What is solar energy?

Solar energy is energy created by the heat and light of the sun. Solar power is produced when this energy is converted into electricity or used to heat air, water, or other substances. Australia has the highest average solar radiation per square metre of any continent in the world.

Installing solar systems can bring many benefits to households and businesses. Solar power can help customers to reduce energy costs. Solar systems can also provide customers with a sense of independence and can act as a hedge against increasingly costly grid energy. Solar power also provides environmental benefits through avoiding emissions-intensive grid energy.

There are currently two main types of solar energy technology available for households and businesses:

Solar photovoltaic (PV)

This technology converts sunlight directly into electricity using photovoltaic (PV) cells. The solar PV cells are combined in panels and can be put on rooftops, integrated into building designs and vehicles, or installed across fields to create large-scale solar power plants.

Solar thermal

This technology converts sunlight into thermal energy (or heat), which in the past has been used mainly for space heating or to heat water (such as in a solar hot water system).

If you already have solar and need information on feed-in tariffs, there is more information here.

One way to assess your needs is with a home energy assessment, known as the Residential Efficiency Scorecard assessment. 

The Scorecard gives you a star rating for your home, in the same way that a fridge or washing machine can receive a star rating.

The star rating represents the running cost of the fixed appliances in your home. You can use it as a guide to make home improvements efficiently and cost-effectively, which may include installing solar PV. 

If you have decided that getting solar is for you, there are many ways to get it. First, you can discuss getting solar with your energy retailer. If your energy retailer does not offer solar products, shop around, as other energy retailers may be able to help you.

When searching for solar retailers, a good starting point is to choose a Clean Energy Council Approved Solar Retailer. The list of Approved Solar Retailers is available at the Clean Energy Council.

These retailers have all signed the Clean Energy Council's Solar Retailer Code of Conduct to commit to industry best practice.  

You can also obtain solar by contacting independent solar installers. Some of these installers will install the panels on your roof for a fee, while others may seek to engage you in ongoing service contracts.

For instance, many installers may engage you in a ‘solar lease’ or a ‘power purchase agreement’. These are briefly described below.

After you have installed solar, your electricity meter may need to be reconfigured to accommodate measuring both the power you use (imports) and the power you send to the grid (exports).  

After reconfiguration, the meter will record your power imports and exports every half hour.  Check with your retailer or installer to see if there are any costs to reconfigure your meter.

Solar lease

A solar lease is an option where you do not pay for the solar panels upfront or their ongoing maintenance.

Instead, a solar lease agreement is a contract between you and the solar installer, where the installer supplies and installs your solar system and you pay a nominated lease fee over a defined contract period.

You can then use the solar photovoltaic system to meet your needs (to offset your consumption or generate feed-in tariff credits).  Over the contract period, the system is owned and maintained by the installer.

Solar power purchase agreement

Solar power purchase agreements (PPAs) are another arrangement where you do not pay for the solar panels upfront or their ongoing maintenance.  

Under a solar PPA, you enter a contract over a defined period with a system operator.  

After system installation, you then purchase electricity from the system operator rather than your electricity retailer, and at a lower rate than retail electricity.

In Victoria, there are two schemes that can help customers to improve their return on investment.

The Federal Government provides a subsidy for small-scale renewable systems called the Small-scale Renewable Energy Scheme (SRES).  

SRES creates a financial incentive for owners to install eligible small-scale installations, including solar panel systems.

STCs are created for eligible installations according to the amount of electricity they produce or displace and can provide an upfront discount to the cost of installing a solar system. For more information please visit the Clean Energy Regulator website.

In addition to SRES, Victoria has the feed-in tariff scheme.  This scheme ensures that retailers pay a fair price for the electricity their customers export to the grid.

The current Victorian feed-in tariff is not a subsidy scheme like other historical feed-in tariff schemes were, such as the Premium Feed-in Tariff, or the now closed Standard or Transitional Feed-in Tariff schemes. More information is available in the feed-in tariff section.

Water heating can account for 16 per cent of the average household energy costs.

