Feed-in Tariff Rises From 1 July 2018!
The commission’s final decision is to set two feed-in tariffs (FiTs) to apply from 1 July 2018, of which retailers must offer at least one:1
- the time-varying FiT, and/or
- the single-rate FiT.
The final tariff rates are set out in table S.1 and S.2.
Table S.1 Time-varying minimum feed-in tariff – final tariff rates
The final tariff rates are distributed as expected, with peak rates higher than shoulder rates, which themselves are higher than the off-peak rates. Peak rates are significantly higher than the shoulder and off-peak rates because wholesale prices during the evening peak in 2018–19 are forecast to be notably higher than during other periods of the day. This tendency is more pronounced in the forecast for 2018–19 than in previous forecasts that have been used to set the FiT.
Table S.2 Single-rate minimum feed-in tariff – final tariff rate
The final single-rate FiT of 9.9 cents per kilowatt hour (c/kWh) represents a 1.4c reduction from the 2017–18 FiT. This outcome may appear counterintuitive, given that average wholesale prices between the two forecast periods have increased by around 18 per cent. It is caused by changes in the prices during the daylight hours when solar photovoltaic (PV) units are exporting electricity, relative to prices during the evening peak. Prices during daylight hours are the prices relevant to setting the single-rate FiT.
Forecasts provided by ACIL Allen indicate that, compared to last year, daytime prices are expected to marginally decrease, while prices in the evening are expected to increase significantly. The reasons for this change in price profile include the introduction of around 190 megawatts (MW) of utility scale solar PV in Victoria, and additional utility scale solar in South Australia and New South Wales during the forecast period.2 Chapter 4 contains further discussion of this trend.
Furthermore, when calculating the single-rate FiT, prices during daylight hours are weighted to account for how much electricity solar PV units typically export at different times of day (the ‘solar export profile’). Prices are forecast to be higher at the start and the end of the day, when solar is exporting less. By contrast, in the middle of the day, when prices are forecast to dip, solar is exporting the most. This explains why the single-rate FiT is slightly lower than the rate during the shoulder period of the time-varying FiT, even though both rates are based on prices during broadly the same time of day.