NSW regulator slashes rooftop solar feed-in-tariff by 25 per cent

New South Wales households could be about to see a significant cut to the tariffs paid for their excess solar power exported to the grid, with the key regulator slashing the benchmark tariff rate about a quarter.

The NSW Independent Pricing and Regulatory Tribunal (IPART) has published its final determination for 2021-22 benchmark feed-in-tariff for solar exports at between 4.6 and 5.5 cents per kilowatt-hour.

It’s a significant cut, with the feed-in-tariff benchmark falling by around 25 per cent, compared to the level set for the 2020-21 year. IPART said that the reduction was justified as wholesale electricity prices – and therefore the value of solar exports – had fallen over the last year.

While the feed-in-tariff benchmark set by IPART is not binding on electricity retailers, it provides an indication of what households may expect to receive from their retailer for the excess solar they send back to the grid.

Many electricity retailers set their solar feed-in-tariffs in line with the benchmark issued by IPART, while some retailers offer a premium above the benchmark amount in an effort to attract customers.

It will likely see New South Wales households paid less for excess solar power fed back into the grid, with many electricity retailers likely to readjust their feed-in-tariffs in line with the lower amount set by IPART.

In its final report, IPART suggested that increasing uptake of rooftop solar had been at least partially responsible for the need to cut the benchmark tariff, as increasing supplies of solar power had been working to push wholesale electricity prices lower.

But IPART said that the lower feed-in-tariff benchmark should be counterbalanced by lower retail electricity prices paid for electricity purchased from the grid.

“This is due to lower forecast wholesale electricity prices. Increasing solar penetration has resulted in these lower prices because it has reduced demand for electricity from the National Electricity Market,” IPART said.

“As more customers export their excess electricity and increase the supply of solar generated electricity available, electricity prices are likely to continue to fall during the day.”

“This means that the value of solar exports is likely to remain low in the longer term. However, customers will continue to make savings on their bills by using the electricity they generate – the key benefit of having solar panels,” IPART added.

The tribunal also said that retailers could consider offering time-based tariffs to customers to reward those who are able to export power during periods, such as households with battery storage.

IPART indicated that excess solar power exported during peak periods, such as between 5 pm and 6 pm, could be worth as much as 14 cents per kWh.