Saving More with Solar - Premium Feed-in Tariffs vs Solar Upgrades

For years feed-in tariffs have been a dominant topic of conversation in the solar industry. Why? High feed-in tariffs are few and far between these days, and those who have them are often keen on keeping it that way. And while the tariff may have served you well before, with the new tech on the market you could be missing out on big savings! It’s time to  take a fresh look at your solar investment.

If you were one of the many Australians who adopted solar early, your system might be on a premium feed-in tariff. It’s often assumed that if you’re receiving premium tariffs then you’re generating as much in savings as possible - this might not be the case. Your energy needs have likely changed since you first installed your solar system, but you might be better off upgrading to a more efficient, higher-capacity solar system with a solar finance plan, here’s why.

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What is a Feed-in Tariff?

A feed-in tariff (FiT) is a fee paid to homeowners for the excess power they produce with renewable energy that is fed back into the power grid. It is stated in terms of cents and applies to each kWh unit of energy.

If you were one of the early adopters of solar in South Australia, you might be receiving a feed-in tariff as high as 44 cents or more. If you’re unsure about the tariff that you get, you can find it on your latest electricity bill by looking for the words ‘solar’ or ‘feed-in’. If you haven’t made any additions or upgrades to your solar system, this “premium” feed-in tariff is locked in until June 2028.

But, if you’re looking to reduce your electricity bills or wanting to have the latest tech and are environmentally conscious, a solar upgrade or battery installation then it might be time to drop the premium tariff.

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Why were FiTs introduced?

When solar was first introduced to the Australian market, the Government wanted to incentivise uptake by providing high feed-in tariffs for the unused energy being fed back into the grid. On top of the savings to their power bill, tariffs allowed people to make money back from their solar system and reduce their system payback period.

First introduced in 2008, most states had a ‘distributor’ feed-in tariff of around 45 cents. For the past decade, this has served households with substantial power bill credits if their power consumption was less than their solar production. Households could feed up to 5kW of power per phase back to the grid and earn money on these units of power.

Understandably, many consumers are quick to ensure they maintain their premium feed-in tariff and avoid system upgrades that are subject to current retailer rates. However, there are a number of factors you should consider when evaluating the true value of premium feed-in tariffs.

Why are retailer FiT rates dropping?

Simply, premium tariff-rates are less profitable for energy retailers. Solar systems are much bigger than they were 10 years ago, this increase in energy production capabilities means it’s not viable for retailers to continue offering the same rates that they used to. These days, we’re seeing retailer feed-in tariffs drop to around 5 cents per kWh.

Not only are solar systems bigger but there’s also more of them. South Australia’s outdated power network is struggling with the big uptake in renewables. Retailers don’t want to ‘reward’ people for sending more and more power to the grid, it destabilises the network and can lead to blackouts and power surges.

Could losing my tariff be better for me?

Chances are, if you are on a high Government-subsidised feed-in tariff, you probably have a small 1kW to 2kW solar system that was installed over 10 years ago.

If you’re looking to have the latest in solar tech, or wanting power in the blackout, then a solar system upgrade could be for you. The last decade has seen great advancements in the efficiencies and technology of solar panels and inverters. A larger, more modern system would likely offer you a greater return than a smaller 1.5 kWh system with premium tariffs. This is especially true if you have a large energy consuming household, you probably aren’t sending much back to the grid (if at all) to capitalise on that 44c FiT!

Michael’s power bill dropped to zero!

In 2014, Michael approached NRG Solar wanting to save more with his solar. He had a small 1kWh solar panel system that was installed about 10 years ago. This system was receiving the premium feed-in tariff and Michael was receiving 44 cents of credit for every kilowatt hour unit of energy sent back to the grid. Even with the tariff, Michael was receiving bills of up to $1,200 each year.

With a simple review of his recent power bills and energy usage, NRG Solar installed a 7.5kW solar system using Winaico panels and a Fronius inverter. By ditching the premium tariff and upgrading his system, Michael’s power bills have dropped to $0!

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On Triple M’s Adelaide Breakfast radio program with Roo and Ditts, Eddy May, Managing Director for NRG Solar, shared his thoughts on the matter. Eddy says “Technology has advanced so much now that a new bigger system can actually eliminate your power bills. Which means you don’t need to rely on the feed-in tariffs anymore.” He went on to explain that “nine times out of ten, you’re better off getting a new system with no feed in tariff. That’s how good these systems are at eliminating your power bills altogether.”

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This graph shows how a larger, more efficient system can be far more beneficial to your savings than retaining your premium feed-in tariff. In South Australia, you could be missing out on more than $850 of annual savings each year by sticking with your outdated, small system.

Why should I upgrade my solar system?

Modern solar components have a much greater lifespan than their decade old counterparts. They  are capable of withstanding harsh weather conditions and standing the test of time. And if they don’t, warranties on solar components can span 25 years or longer. So you’ll be covered for a very long time, even if your products do fail.

If you have a 10 year old system that was made when solar was first introduced, it’s probably close to needing maintenance, repair or replacement. You are often better off replacing your old, struggling system sooner rather than later. Why? Because each year, solar subsidies (STCs) reduce in value, so replacing your solar system in 5 years is going to be much more expensive than replacing it now.

Your older system likely doesn’t use monitoring technology, a recent solar tech advancement. Monitoring is highly beneficial as it allows you to assess when you are consuming the most energy, helping you to change your energy habits and save more with your solar.

Finally and very importantly, small solar systems aren’t able to support battery storage or electrical vehicle (EV) charging. They don’t produce enough energy to be able to charge a battery or a car. Not only are you not getting the full benefits of your solar system, you also aren’t future proofed. The uptake of solar batteries and EV charging is skyrocketing as people understand the benefits of being energy independent and environmentally conscious

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In summary

The easiest way to weigh up your savings potential is to run the numbers. An NRG Solar Consultant can help you break down all of the benefits and disadvantages of each option, and give you projections on how much you would be saving in each scenario. That way, you get an impartial, factual outlay of the options at hand.

You can also calculate the potential savings for yourself using our online solar calculator.

Like anything in life, your energy needs and how you use it will always change. If you’re looking to future-proof your home and family by ensuring your solar system is efficient, durable and able to cater to large loads such as EVs and battery storage, then you need to weigh up savings potentials along with your system’s capability to achieve such outcomes.

So, talk to us about your options. Book an appointment by calling 1300 858 160 or filling out our contact form.