Feed In Tariffs - (FIT  for short) 

What Are Feed In Tariffs?
Feed In Tariffs are a Government requirement on Electricity Retailers like Energy Australia to pay owners of renewable energy systems a premium rate (of about 2-3 times the rate conmsumers pay for electricity) for the electricity their solar panel system generates and is fed back into the electricity grid. 

Benefits of Feed In Tariffs:
             Ongoing - Feed in Tariffs provide benefits over many years from 5 to 20 years
             ROI        - Increases the return on your invest
             Payback - Decreases the time it takes for your system to pay back your investment
             Scalable - The larger the system the bigger the returns up to maximum system limit


How Do Feed In Tariffs Work?
         

1) Solar Panels on roof absorb sunlight creating DC voltage power
2) An Inverter converts this power to AC electricity which is suitable for home appliance or feeding into the electricity grid
3) A smart meter measure how much electricity your home uses and how much energy is generated by your solar system Electricity created by your system is used first by your home's appliance and then
4) Surplus electricity is fed into the grid.
 

Who Pays For Feed In Tariffs? 
Feed in Tariffs are paid to you by the Energy Retailer your home is connected with, either by a cheque or discount off your electricity bill. In fact this is one of the main reasons why electricity bills are on the increase as electricity companies try to recover these extra costs by passing them on to all their customers. 

Different Feed In Tariff Models

In Australia the States regulate their own Feed in Tariff models. Each states Feed in Tariff models differ considerably but the most siginifcant  difference is whether the Feed in Tarrif is calculated on the Gross or Net electricity fed into the grid.


GROSS - Feed In Tariffs
Currently only NSW and ACT have a Gross Feed In Tariff.  (For other states please refer to Net Feed In Tariff details below) 

A gross feed in tariff is by far the best model for owners of renewable energy because with a GROSS feed in tariff the premium rate is paid to you on ALL the electricity your solar system creates. As the rate you are paid for this electricity is about 2-3 times the rate consumers pay this makes it more economical to invest in smaller solar systems.

For example:
A 1.5kW solar panel system would only cover about 20-30% of the average homes electricity needs but as you are paid up to 3 times for all the electricity your system creates a 1.5kW can cover as much as 60-90% of your electricity bill.  A 1.5kW system installed in NSW will provide about $1300 annually in feed in tariff payments.

Gross Feed in Tariffs do not only make investing in small solar systems more economical but they also encourage investment in larger systems as for every kWh your system produces up to the maximum allowed. In NSW feed in tariffs are paid on all the electricity created up to a maximum of 10kW, or about $13,000 annually.

NET Feed In Tariffs
All states with the exception of NSW and ACT currently have Net Feed in Tariffs.

With Net Feed in Tariffs the premium rate is only paid on surplus electricity your home is not currently using. If your solar system is not big enough to cover your homes energy needs you will not receive any benefit of the Feed in Tariffs premium rate.

The following graph demonstrates this further - The most common solar panel system installed in Australia has an energy rating of 1.5kW which as you can see from the diagram below even at it maximum production at midday is unlikely to cover the homes electricity usage. So no feed in tariff will apply. To take advantage of feed in tariff you are likely to need 3kW would generate a Feed in Tariff between 11am & 3pm.

(Note: this graph is an estimate only and is based on summer months and so winter will produce less of feed in tariff benefit).

Although a 1.5kw solar will probably not produce a surplus in electricity to feed back in the grid it will still provide about 20% - 30% of your homes electricity needs saving you around $300 - $500 annually.

Customers may be able to maximise the benefit of their solar system by improving the energy efficiency of their home. This could be achieved by
     * reducing standby power consumption,
     * shifting some tasks to the evening
     * minimising the use of high usage appliance such as air-conditioners.