NSW solar households to get paid less for daytime exports, more for evening peak

New South Wales solar households will face a big reduction in the income from rooftop solar exports to the grid from July 1,  after a draft decision from the state’s pricing regulator proposed an all-day feed-in tariff (FiT) price range of 4.4 to 5.9c/kWh

That tariff range, down from 6-7.3c/kWh, serves only as a benchmark for retailers and is entirely voluntary – and is based on the wholesale value of electricity, which as the regulator flagged in February, has been steadily charting down.

“Our draft benchmark for 2021-22 is lower than the current all-day benchmark range … due to lower forecast wholesale electricity prices,” the draft report said. “These are being driven by lower demand during the middle of the day when most solar exports occur.”

Falling solar feed-in tariffs have been the order of the day across most states and territories around Australia, in lock-step with falling wholesale electricity prices that are being driven down by, you guessed it, rooftop solar – at least partly, anyway.

“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,” IPART explains. “This means that the value of solar exports is likely to remain low in the longer terms.”

This spectre of diminishing returns is something the rooftop solar market has been facing up to for some time, leading some in the industry to switch their focus to helping customers to maximise solar self-consumption, including through the addition of battery storage.

Certainly, this is what IPART recommends: “Customers will continue to make significant savings on their bills by using the electricity they generate – the key benefit of having solar panels.” And they even included the below graph to illustrate their point.

But concern is still growing that falling feed-in tariffs, potentially combined with a solar export charge that was proposed for rollout across the National Electricity Market by the Australian Energy Market Commission last month, will work to kill demand for rooftop solar and disrupt what has been a world-leading shift by Australian households to clean energy.

A report from Victoria University’s Energy Policy Centre just this week warned that the proposed levee would leave existing solar homes with little or no income from rooftop solar exports once much lower feed-in rates were implemented from the middle of this year.

And the report’s author, Bruce Mountain, suggested that the picture was particularly bleak for NSW (and South Australia and Queensland) customers, where export tariffs were falling to new lows.

The potentially good news for NSW solar households in IPART’s draft determination, however, is that the regulator is also proposing to set time-dependent feed-in tariff benchmark ranges, which would offer higher solar FiT rates – worth up to 17c/kWh – at times of peak demand.

As detailed in the table and chart below, these time-dependent tariffs would partly act as a solar sponge, by recommending a slightly higher rate for between 3-4pm, and then higher again at between 9.2c/kWh-14.2c/kWh from 4-5pm.

From 5-6pm would be the sweet spot for solar exports under the proposed pricing scheme, but at that time the between 11c/kWh and 17c/kWh recommended rate would more act as an incentive to invest in battery storage, with the ability to export stored solar power at the designated time.

As IPART notes, 17c/kWh is “significantly higher” than the 2021/22 proposed all-day benchmark, “however currently only 2% of exports occur after 5pm.” It’s also worth noting, again, that the time-dependent tariffs would only be a recommendation to retailers. And if Victoria is anything to go by, retailers have been slow to take up the suggestion.

And to be fair to retailers, even IPART doesn’t sell the concept very well.

“Time-dependent tariffs would provide customers with more options to manage their solar generated electricity, particularly those who are able to shift their usage and/or have batteries,” the IPART report says.

“However, [the top offer of 17c/kWh] is still less than the retail price of electricity. This means that customers would still be better off if they used their solar electricity during this time, rather than buying it from their retailer and exporting their solar electricity to the grid.”

To its credit, IPART has been seeking feedback on its approach to calculating solar feed-in tariff benchmarks – as well as customer views on their experiences as small solar generators – ahead of publishing its final 2021-22 determination in June.

The regulator says it has been considering whether its existing approach to setting the benchmarks and valuing solar exports remains fit for purpose, and whether any changes were required to its methodology.

It has also asked to hear from consumers on whether retailers are offering new and different ways to optimise solar self-consumption, storage, or targeted exports; whether consumers are having trouble getting paid for their solar exports; and whether they are able to export the amount of solar they wish to.

In its draft determination on Friday, IPART said this process was still ongoing, with stakeholder submissions invited up until May 24. IPART’s final determination is being presented to state energy minister Matt Kean with its final report by June 30 2021.