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Electricity Costs and Savings

Electricity Costs and Savings

Buy back rates

Buy back rates offered by retailers for generation exported to the grid have dropped significantly since the introduction of solar distributed generation which, for early adopters of this technology, may have had a negative impact on their expected financial benefits.

Today’s buy back rates are now closely aligned to wholesale electricity pricing.

Retailer Buy Back Rate Maximum System Size
Contact Energy 8¢ / kWh Up to 10kW
Genesis 12¢ / kWh Up to 50kW
Mercury Energy 8¢ / kWh (some exceptions) -
Meridian From 8¢ to 15¢ / kWh Up to 10kW
Trust Power 8.5¢ / kWh Up to 10kW

* all rates exclude GST. Rates as at September 2022.

Can I make money selling back to the network?

Current market buy back rates offer from 8c to 15c per kWh for generation exported to the grid. This reflects the cost of wholesale electricity, and electricity retailers are understandably not prepared to pay a premium to buy solar electricity over what they would pay buying other forms of electricity on the wholesale electricity market. At 8c per kWh the buy back rate is less than a third of the price you pay for purchasing delivered energy. This factor limits the income you can earn from exporting back into the network and reinforces that the best value is achieved through directly consuming solar generation, and avoiding higher value retail electricity purchases.

Potential changes to distribution network charges

The electricity industry is still adapting to the introduction of solar distributed generation. The network, its infrastructure and tariffs were based on a one-directional energy flow (from the grid to the consumer), and the introduction of solar generation is changing this.

To ensure reliability of supply, the national grid operator, Transpower, and Electricity Distribution Businesses (EDB’s) like Unison need to maintain and invest into building the electricity network infrastructure required to meet electricity supply needs of every consumer at times of peak demand.

The cost of building, maintaining and operating network infrastructure is met through consumer line charges, which are intended to be reflective of the value of electricity infrastructure required to supply electricity to your home or business during network peaks – usually winter mornings and evenings. These charges are commonly based on a mix of ‘variable charges’ that vary depending on your electricity usage, in addition to a ‘fixed charge’ component.

Although solar reduces the household electricity consumption from the grid, it has little benefit in reducing overall peak demand, which drives network infrastructure investment. Effectively households with solar will reduce electricity usage from the grid during the daytime when solar generation occurs, but will continue to rely on grid supply during morning and evening peaks. Because DG users can significantly reduce their electricity consumption, they are effectively avoiding a significant amount of their network charges, meaning DG consumers using the network are effectively being subsidised by other consumers. This imbalance will be reduced as changes to fixed charges are implemented, with a larger portion of lines charges being fixed and less related to how much grid energy is used.