This week, our 'explainer' series will address commonly asked questions on the feed-in tariff decision.
My energy retailer charges me 24 cents per kWh (or more) to import energy, but I’m only getting 6.7 cents per kWh for selling my energy to them. Why are these prices so different?
The minimum feed-in tariff is a payment you receive primarily for generating electricity.
When retailers provide electricity to their customers, they must cover costs including:
the ‘spot price’ of energy in the national energy market paid to generators
transporting electricity (the poles and wires connecting customers to electricity generators)
complying with environmental programs
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).
This means the minimum feed-in tariff will always be lower than the retail electricity tariff.
The chart below shows the costs that energy retailers are recovering in general retail tariffs that make up your import rate.
We set the feed-in tariff to reflect the value of that energy as if it was purchased from the National Energy Market, by building in the ‘spot price’ plus avoided costs, which makes it a viable option for purchase in the energy market.
If the feed-in tariff was set to match the retail rate of energy, energy retailers would still need to recover these costs, which will drive up retail rates for all energy consumers in Victoria. This would mean non-solar customers would be subsidising a high feed-in tariff. Our objective when setting the minimum feed-in tariff is to promote the long term interests of Victorian energy consumers and this is achieved by the feed-in tariff reflecting the value of solar energy and therefore being fair and efficient.