In this week’s article, I’ll demystify the value of the solar feed-in tariff and demonstrate what the drop in the tariff from 1st of July means in terms of payback on a typical solar power system.
What is the feed-in tariff?
The feed-in tariff (FiT) is the rate paid by your electricity retailer for energy fed back into the grid from your solar power system. It is set annually by the Essential Services Commission (ESC) with any changes coming into effect on the 1st of July.
What’s it worth?
Today, the minimum flat rate feed-in tariff is 10.2 cents per kilowatt hour, with peak/off-peak rates at similar amounts.
From 1 July 2021, the flat rate feed-in-tariff will drop to 6.7 cents per kilowatt hour. According to the ESC, “the decrease in minimum feed-in tariffs is mainly due to recent decreases in wholesale electricity prices that are expected to continue into 2021-22.
For a 6.6kW solar power system – the most popular size through MASH – you will get around $156 less a year for your solar exports when the FiT drops to 6.7 cents. This assumes you use 50% of the solar power you generate in your home and export the rest to the grid.
So that’s the downside.
But how much are the total savings with a solar power system at the lower FiT?
There’s two parts to working this out.
First is calculating the amount you save by using your solar power rather than buying it from the grid. That’s a saving of around $1,114 a year. (Worked out by calculating what it would have cost if you had to buy 50% of the power you use from the grid at 25 cents per kilowatt hour).
The second part of the calculation is working out the money you make by exporting your excess solar to the grid and getting paid the feed-in tariff. This is around $299 assuming you export 50% of your solar power at 6.7 cents per kilowatt hour.
So the total savings you’ll make will be around $1,413 a year ($1,114 + $299) with a feed-in tariff of 6.7 cents per kilowatt hour.
That compares to total savings of around $1,569 a year at the 10.2 cent feed-in tariff for a 6.6kW system and same assumptions.
The good news is that the payback on a new solar power system is only marginally affected by the drop in the feed-in tariff. Assuming you qualify for the current Solar Victoria Rebate of $1,850, the payback for the above example changes from around 2.8 years (at the 10.2 cent FiT) to 3.1 years (at the 6.7 cent FiT), based on the price of a standard solar system through MASH.
That’s still an attractive payback figure in anyone’s book!
Solar Makes Sense
There’s no doubt that a well-sized solar system can make financial sense but there are a number of variables to consider which can affect your payback and the above results may not be achievable in your circumstances.
If you’d like to know whether ‘going solar’ is a good move for you, come to a MASH solar info meeting at the Castlemaine Senior Citizens Centre, 13 May, 6-7.30pm or Woodend Neighbourhood House, 20 May, 6-7.30pm. Register by calling 1300 466 274 or online at mash.org.au
“Dealing with MASH to get our 6.6kw system installed was a hassle-free experience. Good for the environment and for our energy bills.” – James Allebone with daughter Clara beside their new solar inverter, Woodend
By Jo Kaptein, Program Lead, MASH community solar bulk-buy organised by the Central Victorian Greenhouse Alliance (CVGA)