Feed in Tariff
Feed-in tariffs 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.
| State | Current status | Max Size | Rate Paid | Program Duration | Model |
| NSW | Commenced January 2010 | 10 kW | Suspended | 7 years | Gross |
| VIC | Commences in November 2009 | 5 kW | 60c (credit/cash) | 15 years | Net |
| SA | Commenced in July 2008 | 30kW (10kW per phase) | 44c+ | 20 years | Net |
| ACT | Commenced March 2009 | 30 kW |
45.7 c |
20 years | Gross |
| TAS | Commenced | tbc | 20c | tbc | Net |
| NT | Commenced | tbc | same as consumption rate |
tbc | Gross |
| WA | Commence August 1 2010 | 5kW for Synergy Customers. 10kW per phase for Horizon Power Customers* |
40c/kWh | 10 years | Net |
| QLD | Commenced in July 2008 | 30kW (10kW per phase) | 44c+ | 20 years | Net |
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.
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. From October 28th onwards the feed-in-tariff rate has reduced to 20 c/kW from 60 c/kW and on April 28th 2011 was suspended for 2 months.
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.
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.
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.
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.
Tasmania net feed in tariff
The current feed in tariff rate for Tasmania is $0.20 per kilowatt-hour; but there have been moves to introduce a gross feed in tariff in the state soon.
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 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 decided on a net feed in tariff model.
On May 27, 2010, the Western Australian Government announced the Residential Net Feed-in Tariff Scheme will commence August 1, 2010 and pay a rate of 40 c/kWh for net electricity exported to the mains grid; in addition to any schemes offered by electricity retailers.
Residential Net Feed-in Tariff Scheme participants will receive the premium rate for 10 years. Solar power systems will be limited in size to 5kW for Synergy customers and 10kW per phase (30kW in total) for Horizon Power customers.
*** Note: System size must be consistent with Renewable Energy Buyback Scheme (REBS) which is 5kW for Synergy customers and 10kW per phase (30kW in total) for Horizon Power customers (Horizon Power customers installing greater than 5kW must consult Horizon Power first). These are determined by the size of the inverter.
The feed in tariff is in addition to the price paid by Synergy and Horizon Power under the Renewable Energy Buyback Scheme.
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.
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. JT Solar 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.
JT Solar strongly believes that an effective scheme would involve a feed-in tariff of at least 70 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 70 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 70 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.