Low Rooftop PV Tariffs: Are Solar Households Subsidizing Everyone Else’s Power?

It often seems like energy retailers are getting the better end of the deal. They purchase excess electricity generated by households with rooftop solar PV at low feed-in tariffs and then resell it to consumers who don’t have solar panels.

Retailers acquire around 17 terawatt-hours (TWh) of electricity this way—roughly 8% of the total consumption on the National Electricity Market (NEM). The purchase price varies between $10/MWh and $40/MWh. This amounts to about $500 million annually, while the same electricity is sold to non-solar consumers for approximately $450/MWh, totaling $5 billion.

Network operators, however, do not earn revenue from exported power. Instead, they receive regulated pricing when electricity is purchased directly. While this might seem unfair, networks must generate revenue to comply with regulatory structures.

From an economic standpoint, retail competition ensures that excess profits are minimized. When multiple retailers can access cheap electricity, they compete to lower costs for consumers. As a result, the benefits of low feed-in tariffs trickle down to non-solar customers.

Retail pricing works much like a tax system—if costs increase, prices rise; if they drop, competition drives them down. In this sense, cheap solar electricity benefits all consumers, not just solar panel owners.

Additionally, the NEM has experienced an electricity surplus over the past year, resulting in low daytime spot prices. In some cases, spot prices have been lower than feed-in tariffs, particularly in Victoria and Queensland. This dynamic suggests that retailers could have saved more by purchasing from the pool rather than excess customer-generated electricity.

The current low daytime prices are a signal for future investments. As investors recognize the profitability of storing and redistributing cheap midday electricity, large-scale battery installations and other storage solutions will likely expand. Market forces are proving effective—low prices encourage investment, creating a more dynamic and responsive energy sector.

However, monopolies present challenges. The fundamental issue with the NEM isn’t just the energy mix but rather the monopolistic tendencies within the industry. Achieving a fully competitive market structure remains a long-term challenge.

With customer-generated solar power making up 7-8% of the total energy supply—and growing—better reporting standards are necessary. Currently, networks do not collect and report household energy sales data at the level expected within the NEM. This lack of transparency could hinder effective market participation and policy-making.

Energy companies like AGL offer some portfolio analysis, but industry-wide transparency is still lacking. Investors and stakeholders increasingly demand better reporting to assess the long-term stability of energy businesses.

Retailers purchase more than 15 TWh of electricity from embedded solar sources across the NEM. However, feed-in tariffs remain below production costs. While politicians focus on price reductions, they often overlook the broader financial dynamics affecting both solar and non-solar households.

Data from networks indicate that roughly 14 TWh of residential solar electricity is fed into the grid. However, the accuracy of these numbers is questionable, given the lack of metered behind-the-meter data from the Australian Energy Market Operator (AEMO). Proper measurement and reporting are essential to ensure a fair and transparent system.

Residential solar contributions are often misclassified or lumped into broad categories, making it difficult to analyze trends accurately. Many distribution companies fail to record energy sales based on time-of-use (ToU) tariffs, despite regulations requiring such data collection. This gap in information makes it harder for policymakers to develop effective behind-the-meter solar policies.

Virtual Power Plants (VPPs) represent another growing sector, with approximately 1,000 MW of decentralized energy storage systems operating in the market. These systems allow retailers to manage household battery charging and discharging to optimize supply during peak demand periods.

Retailers pay solar households between $10/MWh and $40/MWh for exported electricity. Meanwhile, non-solar consumers pay approximately $450/MWh for their electricity. Despite this, retailers may not be maximizing their advantages, as spot market purchases in states like Queensland and Victoria could be even cheaper than acquiring solar exports from households.

Contract pricing further complicates matters. Most retailers secure their energy supplies through contracts with generators, which reflect broader market expectations and spot price trends. While futures prices offer insight into long-term electricity costs, they do not always align with real-time market fluctuations.

Battery investments are rapidly increasing due to attractive price signals. Unlike traditional industry demand response mechanisms, battery storage can respond quickly to fluctuations in supply and demand. This flexibility makes battery storage a critical tool for stabilizing energy costs and reducing reliance on fossil fuel-based generation.

The impact of low rooftop PV tariffs extends beyond just solar households—it influences the entire energy market. While solar panel owners may feel they are subsidizing the system, competition ensures that cheaper electricity benefits all consumers. However, improvements in data transparency and market structures are necessary to ensure fair pricing and future energy stability.

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