The 350,000 solar households in NSW could soon be paid twice as much for the power they export to the grid, thanks largely to increasing electricity prices in the wholesale market.
A higher feed-in tariff range, of 11.6 to 14.6 cent per kilowatt hour, was outlined on Monday in a draft proposal from the Independent Pricing and Regulatory Tribunal.
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It is double last year's benchmark range of 5.5 to 7.2 cents per kilowatt hour.
While the proposal is good news for solar customers, it also reflects the rising cost of energy for all homes and businesses in NSW.
Solar feed-in tariffs are voluntary amounts paid by a retailer to a solar system owner, for the energy they export back into the grid.
"People with solar are like mini-power stations selling power to the grid. The fact is the underlying electricity they export is now worth twice as much," said IPART chief executive Hugo Harmstorf.
"We are aiming to give solar customers information so that when they talk to retailers they are better informed to negotiate deals."
Retailers in NSW all offer feed-in tariffs above the current benchmark range. AGL (6.1 cents), Energy Australia (6.1 cents) and Origin Energy (6 cents and 10 cents) all offer similar tariffs, while smaller retailers, like the recently launched Energy Locals, already offer 10 cents.
"For us ... every unit of solar someone exports is one unit less we need to buy from the wholesale market. If the wholesale market has risen, its only fair feed-in tariffs are at the same level," said Energy Locals chief executive Adrian Merrick.
Powershop chief executive Ed McManus described the proposed increase as a "double-edged sword."
"Solar owners look like they are getting fair value for the power they are feeding in, but overall it is bad news for consumers broadly."
One industry expert also questioned whether IPART's methodology painted an accurate picture, as it based the assessment of wholesale cost on forty days' of forward prices, that happen to be the highest period over the last year.
On Monday the government welcomed the announcement, noting it reflected in part the closure of Victoria's Hazelwood brown coal-fired power station in March.
News of the planned closure of the aging and high greenhouse-gas emitting plant helped push up wholesale electricity prices sharply in the past year.
How NSW wholesale power prices have doubled. Source: IPART.
"The value of solar generation to our state is now worth more, as the demand for new generation grows," NSW Energy Minister Don Harwin said.
"I have heard the concerns of solar households and asked IPART to update the benchmark tariff for the energy they feed into the grid. The tariff is not subsidised by other energy users so it won't increase power prices."
The proposed doubling of the voluntary feed-in tariff was also applauded by industry and consumer groups.
"This is good news for NSW families and small businesses and for the Australian solar industry," John Grimes, Chief Executive of the Australian Solar Council, said.
The council "urges utilities to pass on these prices to NSW solar families as soon as possible", he said.
After Queensland, NSW has the second largest solar photovoltaic capacity among the states, but it lags behind both Queensland and South Australia in terms of percentage of households with panels on their roofs.
The consumer group Solar Citizens praised the NSW government for pursuing a higher – albeit voluntary – feed-in tariff.
"These recommended increases to the tariff better reflect the increased wholesale price of electricity and demonstrates the widespread benefits to the network as a whole that solar provides," said Shani Tager of Solar Citizens.
Tristan Edis, an analyst with Green Energy Markets, said solar PV installations had surged across all mainland states since November.
"IPART's decision reflects the new reality - the gas shortage has meant wholesale contract power prices have doubled," Mr Edis said.
"Consequently, electricity retailers should be willing to pay higher prices for power from households as well."
In response to the IPART announcement, an Origin spokesman said it would "respond in due course.
"These prices impact both solar and retail products, and it's important that we get this right for customers."
An Energy Australia spokeswoman said the proposal was a win for NSW solar customers, "recognising the value that solar provides at a time of rising wholesale electricity prices."