A good solar hot water system may involve some upfront cost but can offer significantly cheaper running costs compared to a conventional electric or gas system.

To help you make the right decision, consider getting a home energy assessment. The assessment is a great way to find out if a solar hot water system is right for you.  

The Victorian Residential Efficiency Scorecard assessment has more information on getting an assessment.

Incentives for replacing electric or gas water heaters with solar are available through our discount energy saving products program. For more information on this, visit our energy saving products page, Victorian Energy Upgrades.

While there are many benefits of installing a solar system, there are several things to consider before you do.

Solar PV installation size

Some customers believe that installing a bigger capacity system (in kW) will speed recovery of installation costs.

Customers should weigh this against the additional cost of a larger system.  

More rapid cost recovery may not occur if they obtain a costly system that significantly exceeds their needs, or if they are not able to consume the power when it is generated during daylight hours.

It is also important for customers to distinguish between the installed capacity of a system and the actual output that is obtained from a system.  

A solar installation will only be able to generate a fraction of its official capacity, usually somewhere between 11 and 22 per cent.  

The energy that it will produce depends on many factors including climate, panel orientation and shading.  In addition, the panels can only generate electricity during daylight hours.

If you install a solar system and are not able to consume the power from it (for instance if you work during the day), the benefits you receive may be limited to the feed-in tariff(s) received when the power is exported into the grid.

While this may help you to reduce your energy bill, the overall benefits may be small as the feed-in tariff(s) received may not sufficiently offset your consumption or capital/installation costs.

In this case, a smaller installation size and or shifting consumption (for instance through timers) to daylight hours might help you realise the benefits sooner. Alternatively, a household battery device might be useful.

Batteries can store the solar energy for use later.  However, the cost of purchasing and installing a battery is still relatively high and will not be economically viable in all situations.

It is important that you have a clear understanding of your needs and discuss these with your installer before signing any contracts.

How do I know which solar companies are reputable?

Installation of solar energy products can carry significant risks to property if not undertaken professionally, and many consumers have unfortunately been caught out in the past.

To ensure that solar installation is undertaken to the highest possible standard, you are encouraged to select an installer from the Clean Energy Council’s list of Approved Solar Retailers.

It is worth obtaining quotes from several providers before making any decisions. 

Customers should ensure that the quotes being compared are for the same or similar types of products or services. 

Carefully research the products and suppliers, and read as many online reviews and feedback as possible about the installer.

Interaction with existing supply contracts

Once you have installed a renewable energy system or a solar system, your electricity metering and supply rates may change. 

You should, therefore, contact your electricity retailer and ask them about the potential changes to your electricity rates before purchasing a renewable energy or solar system. 

Shop around for the deal that best suits you as different electricity retailers may offer different prices and different terms and conditions.

When you change to a feed-in tariff plan, you may be transferred to peak and off-peak electricity pricing. 

Compare offers carefully. Many customers benefit from peak and off-peak rates. More information on comparing offers is available at Energy Victoria.   

We also recommend that you proactively manage the solar installation process from start to finish. 

It can take several months, and there are often several parties involved including electricity retailers, solar installers and your local power distributor.

What are feed-in tariffs?

Feed-in tariffs are payments that owners of small scale generators receive for exporting power to the grid.

The current feed-in tariff policy in Victoria is to ensure that customers are paid a fair price for the energy exported into the grid. Feed-in tariffs are paid in cents per kilowatt hour (c/kWh) exported.

What is the minimum feed-in tariff?

In Victoria, the minimum feed-in tariff is the regulated minimum rate that must be paid for electricity that is exported from eligible systems back into the grid.

The minimum feed-in tariff must be paid by electricity retailers who have over 5000 customers. Some retailers choose to offer more than the minimum rate.

For the period 1 July 2017 to 30 June 2018, the minimum feed-in tariff is a single rate of 11.3 c/kWh.  

