Minimum feed-in tariff review 2023-24

Electricity retailers pay feed-in tariffs to people with roof-top solar for power they export to the grid. We set the minimum amounts that electricity retailers must pay for the feed-in tariffs. The minimum feed-in tariffs we set reflect the value solar exports provide retailers and other customers.

Retailers must offer at least the minimum tariffs, but they are free to offer more than the minimum amount.

We are currently reviewing the the minimum feed-in tariffs to apply for financial year 2023-24. We released our draft decision on the 2023-24 minimum feed-in tariffs on 20 December 2022.

We released a draft decision in December 2022 and sought stakeholder feedback on the methodology used. Consultation closed on 30 January 2023.

Draft minimum feed-in tariffs for 2023-24 

The table below shows the draft minimum feed-in tariffs for 2023-24. Retailers can offer solar customers a flat feed-in tariff and/or time-varying feed-in tariffs for electricity exported to the grid.

The feed-in tariffs in our final decision are likely to be different to the ones in the table above. Our wholesale price forecasts are based on prices for ASX Energy futures contracts. We will use more recent contracts when we make our final decision. Wholesale costs make up almost half of the value in the flat feed-in tariff, so changes in futures contract prices will affect the final value of the minimum feed-in tariffs.

The proposed single rate minimum feed-in tariff for 2023-24 is lower than for 2022-23 due to lower daytime wholesale electricity prices.

The proposed overnight and early evening tariffs for 2023-24 have increased significantly compared to those for 2022-23. This is due to a forecast of significant increases in night-time wholesale electricity prices. As for the single rate feed-in tariff, the day rate has decreased due to lower wholesale electricity prices during daylight hours.

Why the minimum feed-in tariff changes each year

The minimum feed-in tariff changes each year mostly because of changes in wholesale electricity prices. Wholesale electricity makes up around half of the costs covered by the minimum feed-in tariff.

We estimate the wholesale electricity prices using the latest information available at the time of publication of each decision. In recent years, wholesale electricity prices during the middle of the day when most solar is exported have been going down.

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.

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.
• complying with environmental programs.

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

How we calculate the minimum feed-in tariffs

Legislation controls how we regulate the minimum feed-in tariffs. 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 tariff 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 weight the wholesale prices in our forecast to reflect the expected proportion of solar exports taking place at the same time. The more exports are expected to happen at a certain price, the greater weight that price is given in our forecast.

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. avoided carbon and human health costs: the value associated with avoiding carbon emissions when energy is produced by solar customers. It is currently set at 2.5 cents per kilowatt hour (c/kWh) by the Victorian government. We have not separately accounted for the human health costs.

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