Feed-in tariffs and net metering are policies designed to encourage the uptake of renewable energy. They compensate solar system owners for the energy they produce. The payment you receive saves you money on your electricity bill. It can also help you recover the amount spent on buying and installing the solar system over the years.
Most Australian states have either a feed-in tariff or a buy-back rate for excess electricity generated. New South Wales, Tasmania, Victoria, and Western Australia have a feed-in tariff for eligible renewable energy systems. Queensland has a buy-back rate for excess electricity generated from solar PV systems. South Australia has both a feed-in tariff and a net metering system. The Northern Territory does not have any laws or regulations in place for on-site renewable energy generation.
What is a feed-in tariff?
A feed-in tariff (FIT) is a policy mechanism designed to encourage the uptake of renewable energy sources. It guarantees a specific price for electricity generated from eligible renewable energy sources, such as solar PV.
What is net metering?
Net metering is a billing arrangement that allows customers with on-site renewable energy generation to receive credit for the electricity they generate and use. Any excess electricity generated is exported back to the grid, and the customer gets a credit against their next bill.
The main difference between the two is that, with the FIT, you are paid for the electricity you generate regardless of whether you use it. This is because the government sets the price to encourage the uptake of renewable energy.
With net metering, you only receive a credit for the excess electricity you generate and export back to the grid for use on-site. Therefore, feed-in tariffs offer a guaranteed price for renewable energy, while net metering provides credit for renewable electricity used on site.
Net metering is typically offered by utilities, while governments and utilities implement feed-in tariffs. Net metering is simpler to implement. You only need a single meter to measure the electricity flowing in two directions. This means that net metering can be implemented without changing the existing infrastructure.
Feed-in tariffs are somehow more complex. They require a separate meter which means more wiring. The extra meter tracks the amount of renewable energy consumed and generated, enabling different pricing. Therefore, FiTs will require some changes to be made to the existing infrastructure. The government also needs to monitor and review the FiT periodically.
The other key difference is the price you receive for the electricity you generate. With FIT, the government sets the price, usually higher than the retail electricity price. You are paid for all the electricity you generate, whether you use it or not. This makes renewable energy more financially attractive.
With net metering, the utilities give you a credit equal to the retail electricity price. It only credits you for the excess electricity you generate and export back to the grid. The price paid for the excess electricity varies from place to place. However, a typical scheme uses a 20-year schedule that pays a pre-set price that gradually reduces yearly. This offers the owner a reasonable rate of return without significantly increasing the overall electricity cost.
Mode of payment
The mode of payment for both policies is also different. FiTs are paid per kWh of electricity generated. In feed-in tariffs, the amount you are paid is fixed for some time. For example, you may be paid $0.15 per kWh for the next 20 years. The payments are made by the government or utility company through your electricity bill. They are often paid monthly, quarterly, or yearly.
Net metering is paid per kWh of electricity exported back to the grid. The amount of credit is equal to the retail price of electricity times the number of kWh exported back to the grid. The credits appear as a line item on your electricity bill and offset the amount of energy you’ve purchased from the utility. They can also be used to offset future consumption. It is often paid monthly or annually by the electricity provider.
Feed-in tariffs are available to all renewable energy generators. This includes households, businesses, and community groups. In this policy, there is no limit on the size of the system or the amount of electricity you can generate.
Net metering is only available to customers who have installed a renewable energy system at their home or business. The system must be connected to the grid and used for on-site consumption. There is also a limit on the size of the system and the amount of electricity you can generate.
One of the main benefits of feed-in tariffs is that they offer a guaranteed price for renewable energy. Consumers are encouraged to install renewable energy sources as they will still get credit regardless of whether they use the power they generate. They are considered a more effective way to encourage renewable energy development.
Net metering encourages customers to invest in energy efficiency measures, such as solar PV systems, to reduce their overall energy consumption. This gives the consumer more energy to export to the grid for net metering credits. It is considered a more fair and efficient system than feed-in tariffs as it only credits customers for the excess electricity they generate.
Feed-in tariffs have been criticised for being too expensive and not incentivising energy efficiency. This is because the government pays for all electricity generated, regardless of whether it is used on-site or exported to the grid.
Net metering has also been criticised for not providing enough incentive to invest in renewable energy. This is because the utility pays for power at the same price as its selling price. Utilities may cap the amount they credit the owner, sometimes at zero. This is undesirable as it discourages consumers from installing large solar systems. They avoid producing more electricity than the property uses, thus “giving away” electricity.
Which one is better?
There is no easy answer to this question as it depends on your circumstances. A feed-in tariff may be the better option if you have an on-site renewable energy system and want to generate income from it. It fits solar owners with low electricity usage and doesn’t export much electricity back to the grid.
However, net metering may be beneficial if you want to lower your energy bills by using more renewable electricity you generate on-site. It fits those with high electricity usage and exports a lot of electricity back to the grid.
Both systems have their pros and cons, but ultimately it is up to the individual state to decide which method is best for their needs. If you are still unsure about which option is best for you, we recommend speaking to a solar expert who can assess your circumstances and provide advice on the best option for you. You can also contact your electricity retailer or state/territory energy regulator.