Can Solar Affect Your Pension?
Lately, we’ve had a lot of inquiries from pensioners (or soon-to-be pensioners) who want to install solar panels to offset their electricity usage, concerned that it could affect their pension payments from the Government.
They’re worried that if they generate excess electricity, solar feed-in tariff schemes mean they will be paid for this surplus electricity, which could count as income and reduce their pension.
So it looks like this is a good time to break down how solar power incentives can affect pensioners!
Do solar feed-in tariffs count as income for pension purposes?
The short answer: Credits on your electricity bill don’t. Cheques in the mail do.
The long answer:
All the information I’m relaying here comes from this senate question time hearing:
“Feed-in tariffs from household solar energy systems, paid as cash, are assessed as income for all social security income support payments. These cash payments are assessed as income over a 12 month period. For example, if a pensioner received a cheque from their electricity company for $260, it would be counted as $10 income per fortnight for 26 fortnights.
Feed-in tariffs paid as a credit on an electricity bill, are not assessed as income for social security income support payments.”
So – credits towards your electricity bill do not count as income. Cheques in the mail from massive excess generation do.
Even if you do manage to get a cheque in the mail for your solar generation, you can earn up to $150 per fortnight for single pensioners, and $264 per fortnight for partnered pensioners, combined, before pension reductions start to kick in.
What’s the difference between a credit on your bill and a cheque in the mail? Well, let’s use a simple example.
Say your solar system generates around 2000 kWh of excess solar electricity (that is, electricity that is not self-consumed but fed back into the grid) per quarter. 2000 kWh x 8c per kWh feed-in tariff = $160.
This means that you get a ‘discount’ of $160 off whatever your electricity bill is.
But what if that $160 brings your bill into a net positive, so that your electricity company owes you money?
Well, there are two things you can do. You can either elect to have your electricity company send you a cheque in the mail that you can cash, or you can elect to have that quarter’s surplus transferred to your next bill.
The first option is not recommended, as it would count as income which would then affect your pension if it brought you over the earnings threshold.
The second option is the best choice, as it allows you to continue to pay $0 (or close to it) for your electricity usage every quarter. Wouldn’t that be a nice situation to be in!
Feed-in tariffs in all states are quite stingy these days compared to years back when they were very generous in order to promote the uptake of solar power systems (this certainly worked).
But, low feed-in tariffs do not mean that solar isn’t worth it. Quite the contrary – when I was on an 8c net feed-in tariff, one of my quarterly electricity bills was $33!
Low feed-in tariffs can be a good thing for pensioners – by reducing the amount of money you’re paid for generating excess electricity, you’re far less likely to earn enough to get a cheque in the mail from your electricity company.
So what’s the best solar arrangement for pensioners looking to minimise exports?
It all depends on your household’s electricity usage, as this will inform the solar power system size that will be the most ideal for your own situation.
If you’re looking to minimise exports, you can do one (or all) of these things:
1) Maximise electricity usage when the sun is up
Since you cannot store your solar electricity without batteries, this means it’s important to self-consume as much of your solar energy generation as possible to prevent it from being fed back into the grid.
In practical terms, you should aim to use electricity-guzzling appliances (such as washing machines & dryers) during the day, instead of running cycles at night.
2) Install batteries
Battery storage, if you can afford it, is the best way to minimise your solar exports back into the grid. In simple terms, battery storage allows you to store any surplus electricity generation from your solar panels and use it when the sun isn’t shining (i.e. at night or on overcast days).
So, instead of feeding excess generation back into the grid, you feed it into the batteries to use at a later time.
3) Buy a smaller-sized solar panel system
Buying a system around 3kW in size all but guarantees you’ll never have a situation where you export enough solar energy to generate a credit on your bill payable by cheque – but this doesn’t provide the best bang for buck.
If you’re considering installing solar panels for your home or business, SolarQuotes can help you get quotes from high-quality installers quickly and easily.
