff

Alice Springs residents can receive a net feed in tariff rate of $0.45 per kilowatt hour produced. Further information (PDF). In other areas of the Northern Territory, the rate is 14.38c.

View solar power specials for Northern Territory.

Western Australia gross feed in tariff

After previously announcing a rate of $0.60 per kilowatt hour based on a gross model starting some time in 2009, the Western Australian government rescinded the rates and conditions in June 2009 and says it will be instead introducing a net feed in tariff model.

The scheme is due to launch in Western Australia in July 2010 and it is intended that owners of systems installed since the 2008 State Government election will be eligible.

View solar power specials for Western Australia.

Queensland net feed in tariff

The Queensland Government Solar Bonus Scheme commenced on 1 July 2008. Grid connect solar owners participating in the scheme will be paid $0.44 per kilowatt hour (kWh) for surplus electricity fed into the grid, plus local electricity companies may choose to over additional payments above that.

The 10kW limit applies to each phase of power supply. If you have 3 phase power, it would be possible to set up 3 separate 10kW systems and still get paid the 44c for every kWh fed into the grid. This tariff is open to residential, business and community buildings.

View solar power specials for Queensland.

New South Wales feed in tariff

The New South Wales Government originally announced details of the state's feed in tariff incentive (called the Solar Bonus Scheme) on June 23, 2009, but on November 9 2009, made a decision to switch from a net feed in tariff to the gross model; a much more generous arrangement.

• Pays 60 c/KWh on a gross basis
• Maximum system size 10 kW
• Commences 1 January 2010
• Reviewed in 2012

NSW gross feed in tariff and electricity meters

According to the information we have on hand, current as at late December 2009, there are 3 distributors who will all be handling the GFiT separately;

a) Integral (West & South Sydney) - Integral meters can be reprogrammed and the gross feed in tariff will be offered from 1/1/2010. Customers must apply for the gross feed in tariff and may need to pay a fee.

b) Energy Australia (North Sydney) – The gross feed in tariff will not commence until 1/7/2010 for Energy Australia customers, but the net feed in tariff will be available before this time. Energy Australia's meters cannot be reprogrammed. Customers will need to change to a net meter on 1/1/2010 and then to a gross meter on or around 1/7/2010. It is likely that customers will need to pay for 2 meter changeovers.

c) Country Energy (the rest of NSW) – As per Energy Australia; the only difference being since January 1 2010, all grid interactive metering became contestable works. This means that although there is no charge for the meter, customers are asked to engage a level 2 Accredited Service Provider (ASP) to complete the installation of the meters. This will incur a varied cost.

View solar power specials for New South Wales.

Why do we need feed-in tariffs?

Residential solar power is disadvantaged in Australia. The market fails to take into account the true value and many benefits to the electricity network which arise from the adoption of renewable energy technologies embedded within the electricity grid.

Solar PV, like other renewable energy sources, provide environmental benefits through reduced atmospheric pollution, and social benefits through industry development and job creation - for example through the installation of grid connect solar systems, each with related economic benefit.

When electricity is transmitted over a distance, some is lost through what's called line loss. By installing rooftop solar arrays on houses, the electricity can supply not only the house on which it's installed, but the surplus can feed other houses close by.

Centralised power generation facilities also provide a relatively easy target for hostile parties and can be destroyed in natural disasters such as cyclones or fires. A decentralised network or grid connected systems allows for better energy security as it's much cheaper and faster to repair a sub-station than it is to replace an entire plant. It's in the interests of our national security to decentralise power generation.

During the summer months, it's becoming increasingly common for blackouts to occur due to an overload of the mains grid. It's during these months that solar power installations can make their greatest contribution.

A feed-in tariff for grid connected systems redresses these systemic market failures and threats and rewards solar electric generation for its true value to the electricity market and wider society, by providing a financial incentive for the adoption of renewable energy.

Design of a feed-in tariff scheme

For a feed-in tariff to be effective, it is essential that the tariff offered is designed in a way as to adequately reward solar PV proponents. Energy Matters believes that in order to provide an incentive for people to install grid-connected solar systems, and thus achieve the goals of the scheme, there are three key elements of a feed-in mechanism which need to be considered: The price level of the tariff; the means of metering; and the duration of the scheme. It is the proper combination of these three elements, which will determine the success or failure of a feed-in mechanism.

Energy Matters strongly believes that an effective scheme would involve a feed-in tariff of at least 80 cents per kWh, paid on the entire output of a solar power system (via gross production metering), and offered for at least 15 years. Only a gross feed-in tariff set at or above these levels would adequately reward the adoption of solar PV for the range of environmental, social and economic benefits arising from this technology, and encourage the uptake at sufficient levels to achieve the policy goals.

It is important that the 80 cents per kWh gross production feed-in tariff is established in conjunction with the Australian Commonwealth Government’s Solar Homes and Communities Plan. Only then will a feed-in tariff scheme be effective in encouraging uptake of rooftop solar photovoltaic systems by helping owners to recoup the cost of their system.

However, for any feed-in tariff to totally phase out the federal means-tested $8000 rebate scheme, we believe a feed-in tariff mandated at 80 cents per kWh would be more effective and there should be a crossover period where the rebate is still available.

Although several states in Australia already have feed-in tariff schemes in place, those introduced in South Australia, Queensland and Victoria recently are net feed-in tariffs, meaning they only pay homeowners for the electricity exported to the grid minus what is consumed in the home at the time of production. This system of metering significantly discriminates against both owners of smaller grid-connected systems and those who are more likely to consume electricity during the day, such as pensioners or stay-at-home parents.

Alternatively, double incomes families who are typically away from home during the day manage fine under net metering, but now it is these households who have become ineligible for the solar rebate, due to the $100 000 per household income means test.

Energy Matters' feed in tariff standpoint

At Energy Matters we believe that for a feed-in tariff scheme to make the most impact in Australia it must be a gross feed-in tariff. When Germany introduced gross feed-in tariffs in 2000 it doubled the amount of electricity generated from renewable energy sources and adjusted its 2010 target of 12.5% of total energy consumption. It is now three years ahead of schedule.

As a consequence of this success, Germany recently increased its renewable energy target to 27% of all electricity generation by 2020. Also the gross feed-in tariff has created nearly 250,000 new jobs in the renewable energy industry, which will soon surpass the car industry as that nation’s number one employer. The German solar power sector is now creating three times the number of jobs per installed megawatt as the coal fired electricity industry - all of this in a country receiving half the sunshine Australia does.

International experience tells us that gross feed-in tariffs can be very successful in stimulating the uptake of renewable energy, addressing climate change and creating strong local industries and employment. However our state governments, through inventing a net feed-in tariff have made a fine mess of a policy, which has delivered so much for the solar power industry overseas.

How you can help

If you care about fighting climate change, cutting Australia’s greenhouse gas emissions and encouraging our domestic renewable energy industry then please write to your local State or Federal members of Parliament requesting they consider gross feed-in tariffs as the most effective way to increase solar power use in Australia.

You can also sign our petition at FeedInTariff.com.au! Your voice will be heard!

By introducing these incentives we will encourage the installation of solar panels on more homes around the country and increase the output and generation of clean renewable energy.

International feed in tariffs

Feed in tariffs are increasingly being implemented around the world as they are a proven means to stimulate renewable energy uptake without impacting on the public purse. Tariff Watch on PV-Tech's web site keeps track of the efforts and schemes in various countries; and allows you to compare programs between nations and states within.