Minimum feed-in tariff

Your energy company pays you feed-in tariffs for power you export to the grid (via sources including solar panels). Energy retail companies are responsible to price their feed-in tariff offers just like they set the retail offer prices for the power you consume from the grid.

We set the minimum that they must pay for the feed-in tariffs. This means retailers have to offer you at least the minimum tariffs, but they are free to offer you above this minimum.

Retailers can offer solar customers a choice between a single rate or time-varying tariffs.

The time-varying tariff for certain times of day is outlined in this table:

We have completed our review for the 2023-2024 minimum feed-in tariffs. 

On 27 February 2023, we released our final decision on the minimum rates that retailers must pay for the energy their customers export to the to the grid. Read more about our final decision on the minimum feed-in tariffs from 1 July 2023 to 30 June 2024.

Why has the minimum tariff decreased?

Average wholesale electricity prices have gone up recently and are forecast to go up further. In the evening when electricity demand is highest, wholesale electricity prices have increased significantly due to a combination of high fuel prices, generator outages and weather conditions.

However, growth in installations of rooftop, and utility-scale, solar has decreased demand for and increased supply of electricity during the day. As a result wholesale prices at the times when solar exports happen are lower, leading to a lower feed in tariff.

Wholesale electricity prices make up around half of the costs covered by the minimum feed-in tariff. The wholesale price is set in a competitive national market, based on the supply of and demand for energy. The wholesale price is not set by government or a regulator.

The chart below shows how wholesale electricity prices are low during the day, when solar exports happen, but higher at night.

Why the minimum feed-in tariff is different to the retail electricity tariff

The minimum feed-in tariff is a payment you receive for generating electricity.

When retailers provide electricity to their customers, they must cover costs including:

• transporting electricity (the poles and wires connecting customers to electricity generators)
• operating a retail business (for example, billing and revenue collection systems, information technology systems, call centre costs, human resources, finance, legal services, regulatory compliance costs, licence costs and marketing)
• the ‘spot price’ of energy in the national energy market paid to generators
• hedging costs to provide a guaranteed price to their customers
• complying with environmental programs.

These additional costs mean the minimum feed-in tariff will always be lower than the retail electricity tariff.

Also, the retail price of electricity covers the cost of supplying energy at all times of the day. Because retailers must supply energy 24 hours a day, they must also pay for high cost electricity during the night (when wholesale electricity prices are higher). On the other hand solar exports happen during the day, when wholesale electricity prices are lower. So the wholesale prices in the feed-in tariff are lower than those for retail prices.

How we calculate the minimum feed-in tariff

Legislation controls how we regulate the minimum feed-in tariff. The costs we must include are set out in the Electricity Industry Act 2000. By no later than 28 February each year, we must set the minimum feed-in tariffs to apply for the next financial year.

We calculate the minimum feed-in tariffs by forecasting the wholesale price of electricity for the year ahead. This has the following affect on the minimum feed-in tariffs:

• The forecast includes wholesale electricity market information available up to the time of the decision. This means that for each decision effective from 1 July, the forecast wholesale prices is based on market information up to February of that year.
• Any changes in wholesale electricity market after the publication of the final decision in one year are included in the next decision. This means any changes in the wholesale electricity market after the final decision will be incorporated in the wholesale electricity price forecasts for the feed-in tariffs for 1 July of the next financial year.

The wholesale price varies across different times of the day due to changing supply and demand. As solar panels generally export power between certain hours of the day, we only use the forecast wholesale price for electricity during these ‘solar hours’.

In our calculation, we also include:

1. avoided transmission and distribution losses: the value of energy saved by not transporting the energy long distances from large scale generators.
2. other fees and charges: the value of market fees and ancillary service charges that retailers avoid when energy is produced by solar customers.
3. environmental benefits of renewable energy: the value associated with reducing greenhouse gas emissions when energy is produced by solar customers. It is currently set at 2.5 cents per kilowatt hour (c/kWh). 

For more information about our methodology and review process for the 2023-24 minimum feed-in tariff, see our final decision paper.

Got a question?

Contact us for more information.