From 1 July 2018, the single-rate minimum feed-in tariff will be 9.9 c/kWh. As an alternative or addition to this single rate, electricity retailers may also offer time-varying minimum feed-in tariffs with different rates at different times of the day.

These rates are detailed below:

PeriodWeekdayWeekendTariff (c/kWh)
Off-peak10pm - 7am10pm - 7am7.1
Shoulder7am - 3pm, 9pm - 10pm7am - 10pm10.3
Peak3pm - 9pmn/a29.0

You can find more information on solar feed-in tariffs on the Essential Services Commission Minimum Feed-in Tariff webpage.

Victoria’s independent regulator, the Essential Services Commission (ESC), determines the feed-in tariff rates annually.

When determining the wholesale energy value of the electricity produced, the ESC utilises complex energy market modelling to determine the value of energy at different times during the day. These wholesale values are then used as a component of the feed-in tariff.

When electricity retailers purchase electricity from you, a small-scale generator, instead of via the wholesale electricity market, they avoid costs.

The ESC aims to measure these cost savings and compensate you for them. The avoided costs for electricity retailers include wholesale market access costs, market fees and ancillary services charges, the social cost of carbon, and the health costs of fossil fuel generation. 

The ESC also undertakes stakeholder consultations each year to ensure that its decisions on feed-in tariffs are in the best long-term interest of Victorian consumers.

For the feed-in tariffs in place from 1 July 2018, the ESC undertook a stakeholder workshop and requested written submissions.

The ESC’s final decision was released on 27 February 2018, and the new rates will be effective from 1 July 2018.

On 27 February 2018, the Essential Services Commission set new feed-in tariff rates for the 2018-19 Financial Year.

The new single-rate minimum feed-in tariff of 9.9c/kWh is slightly lower than the previous rate for 2017-18 (11.3 c/kWh) because the value of energy at times of the day when solar systems generate power has fallen.

The ESC indicated that the reason for this reduction is that there is significantly more solar in the grid now than at any time before, and that this is pushing wholesale prices down during the times when solar systems generate electricity.

This has had an impact on the feed-in tariff. The ESC notes the introduction of around 190 megawatts of utility scale solar PV in Victoria, and additional utility-scale solar in South Australia and New South Wales.

To access the current feed-in tariff, you must have your solar or other type of renewable energy system fully installed, signed off by a licensed electrical inspector, and have submitted all the necessary paperwork to your electricity retailer. Your solar installer will be able to do most, if not all, of this paperwork on your behalf.

This paperwork includes the:
*Solar connection form
*Electrical works request
*Certificate of electrical safety
*An accepted feed-in tariff contract with your electricity retailer

Once paperwork is submitted, to complete the eligibility process you may also need to have your metering upgraded before feed-in credits can be applied to your account.

Many retailers offer feed-in tariff rates above the current minimum rates. Customers are encouraged to shop around to find the best deal.

To help Victorians find and compare energy offers, the government has created Victorian Energy Compare.

Customers with small-scale renewable energy systems are encouraged to investigate their energy profile and product options to ensure they get the most out of their solar system.

Under the current minimum feed-in tariff, the price received from electricity retailers for solar energy is lower than the price paid to retailers for electricity.

Consuming the solar power generated by the system is therefore beneficial, and customers should try to meet as much of their energy needs by using the solar power they generate. This can help to minimise electricity bills.

Current feed-in tariff policy aims to better reflect the market energy value of the electricity that customers provide to the grid. 

The feed-in tariff rate is not directly comparable to the price that customers pay their retailers because the latter includes the costs of sourcing and delivering energy to customers.

This can include recovering the costs of IT and billing systems, complex arrangements with the wholesale market, and customer service. In addition, retailers are required to pass on network charges associated with the use of the poles and wires to transport electricity to households and businesses. 

If electricity retailers were required to pay feed-in tariffs at a rate equal to their electricity prices, retailers would need to recover the additional costs by raising retail electricity prices for all customers, including non-solar customers. This would be an unnecessary cost increase for other Victorian energy customers, particularly as the price of solar and batteries continue to fall.