Most states in Australia currently have or have had some sort of Solar Feed-in Tariff scheme in place. Solar Feed-in Tariffs, which pay solar system owners a premium per kilowatt-hour for the power that they feed into the grid, are one of the key incentive mechanisms for the promotion of renewable energy generation across the globe. FiTs are what enabled Germany to become the unquestioned world-leader in rooftop solar power, and even China has introduced a national FiT program in an effort to expand domestic demand for solar PV systems. 1-to-1 solar buybacks are schemes similar to Solar Feed-in Tariffs, but which offer rates equal to the retail rate for electricity.
Tiers of Solar Feed-in Tariffs
In Australia, the rates on offer to those who export their solar power to the grid vary depending on state/territory, system size, and electricity retailer. There are essentially 3 ‘tiers’ to Solar Feed-in Tariffs, although, when it comes down to the details, the differences get a bit fuzzy.
Please note that all the FiT schemes described below are net schemes, which means that customers only get paid for excess electricity that they export to the grid. Australia’s only gross feed-in tariff scheme, the NSW Solar Bonus Scheme, is no longer open to new applicants.
‘Bona fide’, state-sponsored Solar Feed-in Tariff Schemes
At the time of writing, Queensland, Victoria (for systems under 5kW under the Transitional Feed-in Tariff), and South Australia (plus certain areas of the Northern Territory) offer bona fide Solar Feed-in Tariffs to residents planning on installing new eligible solar systems. Bona fide Solar Feed-in Tariff schemes are initiated by the state government, and effectively value solar power a rate that is greater than the rate that electricity customers pay for energy from the grid. (In the states with generous Solar Feed-in Tariff Schemes, some electricity retailers will offer up to 8c/kWh above the legally mandated rates in order to attract solar customers.)
These Feed-in Tariffs improve the Return on Investment (ROI) for solar systems and shorten payback periods significantly. (All of the above comments refer to residential Solar Power Feed-in Tariff Schemes. The ACT also recently introduced Australia’s first large-scale Solar Feed-in Tariff.)
1-for-1 ‘Solar Buyback’ Schemes
1-for-1 (also ’1-to-1′ or ’1:1′) Solar Buyback schemes offer exactly what the name suggests: Whatever retail tariff rate someone pays for electricity from the grid, they will receive the same rate for each kWh of solar power that they export to the grid. These schemes, therefore, effectively value solar power as being ‘equal’ to that of power taken off the grid, which is generated by more conventional sources such as coal.
New solar customers in the ACT (ActewAGL) and Tasmania (Aurora), plus Horizon Energy customers in Western Australia are elegible for this kind of 1-to-1 Solar Buyback scheme. They are not ordinarily state-sponsored, but rather agreements between electricity retailers and their solar customers. One exception is the Victorian Standard Feed-in Tariff, under which new solar customers with systems 5kW and above are are eligible for a 1:1 solar buyback.
Nominal Solar Buyback Schemes
These ‘schemes’ are not really schemes. Instead, they are voluntary payments that retailers make to solar customers in states where no mandatory Solar Feed-in Tariff scheme exists. For example, in NSW, certain retailers will offer up to 8c/kWh for solar power exported to the grid. Likewise, in WA, Synergy customers can receive 7c/kWh. Amounts of this sort are unfortunately what is rather cynically deemed to be the ‘fair price‘ of solar power to the grid, taking into account only the value the value to electricity retailers, and not the potential broader benefits to the grid and the environment.
Set Solar Feed-in Tariff vs Solar Buybacks: How to time your electricity use
With any grid-connected solar system, customers have the option for either self-consumption or export to the grid, and the finance-savvy system owner will endeavour to 1) minimise electricity use at home and 2) endeavour to get the best value out of the solar system’s production. Depending on the rate offered through a FiT or solar buyback scheme, the actions taken to manage the volume and timing of household electricity demand will differ. What are they?
A short note on how to export, how to self-consume
It is important to remember that power from a solar PV system is automatically directed to household use first; if/when it is not consumed then and there, it automatically passes through an electricity meter and onto the grid. Therefore, when a household opts to ‘self-consume’ their solar power, this means that they time their power usage to coincide with generation–i.e., when the sun is shining. When a household opts to export their solar power to the grid, this means that they avoid using electricity when the system is producing–the excess is automatically exported.
Timing power usage with a set Feed-in Tariff rate
Solar Energy Production vs Household Energy Consumption: Summer
A set, guaranteed Solar Feed-in Tariff rate gives the solar system owner some sense of confidence regarding the returns they will receive from their solar power system as the years go on. Right now, with electricity prices lower than the bona fide FiTs, this means that it makes more financial sense for homes and businesses to favour export to the electricity grid, and strive to use electricity as much as possible when their solar systems are not producing. Because electricity prices are set to rise across Australia, however, this will change; eventually the price of electricity will rise to reach ‘equilibrium’ with the FiT rate, and it won’t make a difference when power is used–export and self-consumption will have the same value. With further inflation of electricity prices, it will eventually be the most sensible option self-consume as much as possible.
A simple equation to calculate the benefits of solar under a Solar Feed-in Tariff/Solar Buyback Scheme:
[FiT rate (c) * Electricity Exports (kWh)] + [Price of Electricity (c) * Solar self-consumption (kWh)]
Examples and Comparison:
Here are some examples of how returns will differ with the timing of electricity use under a Feed-in Tariff:
- If a household exports 1kWh and self-consumes 1kWh of solar power:
[44c (FiT rate) * 1kW] + [23c (cost of electricity) * 1kW] = [44c + 23c] = 67c savings on electricity bill
- If a household exports 2kWh of solar, however, the benefit is greater:
44c (FiT rate) * 2kWh = 88c savings on electricity bill
- Self-consuming 2kWh of solar power will yield less benefit:
23c (cost of electricity) * 2kWh = 46c savings on electricity bill
Timing usage with a 1-for-1 solar buyback
With a 1-for-1 solar buyback, however, as long as the homeowner/business uses no more electricity than is produced by the solar system while it is being produced, it makes no difference whether they self-consume the solar power or export it to the grid–both offer the same returns. The key here, then, is to focus on reducing electricity use in general, because it is not possible to optimise the timing to obtain greater savings.
Examples and Comparison:
-If a household exports 1kWh and self-consumes 1kWh of solar power:
[23c (cost of electricity) * 1kW] + [23c (solar buyback rate) * 1kW] = [23c + 23c] = 46c savings on electricity bill.
- 2kWh of exported solar power have the same value:
23c (solar buyback rate) * 2kWh = 46c savings on electricity bill
- The same is true for 2kWh of self-consumed solar power:
23c (cost of electricity) * 2kWh = 46c savings on electricity bill
Timing electricity usage with a nominal solar buyback
In this scenario, it makes more sense to self-consume as much as possible, as this will offer the greatest value for each kWh of solar power produced. While solar does make sense for some households and businessses in NSW, provided they can find a way to use all their solar power as it is being produced.
Examples and Comparison:
- If a household exports 1kWh and self-consumes 1kWh of solar power:
[8c * 1kW] + [23c * 1kW] = [8c + 23c] = 31c savings on electricity bill
- However, 2kWh of exported solar power would yield significantly less savings:
8c (solar buyback rate) * 2kWh = 16c savings on electricity bill
- Self-consuming 2kWh is the best option:
23c (cost of electricity) * 2kWh = 46c savings on electricity bill
© 2012 Solar Choice Pty Ltd
