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What Is The Sun Tax In Australia

What Is The Sun Tax In Australia

Published on:
June 20, 2024

The sun tax has sparked much debate about how it will affect the current crediting system for rooftop solar exports. But how much will the sun tax impact Australian households? And what is the sun tax?

Let’s learn about sun tax today and why you shouldn’t worry about it!

What is the Sun Tax?

The “sun tax” is part of new rules created by the Australian Energy Market Commission (AEMC), which makes the rules for the electricity system in the National Electricity Market.

The original rules for the National Electricity Market were made 25 years ago when electricity only flowed one way, from big power stations to homes and businesses.

The rules have been updated to include solar energy and other renewables in the national energy system.

The new rules reward solar owners for sending clean energy to the grid but also allow charging when they send solar electricity to the grid at times it isn’t needed, like 2 PM on a sunny afternoon. This helps manage the grid during peak hours.

The tariff, approved by the Australian Energy Market Commission (AEMC) in August 2021, is part of a two-way pricing system. This system rewards solar customers for sending energy from their solar panels to the electricity grid when demand is high.

However, it also charges them for sending solar energy to the grid when there is too much solar power, like during the middle of the day. Currently, most energy providers pay households for the electricity they send to the grid, regardless of the time of day.

The “sun tax” was suggested to prevent grid overload. It’s believed that this will reduce supply disruptions by encouraging households to use their solar energy first instead of sending it back to the grid for a credit.

Motivating solar customers to change when they export solar energy, possibly by using home batteries, will reduce renewable energy waste and better support the energy supply for homes and businesses connected to the grid.

How Much Will the Sun Tax Cost Your Household?

The sun tax is still in its preliminary stages for most of Australia. However, some distributors in New South Wales and the Australian Capital Territory have already proposed how these costs may look for households and businesses.

According to proposals shared with the Australian Energy Regulator (AER), rooftop solar owners on several renowned networks could soon be charged between 0.94 cents per kilowatt hour (kWh) and 3.6/kWh for exporting above their set limits.

The suggested limits vary yearly to monthly and, on some networks, even hourly or seasonally. However, most reward windows are within the late afternoon and early evening hours, aligning with times of peak demand.

Electricity distribution companies have emphasized that the total impact of the sun tax will depend on how retailers factor it into their pricing structures.

If energy providers decide to implement the new tariff in full, the current solar feed-in tariffs will be changed to offer a smaller rebate during peak export hours. And a larger one when demand on the grid is high.

For those households concerned about potential additional costs, the AEMC and AER have also agreed to include a ‘free’ export option for solar customers.

Customers would be free from potential charges for exporting above limits or outside peak hours. However, it does mean that they won’t be rewarded as highly for exporting at the right times.

When Will the Sun Tax Take Effect?

The new sun tax rule started in July 2022, but depending on their state or territory, most households and businesses will not feel the impact until 2025.

This delay is because all electricity distributors must submit a price proposal to the Australian Energy Regulator (AER) showing why they need this tariff before using it.

These proposals are reviewed at different times based on the state or territory, and the approval date sometimes matches when the tariff will be applied.

For example, all three distributors plan to start the two-way tariff in New South Wales in July 2025. However, some electricity distributors will offer the tariff on an opt-in basis starting in July 2024.

This means that starting July 2024, customers with rooftop solar can choose to switch to the new tariff by contacting their energy provider. Otherwise, they will be affected in July 2025; the tariff will automatically apply to all solar customers.

Solar Emporium notes that the potential tariff only applies to areas part of the National Electricity Market, so solar owners in Western Australia and the Northern Territory are excluded.

Upsides of the Sun Tax

The new rule changes for solar owners have several benefits:

  1. Distribution networks can no longer set zero export limits, allowing solar owners always to send some energy back to the grid.
  2. Networks can only introduce export tariffs after proving they benefit households.
  3. Battery owners will earn rewards for sending power from their batteries to the grid during peak evening times.
  4. Electric vehicle (EV) owners with vehicle-to-grid charging can send power from their EV batteries to the grid and receive rewards. (Contact us if you’re interested in vehicle-to-grid charging solutions; we supply and install them.)

