What you need to know about declining feed-in tariffs before you get solar

Solar feed-in tariffs are declining. 

In fact, they’ve been trending downwards for years now. However we’re hearing a lot about it in the media at the moment. 

To take a quick step back: A solar feed-in tariff (FiT) is the rate your power company pays you for the solar power you export back into the electricity grid.

As you’d expect, solar owners aren’t happy – particularly when electricity usage rates aren’t declining alongside FiTs. However decreasing feed-in tariffs aren’t the beginning of the end for rooftop solar, as some solar owners have concluded. 

Going solar is still one of the best ways to save money. However, how we use it needs to change.

    A brief history: When and why solar feed-in tariffs decreased

When solar panels first started popping up on rooftops around Australia, feed-in tariffs were high. 

State governments offered subsidies to incentivise homeowners to install solar panels, so solar owners were getting upwards of 40-60 cents per kWh for the solar electricity they exported. 

Fast forward a decade or so and feed-in tariffs have steadily reduced over the years.


We now have over 2.5 million solar households in Australia and the vast majority of those all feed solar electricity back into the grid in the middle of the day when the sun is up. 

Combine that with our large-scale electricity generation (think solar farms, wind farms, coal-fired power stations, etc) and that’s a huge supply of electricity during the day when demand is often low. 

It’s a simple case of supply exceeding demand and, as a result, the value of electricity in the wholesale market is low (sometimes even negative) in the middle of the day when solar households export their solar power.

But by this logic, shouldn’t electricity usage rates also be just as low as feed-in tariffs in the middle of the day? The reason they’re not comes down to how electricity is bought and sold in the market. 

When you buy electricity from your power company, you’re paying for a number of costs including the costs associated with generating the electricity and transporting it. 

These generation and transportation costs are paid for at the point of consumption – i.e. by the person who uses the electricity. So when you buy electricity, you’re paying for all of these costs. However when you sell your solar power, you’re only paid for the generation portion of these costs. 

The other thing you pay for when you buy energy (but don’t get paid for when you export it) is a risk protection cost. Most power companies build this into your electricity rate – it’s like insurance and means you don’t pay an exorbitantly high rate when electricity prices skyrocket during peak-demand events (e.g. on a really hot summer day). 

As a result of all of these changes over the years, solar owners can now expect to receive between 4-12c/kWh for their solar exports depending on their location and energy plan. 

    Maximising your solar value in 2021 and beyond: How we use solar is changing

You might be wondering, why is a solar installer telling us about decreasing feed-in tariffs? Won’t it be bad for business?

The key is education. Declining FiTs don’t mean solar power is no longer a good investment. However it’s important to understand it before you install solar. 

For years, solar owners have been focusing on their feed-in tariff as a revenue stream. As a result, declining FiTs seem like the end of the world. But really, we just need to adapt the way we use our solar power – it’s no longer about exporting your excess solar energy, it’s about using it in your home. The more solar power you use in your home, the less expensive electricity you’ll have to buy from your power company. That’s the key to saving with solar. 

So how do you use more solar power in your home? After all, there are only so many loads of washing you can put on during the day! 

    1. Get a solar battery and store your excess solar power to use later on

If you have solar panels, any electricity you’re not using during the day will automatically be exported to the electricity grid. You’ll be paid a small feed-in tariff for these exports and will have to buy electricity in the evening when your panels are no longer generating energy. 

But if you have solar panels and a battery, you’ll be able to store that excess solar power to use later on, rather than having to buy it.

You can get a battery at the same time as your solar panels (this is usually the most cost-effective time to do so) or, in most cases, you’ll be able to add a battery to an existing solar system. Contact us here to find out more.

    2. Get a hot water heat pump and store your excess solar power in the form of hot water

Hot water accounts for around a quarter of the energy used in the average Australian home, so using free solar power to heat your water can slash a huge chunk off your power bill. 

Hot water heat pumps, like the Sanden heat pump, are up to 4x more efficient than traditional electric resistance hot water systems. Most have a timer setting which means you can set it to run during the day when your solar panels are generating electricity. The hot water will then sit in the heat pump system, ready to be used at any time. 

In this way, a heat pump functions like a battery – storing your solar power in the form of hot water for use any time of the day or night.

    3. Pre-heat or -cool your home

Even if you’re not ready for a battery or hot water heat pump, you can use free solar power to run your air conditioner or heater during the day. 

This way, by the time it gets really hot in the late afternoon or very cold when the sun goes down, your home will already be at a comfortable temperature and you can turn the air con or heater off (or at least, down much lower) so you don’t have to pay for power to run it.

    4. Charge an electric car

We don’t all have an electric car, but using solar power to charge an electric vehicle means you could not only run your home on free solar power but you could also run your car without the need to pay for electricity or petrol.

What solution works best for my home?

The best way to understand how to maximise a solar system investment get a personalised solar quote. Solar Flow are Melbourne’s leading solar system and heat pump installation team, so we can work with you to develop a free quote based on your home, your electricity usage, your budget and your energy goals.

Ready to get started? Get in touch with us today for a free, no obligation quote. Call us on 1300 93 14 24 or send us an email here.

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