Victoria’s solar industry is bracing for a major shift as the state’s feed-in tariff (FiT) is set to drop to its lowest level in Australia from July 1, 2025. The projected flat rate FiT is set to reduce from 3.3 c/kWh to a mere 0.04 c/kWh. The Essential Services Commission (ESC) is set to announce a significant reduction in the minimum FiT, a move that is expected to have widespread implications for solar panel owners and prospective investors in renewable energy.
What is a feed-in tariff?
The feed-in tariff is the rate solar system owners receive for exporting excess electricity to the grid. Designed as an incentive to encourage the adoption of solar power, FiTs have historically helped households and businesses reduce payback periods on their solar investments. However, declining wholesale electricity prices and shifts in energy policy have led to ongoing reductions in these tariffs.
The new Victorian feed-in tariff
The proposal by the ESC has set the new minimum single-rate FiT at just 0.04 cents per kilowatt-hour (c/kWh)—a sharp decline from the current rate of 3.3 c/kWh. This change makes Victoria’s FiT the lowest in the country, trailing behind other states where rates range between 5 and 10 c/kWh depending on providers and energy market conditions. The ESC is set to confirm the reduction with the release of its 2025/2026 report on February 28, 2025.
Why is the FiT being reduced?
There are several reasons behind this cut:
- Lower wholesale electricity prices – The value of electricity during daylight hours has decreased due to increased solar generation across the grid.
- Grid stability concerns – High levels of solar exports during peak sunshine hours can sometimes create grid management challenges.
- Shift towards battery storage – The Victorian government is pushing for more households to install batteries, reducing reliance on the grid for excess solar energy storage.
How will this impact solar owners?
For existing solar customers, the reduced FiT means lower returns on exported energy, which may extend the payback period of their solar system. New solar investors might need to rethink system sizes and consider battery storage to maximise self-consumption rather than relying on exporting power to the grid. It is important to note that the projected rate of 0.04 c/kWh is the minimum flat rate for retailers to offer; some retailers may choose to offer higher rates.
What can solar owners do?
To counteract the impact of the lower FiT, Victorian solar households can:
- Maximise self-consumption – Using more solar energy during daylight hours reduces reliance on the grid and increases savings.
- Invest in battery storage – A home battery system allows excess energy to be stored and used later, rather than being sold back to the grid at a low rate.
- Shop around for retailers – Some energy providers offer higher FiTs or bundled incentives that may provide better value.
- Utilise smart energy management – Smart home technology and appliances can help schedule energy usage for maximum efficiency.
The future of solar in Victoria
Despite the FiT reduction, the long-term benefits of solar energy remain compelling. With rising electricity prices and ongoing government incentives for renewable energy adoption, solar power continues to be a smart investment. However, this shift signals a growing need for energy independence strategies, including battery storage and smarter energy use, to maximise the value of solar installations.
Final thoughts
While the reduction in Victoria’s feed-in tariff may be disappointing for some, it reflects the evolving energy landscape. Homeowners and businesses must adapt by focusing on self-consumption, exploring battery solutions, and staying informed about energy policy changes. As the renewable energy sector continues to develop, those who take proactive steps will be best positioned to reap the long-term benefits of solar power.
Make the switch to solar today and start generating your own electricity. Already have solar? Maximise your investment with battery storage. Get FREE quotes today from Energy Matters’ nationwide installer network.
