Feed-in tariff for grid-connected solar power systems

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 panel system or wind turbine. At present, feed-in tariff regulations for renewable energy exist in over 40 countries around the world and they are widely considered one of the most effective ways to increase solar energy uptake. 

Feed in tariff information quick links

• At-a-glance state feed in tariff arrangements
• Germany sets the example
• Gross vs. net feed in tariff
• Feed in tariff revenue and income tax
• Feed in tariff income and social security
• Is GST payable on feed in tariff revenue?
• Why do we need feed in tariffs?
• Design of a feed in tariff scheme
• Energy Matters' standpoint
• How you can help
• International feed in tariffs

State specific feed in tariff details

• Victoria
• South Australia
• ACT
• Tasmania
• Northern Territory
• Western Australia
• Queensland
• NSW

Feed in tariffs in Australia - at a glance

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. Some retailers also offer an additional incentive over and above the legislated amount.

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 or can also request a private ruling from the ATO. An example of an ATO private ruling result in relation to feed in tariffs can be viewed here

Feed in tariff income and social security

According to a May 2010 announcement from Centrelink, feed in tariff credits where applied as a credit on an electricity account are not included in Centrelink's income test for pensioners, but credits converted to cash payments such as a cheque or direct deposit will be.  The adjusted policy applies from 14 May 2010 and is relevant to not just pensions, but all Social Security income support payments such as NewStart. However, we are still unclear if this applies to payments such as Family Tax Allowance and Parenting Payments. We advise people who may be affected should consult with their local Centrelink Office.

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 feed in tariff

On September 3, 2012 the Victorian Government announced a new rate under both the Standard Feed-in Tariff (SFiT) and Transitional Feed-in Tariff (TFiT) of 8c per kilowatt hour. Read more.

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?

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 Melbourne and Victoria.

South Australia net feed in tariff 

South Australia's solar feed in tariff is comprised of two components; the distributor (ETSA Utilities) contribution, plus a minimum electricity retailer contribution.

Households that joined the program before October 31 2011 receive 44c per kilowatt hour from ETSA Utilities for a period of 20 years. Households joining after that date receive 16c until 30 September 2016.

Additionally, the electricity retailer contribution is as follows:

• 27 January 2012 to 30 June 2012 - 7.1c per kilowatt hour 
• 1 July 2012 to 30 June 2013 - 9.8c per kilowatt hour 
• 1 July 2013 to 30 June 2014 - 11.2c per kilowatt hour*
• 30 June 2014 onwards to be determined

The increase to 11.2c is now in doubt, with the Essential Services Commission of South Australia (ESCoSA) backflipping on a previous recommendation. In a draft recommendation, it has left the rate at 9.8 cents.

View solar power specials for Adelaide and South Australia.

ACT gross feed in tariff**

New applicants to the ACT's feed in tariff receive a 1:1 payment for all electricity generated. 

Tasmania solar feed in tariff

Electricity generated by a solar power system in Tasmania up to 3kW capacity is credited by Aurora Energy at the same rate as the applicable supply tariff. For systems larger than 3kW, you'll need to contact Aurora for applicable feed-rates.

View solar power specials for Hobart, Launceston and Tasmania.

Northern Territory net feed in tariff

For new connections, the Northern Territory feed in tariff is  1-for-1  - whatever the customer's consumption tariff is:

• residential customers: 19.23 c/kWh
• commercial: 22.37 c/kWh
• commercial time-of-use customers: peak 28.63 c/kWh and off-peak 16.12 c/kWh

Customers under the Alice Springs Solar City initiative receive 51.28 c/kWh, still capped at $5/day, but that rate is only for existing customers under the initiative. The funding has been fully allocated now, so no new customers can receive this rate.

Western Australia net feed in tariff

New systems connected under the State Government’s Renewable Energy Buyback Scheme receive 8c per kilowatt hour. However, Horizon Power has introduced area-specific solar feed-in tariffs. While owners of systems in some towns will receive a much higher rate, others will receive less. Read more.

Queensland net feed in tariff

The Queensland Solar Bonus Scheme feed-in tariff was reduced from 44 cents per kilowatt hour to 8 cents + in some cases a 6-8 cents retailer contribution for those lodging applications after 9 July 2012.

The Queensland Government Solar Bonus Scheme originally commenced on 1 July 2008. Grid connect solar owners  participating in the scheme or who have lodged successful applications prior to July 10, 2012 are paid $0.44 per kilowatt hour (kWh) for surplus electricity fed into the grid, plus local electricity companies may choose to offer additional payments above that.

Brisbane and Queensland solar power specials

New South Wales feed in tariff

The Independent Pricing and Regulatory Tribunal's final determination for the 2012/13 financial year is that a fair and reasonable value for surplus solar electricity exported to the mains grid for systems not covered under the previous Solar Bonus scheme is in the range of 7.7 to 12.9 cents per kilowatt hour (c/kWh). 
 
   

View solar power specials for Sydney and New South Wales.

Germany sets the feed in tariff example

Possibly the most famous and successful feed-in tariff arrangements would be those in Germany over the past 22 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 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 had 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 its solar market and currently has around 18,000 megawatts of solar power capacity. By the end of 2010, the total installed capacity of PV based solar power systems in Australia was over 571 MW.

Germany's program has been so successful that in late 2011, 1 million solar panel systems had been installed.

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

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 is known as 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.