A feed-in tariff is a rate paid for electricity fed back into the electricity grid from a designated renewable electricity generation source such as 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
State specific feed in tariff details
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.
|State||Current status||Max Size||Rate Paid||Program Duration||Model|
|VIC||Commenced November 2009||5 kW||60c/25c/8c(credit/cash)||15 years5 years||Net|
|SA||Commenced July 2008||30kW (10kW per phase)||44c/25c/9.8c
|ACT||Commenced March 2009||200kW||30.16c/1:1/7.5c||20 years||Gross|
|NT||Commenced||tbc||Same as consumption rate||tbc||Gross|
|WA||Finished August 1, 2011||See Western Australia notes below***||Varies***||10 years||Net|
|QLD||Commenced July 2008||5kW||44c/8c -16c/ 9.07 – 6.53c||20 years||Net|
|NSW||New scheme from July 2012||tbc||60c, 20c, 6.6- 13c||7 years / ongoing||Gross|
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.
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
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.
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.
Which distributor should you choose?
Unfortunately, you have no choice. A distributor is assigned to specific geographic areas:
CitiPower distributes electricity to Melbourne’s CBD and inner suburbs.
Jemena Electricity Networks distribute electricity to the north-west greater metropolitan region of Melbourne.
Supplies electricity to Melbourne’s outer western suburbs and regional and rural centres in the central and western areas including Ballarat, Bendigo and Geelong.
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.
South Australia’s solar feed in tariff is comprised of two components; the distributor (SA Power Networks) contribution, plus a minimum electricity retailer contribution.
Households that joined the program before October 31 2011 receive 44c per kilowatt hour from SA Power Networks for a period of 20 years. Households joining after that date, but before September 30, 2013 receive 16c until September 30, 2016.
Additionally, the electricity retailer contribution is as follows:
- 1 July 2013 to 31 December 2013 – 9.8c per kilowatt hour
- 1 January 2014 to 30 June 2014 – 7.6c/kWh
- From 1 July 2014 , a minimum 6.0c/kWh – which takes into account the abolishing of the carbon tax.
ACT’s feed in tariff provides a 1:1 payment for all electricity generated for those who have their applications submitted by close of business, June 30, 2013.
The 1:1 rate is payable until 2020. For those submitting applications after June 30, the rate will drop to 7.5c per kWh and be based on a net model (surplus electricity export).
Applicants to Tasmania’s solar feed in tariff who lodged applications by August 30, 2013 receive a 1:1 rate until 1 January, 2019
For applications lodged after August 30, 2013 a transitional feed-in tariff rate of 8 cents per KWh applied until December 2013. The feed in tariff rate from 1 January 2014 – 30 June 2014 was a rate of 8.282c. From 1 July 2014, the rate set is 5.551 cents per KWh.
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.
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.
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.
On March 6, 2014, Energy and Water Supply Minister Mark McArdle announced the mandated 8 cent tariff paid by Energex will end on 30 June 2014.
On May 23, 2014; the Queensland Competition Authority stated the appropriate feed-in tariff for regional Queensland in 2014–15 is 9.07 cents per kWh while the carbon tax is still active. Should the carbon tax be repealed during the period, it estimates the value would be 6.53 cents per kWh.
In South East Queensland, there will be no regulated feed-in tariff from 30 June 2014 for those not signed up under the 44 cent arrangement. Instead, the rates will be determined by electricity retailers.
The Independent Pricing and Regulatory Tribunal’s final determination for the 2013/14 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 6.6 to 11.2 cents per kilowatt hour (c/kWh).
IPART’s draft determination for solar feed in tariffs for 2014/15 recommended a retailer contribution of 5.3c/kWh for solar energy exported back into the grid.
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 had around 35,700 megawatts of PV solar power capacity installed by the end of 2013. In Australia, the total installed capacity of PV based solar power systems by the close of 2013 was around 3,000 MW.
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.
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.
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 uptake. 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.