Solar feed-in tariffs – what are the changes and what does this mean for solar customers?

The Victorian Government on Wednesday passed reforms in Parliament to deregulate the solar feed-in tariff (FIT), meaning the Essential Services Commission (ESC) is no longer required to determine a minimum FIT rate.  From 1 July 2025 onwards, electricity retailers may set their own FIT rates so long as these rates are not below zero.

This decision is intended to cut red tape and enable access to more FIT offers for Victorian households with solar. It follows the continuing trend of market-led reductions in the minimum FIT set by the ESC each year – most recently the near-zero rate of 0.04 cents per kilowatt hour for 2025-26 announced by the regulator on 27 February 2025.  With deregulation, retailers will not be restricted by the regulated minimum.

This is good news for solar customers, with deregulation expected to make it easier for electricity retailers to offer competitive prices and innovative tariff packages to help their customers maximise the value of their investment in solar. 

Powered by Victorian Government support, rooftop solar has increased by 76 per cent in Victoria since 2019 to almost 800,000 systems across the State, with more than 300,000 of those installations supported by the Solar Homes program.

The benefits of solar are clear – even without a feed-in tariff solar customers can save around $500 a year on energy bills and can double those savings to up to $1,000 by maximising their use of the solar power generated through the day to avoid paying retail electricity prices.

It’s important to note a few things in relation to these changes:

• Declining FITs reflect the market value of an abundance of households generating solar electricity during the day.

• The changes do not alter the existing obligation on electricity retailers to provide FIT options that are for credits for exported electricity – this means that FITs cannot be set below zero (or be negative) and that solar customers cannot be charged for their solar exports.    

• This move aligns Victoria with most parts of Australia, including New South Wales, south-east Queensland, South Australia, and the ACT, where deregulation of FITs has already occurred and supports retailers in offering competitive FIT rates and innovative products.

• The best savings for households with solar come from consuming their free energy when it is produced during the day, avoiding default retail prices from the grid of 26 to 35 cents per kilowatt hour, depending on their location.

Right now, many retailers in Victoria are offering FITs above the minimum rate. Solar customers can visit Victorian Energy Compare to shop around for the best plan to suit their needs.  

All Victorian households and businesses – with or without the benefits of solar - can take advantage of this free, independent tool at any time to ensure they are on the best energy deal and not paying more than they need to for electricity. On average across last year, people who use the Victorian Energy Compare website were able to save $240 by switching to the best priced energy offers. 

Visit www.energy.vic.gov.au to see more great ways to save energy and money.

The history of the solar FIT

Early feed-in tariffs offered a ‘premium’ rate – much higher than when compared to FITs today – to encourage uptake of solar when the technology was new and system sizes were small but costs were significantly higher.

The costs of these premium FITs were borne by all customers on the network, including those that did not have solar systems. As the solar industry and technology has developed and the cost of solar systems has fallen dramatically, the evolution of FITs has followed a common trend across Australia and globally, transitioning over time from generous incentives for early adopters to more market-driven, cost-reflective approaches. 

While FITs may have historically been a motivator for some households and small businesses to install solar, the best way for solar customers to make the most of their solar panels and reduce their household energy bills is to use the free solar power they generate during the day and avoid paying retail electricity prices.

Through our Solar Homes program, we continue to help Victorians harness their own energy from the sun - the program has seen an extraordinary uptake in rooftop solar across the state with almost 50,000 rebates provided last year alone.  

These changes do not remove the ability for the Minister for Energy and Resources to request the ESC to investigate and assess whether the terms and conditions of a retailer’s FIT offers are fair and reasonable - ensuring there is ongoing oversight of retailers’ FIT offers.

Rooftop solar and the energy transition

Rooftop solar plays a significant role in Victoria’s energy transition - with almost 800,000 homes with solar panels feeding power into the grid, it provides a meaningful contribution to our total renewable generation. Last year, rooftop solar represented 10.2 per cent of Victoria’s electricity generation, contributing to our State experiencing some of the cheapest daytime wholesale electricity prices in the country.

As part of our energy transition, we’ll continue to support Victorian households to better capture, store and share their energy and benefit from their investments, including solar and batteries, whilst unlocking lower energy prices for all Victorians.

Next steps

The legislative amendments to deregulate the FIT will now be implemented, enabling electricity retailers to offer new FIT rates from 1 July 2025.

For information on solar panel and hot water rebates and solar battery loans, visit www.solar.vic.gov.au.