New tariff will punish solar panel owners who produce too much power

For hundreds of thousands of people, the prospect of no power bills and paying off their solar system within a few short years, was enough to entice them to switch to solar for the first time.

Feed-in tariffs are now a fraction of what they once were as the grid struggles to cope with the surge of renewable energy that hits it in the middle of the day.

Ausgrid, the biggest electricity distributor on the east coast, now plans to introduce a 1.2 cent a kilowatt-hour penalty for electricity exported to the grid between 10am and 3pm above a free threshold.

During peak demand times of 4pm and 9pm, Ausgrid will pay 2.3 cents an hour to customers who export power to the grid.

The two-way tariff is designed to encourage households to use energy in the middle of the day and export it to the grid at night, thereby helping Ausgrid avoid costly network upgrades.

It also incentivises the uptake of batteries, which allow households to store their excess energy for consumption at night, or to export it to the grid when the price is higher.

However, with the cost of batteries starting at about $9000, relatively few people are yet to install them.

As a retiree Mr Giles is able to maximise the use of the energy he generates by running the dishwasher and washing machine during the day.

He also receives four cents for each kilowatt hour he sends to the grid, which adds up to about $20-$30 per quarter.

"Getting that extra bit (feed-in tariff) helps. The less you get the more you have to consider whether it's worth it. It still costs between $5000 to $10,000 to get a domestic solar array."

"When we recently upgraded our system we looked at getting a battery. If you are just doing it for solely economic reasons it doesn't stack up. They will need to provide a much bigger incentive than that (the new two-way tariff) to get people in."

The Solar Citizens group has called on the NSW government to follow Queensland's lead and implement a Battery Booster Program, which provides financial support for households to purchase batteries.

"Households with existing rooftop solar are doing the energy grid a favour by exporting cheap, clean solar that their neighbours can use. We should be removing barriers for more households to go solar, not introducing penalties," Solar Citizens chief executive Heidi Lee Douglas said.

"If these tariffs are designed to encourage battery uptake, then this is a blunt, heavy-handed approach. Rather than stick people with penalties for not having batteries they can't afford in a cost of living crisis, NSW households need more support to access the benefits of battery storage."

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The new tariff will be opt-in from July this year, and mandatory from July next year.

The impact on customers will depend on how retailers pass through the charges and rewards, and how and when households use the power from their solar systems.

An Ausgrid spokeswoman said the electricity distributor fully supported the uptake of rooftop solar as part of the clean energy transition.

She said under the new pricing arrangements, a typical solar customer could see an increase of $6.60 per year - or 13 cents a week. Some solar customers could expect a rebate.

"This pricing has been designed to encourage customers to use their own solar power first and keep energy bills lower for everyone across the network in the long term. This ensures fairness for all customers including those who can't access rooftop solar," she said.

"The introduction of these prices is opt-in for the first year and comes after detailed consultation with key stakeholders, including customer representatives."