Victoria’s Essential Services Commission (ESC) released its draft decision on minimum solar feed in tariff rates for 2025/26 on Friday – and system owners won’t be happy.
Each year the ESC consults on minimum rates electricity retailers are allowed to pay solar owners for the surplus energy they export to the grid. It provides a few sets of numbers – a flat/single “all day” rate and two time- varying sets of feed-in rates.
Proposed Flat Rate Solar Feed-In Tariff 2025/26
Currently, the minimum flat rate for Victoria’s feed-in tariff is 3.3 cents per kilowatt hour. But from July 1, the ESC has proposed a rate of just 0.04 c/kWh. Here’s how the flat rate has tracked in recent years:
- 2025-26 (proposed): 0.04c
- 2024-25: 3.3c
- 2023-24: 4.9c
- 2022-23: 5.2c
- 2021-22: 6.7c
- 2020-21: 10.2c
Proposed Time Varying Rates 2025/26
Currently, time varying feed-in tariff rate options range from 2.8 cents – 7.6 cents, and 2.1 cents – 8.4 cents per kilowatt hour depending on when the energy is exported. For the 2025/26 financial year, the ESC has proposed between 0 cents and 7.5 cents and 0 cents and 6.5 cents per kilowatt hour.
The 0c per kilowatt hour applies to:
- Weekdays: 7 am to 3 pm, 9 pm to 10 pm. Weekends: 7 am to 10 pm for option 1.
- Every day from 10 am to 2 pm for option 2.
The Commission stresses all these are minimums, and retailers can offer feed-in tariffs above the minimum amounts. But looking at the SolarQuotes electricity plan comparison tool, most retailers offering the flat rate are just providing the minimum, with several exceptions.
Why The Big Cuts?
It’s the same old story – solar power pushing down wholesale electricity prices. The Commission says the number of rooftop solar systems in the state has increased by 76 per cent since 2019; from approximately 446,000 systems to 787,000 – helped along by Victoria’s solar panel rebate.
“This has both increased supply and reduced demand for electricity during the middle of the day, resulting in decreasing value of daytime solar exports,” says the Commission.
I took a look at wholesale electricity prices in Victoria on Friday between the hours of 10am and 2pm, and it worked out at an average of 3.2c per kilowatt hour. But that was just one day and the ESC says further wholesale prices declines are forecast, especially during daylight hours.
The ESC says its pricing methodology hasn’t changed from previous years; which considers wholesale electricity, costs of solar exports, avoided costs faced by retailers, along with other social and environmental factors.
Have Your Say
As mentioned, the 2025/26 rates are proposed at this stage, not a final decision. And no doubt many solar owners will have strong opinions. A consultation on the decision has kicked off and you can share your thoughts with the ESC via Engage Victoria until 31 January. You can provide feedback in a survey on the Engage Victoria website; or submit documents.
The full draft decision can be viewed here. A final decision on minimum feed-in tariffs for the next financial year is to be published by 28 February 2025.
0c Feed-In Tariff – Impact On System Payback
To get an idea of the impact of what is effectively a zero-cent feed-in tariff, try SQ’s solar calculator. As an example, using the calculator with its default settings aside from postcode and system price, a 6.6kW solar system with a 3c FiT installed in Melbourne achieves simple payback in around 6 years, 9 months. At zero cents, it’s about 9 years.
What Now For Victorian Solar Owners?
Aside from participating in the consultation, the outcome of which is unlikely to shift the needle much (short of some miracle), there are other actions to consider – some more attainable than others.
Going *Entirely* Off-Grid
Whenever announcements of feed-in tariff cuts are made, they are invariably followed by some system owners declaring they’ll go entirely off-grid. But that’s a *really* expensive way to protest – expect to pay tens of thousands for a system done right that won’t leave you in the dark, and more time spent monitoring it. As well as batteries, bear in mind you’ll likely need an expensive, noisy, polluting backup generator that will need regular and costly servicing.
Home Batteries
Others will start thinking more about home batteries but staying grid-connected; the financial viability of which varies depending on circumstances. Batteries provide other benefits too, including blackout protection (if you get the right one), which can be invaluable to those living in areas where mains grid electricity supply is often interrupted.
To really pin down whether a home battery can provide payback within a timeframe acceptable to you, try SolarQuotes’ battery calculator. You’ll need to upload your smart meter data (instructions here) to get accurate battery savings and payback based on your real-life 12 month electricity usage.
While there are zero interest battery loans available from Solar Victoria, there are no state-level subsidies or federal support (at this point); so it can still be a pretty pricey exercise.
Water Heating
There’s another form of energy storage that can be much cheaper to implement. Water heating is the second-biggest energy user in the typical Australian home after space heating and cooling. If you have a gas hot water system, it might be time to consider shifting to an electric model, particularly if your current system is nearing end of life. Set it on a timer (unless those smarts are already built-in) or also get a PV diverter and use your surplus solar energy to heat water during the day for use at night and the following morning.
If you want to take things a step further and spend more money, consider a heat pump hot water system and put it on a timer. The good news is there is financial support in Victoria – for example, upgrading a gas hot water heater to a heat pump can provide a discount of around $490 under the Victorian Energy Upgrades program. If it’s replacing an electric hot water heater, you can get up to $840.
Time-Shifting Other Loads
Nothing new here – maximising self-consumption is the name of the game, and has been for a long time. In the Essential Services Commission’s words:
“Households can maximise their savings by shifting their electricity usage to daylight hours – when their solar system is producing electricity. By doing this, households are not paid feed-in tariffs but avoid higher retail prices.”
But that will be of little help to those who cannot load shift more than they already are.
Some solar owners may even decide to zero export limit their systems to stick it to the man so to speak – and to each, their own.
About Michael Bloch
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My favourite line in this article is
“It’s the same old story – solar power pushing down wholesale electricity prices.”
We should celebrate the fact that it IS an old story – we have done a good thing with our adoption of rooftop solar.
And it’s a good thing that the wholesale price is so low when the Sun’s out. Do I wish I still had the 66 cents FIT I started out on? Of course I do. Do I wish the market reflected the injection of low cost electricity with lower prices? Of course I do.
But in what universe does it make sense to continue encouraging the adoption of solar generated power when that adoption has been brilliantly successful?
We’re being steered towards what looks to one of, and it may be the best, possible outcome for the planet (and our kids and their kids …) – a renewable solar based power supply.
The next step on that path looks like finding a way to shift the availability of that energy to times when it’s expensive to buy. Storage is the next step on this path we’ve started on.
Bring it on I say. Even if it’s not where this transition story finishes, we can look the generations that follow us on the face and say “We played our small part in reducing the catastrophe we were facing.”
Well put Ray,
Storage is the next step and combining that task with electric mobility & hot water is a no brainer. The real trick is going to be working out that we can’t consume our way out of this problem.
One option that the above article has omitted, is the prospect of buying a comparatively inexpensive BEV that has,if not V2H, then V2L,and, using the V2L functionality to provide power to the house, through a HOEM thingy – see
https://www.solarquotes.com.au/blog/hoem-review/
Even 2kW of power from a V2L BEV, could help with both energy costs, and,with power supply stability.
And, the proposition could also help with the environment, and, with transportation costs.
And, in comparison with stationary batteries, a BEV can have a lower per kW price.