The Essential Services Commission (ESC) of Victoria in Australia has lowered the minimum electricity feed-in-tariffs (FIT) for solar customers in the state by 33%, to be applicable for financial year (FY) 2024-25. This has brought it down from AUD 4.9 cents/kWh in FY 2023-24, to AUD 3.3 cents/kWh.
The commission has allowed time-varying minimum FITs to range within AUD 2.1 cents/kWh to AUD 8.4 cents/kWh. These rates will come into force from July 1, 2024 and remain until June 30, 2025.
It says this reflects the changing value of solar exports amid increased solar generation in the market, and low wholesale electricity prices during sunlight hours.
According to the commission, the increased number of rooftop solar households feeding solar power into the grid has reduced demand and increased supply during daylight hours. This has led to reduced prices when most solar exports are occurring.
Rooftop solar currently accounts for 99.9% of the state's small-scale renewable energy generation.
"Consumers will get the best value from their solar by using the power they generate to avoid paying retail energy prices for the electricity they use. Shifting electricity usage to daylight hours – when solar is producing – is the best way to maximise the financial return on a solar system," explains the Executive Director of Price Monitoring and Regulation at the ESC, Marcus Crudden. "This can save most solar customers in the order of around 30 cents per kWh – a far more efficient option than exporting electricity to the grid during daylight hours."
The final decision of the commission follows a consultation it launched in November 2023 when it proposed the reduced rate. Back then, it reasoned that overall wholesale electricity prices are forecast to be lower in FY 2024-25, especially at the times when solar customers export most of their power to the grid.
As against the forecasted solar-weighted average wholesale electricity price of AUD 2.13/kWh in 2023-24, ESC says it is expected to be AUD 0. 64/kWh in 2024-25. Setting up minimum FITs requires it to consider prices in the wholesale market, avoided transmission and distribution losses and the avoided social cost of carbon and human health costs attributable to a reduction in air pollution.
While the commission admits that solar customers were strongly against the decision, their submissions 'did not include alternative methodologies or facts that showed the value of solar exports to be higher than the proposed draft decision.'
However, in its final decision on the subject, the commission said, by legislation, it is expected to base the FIT rates on the value of solar exports.
According to local media portal One Step Off The Grid, 2024-25 will be the 3rd consecutive year of decline in Victoria's FIT rates. In 2021-22, it was AUD 10.2 cents/kWh, then lowered to AUD 6.7 cents/kWh in 2022-23.