What energy diversification means for your power bill

What Energy Diversification Means For Your Power Bill
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What energy diversification means for your power bill? Here you will find out the answer. Gas and electricity prices have been steadily on the rise in Australia for years: in fact, they increased by a whopping 63%[1] between 2007 and 2017. Fortunately, things have changed a little since then, partially thanks to an Australian Competition and Consumer Commission (ACCC) report on the national energy market making big waves on national news. That report condemned the market as “unacceptable”, unaffordable”, “uncompetitive” and “unsustainable”. All things which contribute to many an Aussie billpayer opening their power bills and shaking their head repeatedly!

Of course, energy’s a hot-button topic here in Australia, with plenty of disagreement between the major parties about our energy future. But what there’s certainly agree on is that Aussies are paying too much for their power; in fact, energy costs are some of the biggest cost-of-living expenses. Bill shock is an all-too-common experience here. You might be nervous about turning your air-con on when the weather gets too hot or too cold. KPMG even wrote an eye-opening report on the rise of energy poverty in Australia;[2] for many low-income homes, power bills are a financial struggle.

What energy diversification means

What Energy Diversification Means

Fortunately, the current Federal Government has committed to a “big stick” approach, which has come into legislation as of June this year. These changes are designed to make sure that reductions in wholesale energy prices are passed on to customers while penalizing anti-competitive behavior. So far, so good, right?

Well, it’s not quite so simple. Wondering why? Let’s think like an economist. Thanks to a concept called “policy lag”, it can take a while before new policies start to impact a market. As Energy Minister Angus Taylor explains it:

“While it is good to see reductions starting to flow through… we are going to keep the pressure on the energy companies to make sure they keep coming down”

So, what do we do in the meanwhile? Well, there are a few ways you can start saving faster. Thanks to energy market deregulation, prices are increasingly reducing, and it’s worth comparing energy providers to make sure you’re getting the best deal for the way you use power. If you’re happy to time your dishwashing, laundry, and videogame marathons for off-peak times, you can look into Time of Use plans. Between those two tips, you’re already potentially saving hundreds; but wait, there are even more ways to save.

Think energy, think diversity

A national energy market that’s powered (literally) by diverse sources is a good way to keep costs down. The Government recently announced they will be opening up new gas supplies and back the construction of a gas-fired power station, with a gas-fired approach to economic recovery that is expected to reduce the costs of both gas and electricity.

The renewable energy market is also growing steadily. In 2019, Australian renewables achieved 21% of electricity generation 2019, with a 46% growth in solar output and a 19% increase in wind power. TAS led the way, generating 94% of their electricity from renewables; SA followed next, at 50%.

Soaring above with solar

It won’t surprise you that our sunny country leads the world in household rooftop solar power installations. About 23% of Aussie homes have solar panels! The Clean Energy Council finds that in 2019, small-scale solar (systems up to 100 kW) generated 22% of Australia’s clean energy and 5.3% of the country’s total electricity. When it comes to solar, the Great Southern Land is doing great!

Sunshine and savings

Solar isn’t just eco-friendly, it’s friendly to your pocket. Choice Magazine estimates the payback rate for a 5kW system across capital cities as being between 3-7 years; you’ll find their breakdown here. In Canstar Blue Research’s survey of 1500 households, they found average electricity savings for a household with solar panels to be about $350 annually. 94% of respondents with solar believe that installing their panels was a good financial decision.

Selling your sunshine

You can actually “sell” the solar power you generate to minimize your power bill, with a feed-in tariff agreement. Feed-in tariffs are also known as “buy-back rates” and “solar tariffs”. If you’re eligible to receive a FiT, it will show up on your electricity bill at a per kilowatt-hour (kWh) rate.

When you think about it, this is a pretty powerful (pardon the pun) proposition. The sunniest hours of the day are when you’re at work, the kids are at school, and no one’s at home using electricity. Fortunately, that’s where solar feed-in tariffs come in.

Understanding solar feed-in tariffs

Solar feed-in tariffs might sound a bit technical, but it’s surprisingly simple. The folks at energy comparison website Econnex have compiled a handy guide to using solar feed-in tariffs to save, with data helping you to compare solar feed-in tariffs from 20 leading energy retailers at a glance. Some important highlights:

Feed-in tariffs and your solar system

Feed-in tariffs (FiTs) are only available for ‘on-grid solar systems; in other words, systems connected to the electricity grid. These systems draw electricity from the grid when the household needs more power than their solar system generates; when the household needs less, it feeds electricity back to the grid.

Signing up for a solar feed-in tariff

Firstly, you’ll need a solar system of a suitable size (requirements vary from state to state). Once your system is installed and signed off, contact your retailer. They’ll ask you to fill out a solar connection form, and submit documents demonstrating the system was installed by a licensed professional. Your meter may need to be upgraded or reconfigured to measure solar exports. Finally, you’ll need to find and sign up for an electricity plan offering FiTs.

Types of feed-in tariffs (FiT)

There are two main types of FiT: net and gross.

Net FiT

This feed-in tariff is the most common type in Australia. It gives credits only on surplus energy fed back into the grid.

Gross FiT

Gross feed-in tariffs were an earlier form of FiT which are generally no longer offered. These used to pay a credit for every kilowatt-hour of electricity the solar system produced, regardless of consumption.

Other types of feed-in tariffs

Single rate FiTs

With a single-rate FiT, you receive the same price for your solar energy no matter when you feed it back to the grid. These are the most traditional form of FiTs.

Time-varying FiTs

Time-varying FiTs pay different rates depending on when the electricity is fed back to the grid (usually either peak, off-peak, or shoulder).

Maximizing your feed-in tariffs

The best way to maximize your FiT credits is to feedback on most of your surplus solar power during peak times. For example, using a solar battery means you can store surplus power during the day, and export it back during peak times at night to make sure you’re receiving the highest FiT. However, solar batteries can be quite expensive, so it’s important to compare costs with benefits before you decide to go ahead. You can also generate more power in the late afternoon by positioning your panels towards the west; so if you haven’t installed your solar panels yet, it’s worth keeping in mind!

A solar energy future

Solar is an investment in your financial future and Australia’s future. We live in one of the world’s sunniest countries, with enormous potential for solar to make an even larger contribution to energy in Australia in the years and decades to come. We’re leading the world in solar already, but we’ve got plenty of scopes to grow; a 2019 UNSW report found we’re still only using 5% of our capacity for rooftop solar. But with such extraordinary solar growth in recent years, our shared future is looking bright and sunny.

Key Takeaways

So, if you’re looking to save some serious money on your power bills, it’s well worth comparing energy providers, making adjustments to your power usage so that you can benefit from shoulder and off-peak rates, and investing in solar energy. Whether you’re saving for a post-COVID overseas holiday or even better presents for the family during the silly season, you’ve got more power over your power than you might think!

Thank you for reading!

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