Why You Shouldn't Worry About It

The “sun tax” isn’t as bad as some people say. The new AEMC rules have more benefits than drawbacks for solar and battery owners. The changes will happen slowly and only if state governments approve them.

If you want to avoid charges for exporting electricity to the grid, you can use your extra solar power to run your air conditioning or a hot water heat pump. These energy-efficient systems use very little electricity and can be powered for free with solar energy.

And there’s more!

New air conditioning units have Wi-Fi, so you can use an app to turn on your aircon while at work and come home to a cool house without paying for electricity.

This feature isn’t just for air conditioning systems; it’s becoming common in modern electrical appliances. Solar and battery owners can use all the electricity their panels produce.

So, the “sun tax” won’t be a big deal. You’ll wonder why you even worried about it in a few years!

How to Benefit from the Sun Tax

Consider getting solar batteries! Solar battery owners can earn money by sending power from their batteries to the grid during peak evening hours. This provides financial rewards and helps balance the grid’s supply and demand.

Owning a solar battery can make a big difference for homes and businesses. It lets you store extra energy produced during the day and use it when demand is high, usually in the evening.

This ability to control and time your energy exports can save you more money and make your energy use more efficient.

There are still ways to make the most of your solar energy for homes without a solar battery. One way is to use extra solar power to run household appliances like washing machines, dishwashers, or heat pumps.

By using your solar energy directly, you can reduce the amount of power you send to the grid, helping to stay within the export limits set by your network distributor.

Future Implications and Policy Considerations of the Sun Tax

The “sun tax” can potentially significantly shape the future of solar energy use and distribution.

Here are some key implications and policy considerations:

Encouraging Energy Storage:

The sun tax can motivate more households and businesses to invest in solar batteries. By storing excess energy and using it during peak times, users can avoid export charges and benefit from potential rewards. This can lead to increased adoption of battery storage systems, enhancing energy independence and resilience.

Grid Stability and Efficiency:

The policy balances the grid by discouraging solar exports during low demand and high solar generation times. This prevents grid overload and ensures a more stable and efficient electricity network. As more people adjust their energy usage patterns, the grid can operate more smoothly and reliably.

Innovation in Energy Management Technologies:

The sun tax could drive innovation in smart home technologies and energy management systems. Devices that automatically adjust energy usage based on real-time grid conditions could become more popular, helping users optimize their energy consumption and export patterns.

Equity and Fairness:

Policymakers must ensure that the sun tax is implemented fairly so it does not disproportionately affect lower-income households or discourage solar adoption. Incentivizing low-income households to invest in solar and storage technologies could help address potential equity issues.

Environmental Impact:

The sun tax can contribute to environmental sustainability by promoting renewable energy and reducing reliance on fossil fuels. Encouraging the optimal use of solar energy can help reduce carbon emissions and support national and global climate goals.

Regulatory Oversight:

Effective regulatory oversight ensures the sun tax achieves its intended goals without unintended consequences. Continuous monitoring and adjustments to the policy may be needed to address any emerging challenges and ensure that the benefits outweigh the drawbacks.

Consumer Awareness and Education:

Educating consumers about the sun tax and how to maximize their solar energy benefits can lead to better acceptance and more effective implementation. Clear communication from energy providers and government agencies can help users understand the advantages and make informed decisions about their energy usage and investments.

Impact on the Solar Industry:

The solar industry might see shifts in demand for different products and services. For instance, there could be an increase in demand for solar batteries, smart inverters, and energy management systems. Companies that adapt to these changes can find new opportunities for growth and innovation.

Overall, the sun tax represents a significant shift in how solar energy is managed and utilized. By carefully considering its implications and making informed policy decisions, it is possible to enhance the benefits of solar energy for consumers, the grid, and the environment.

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