Solar sponge tariffs mean cheaper electricity for all

Last Updated on April 28, 2022 by Tim Hiley

solar sponge tariff
Rooftop solar is now the second biggest generator of electricity in Australia, pushing down the cost of power. But what about the 7 million households who don’t have solar? Here’s how the new so-called ‘solar sponge tariffs’ enable anyone to get on board with cheaper daytime electricity.

As at July 2021, there are over 2.8 million solar-powered homes in Australia. That’s because rooftop solar is a high-return, low-risk, tax-free investment that provides immediate and ongoing financial savings. Plus significant benefits for society through reducing CO2 and toxic emissions from burning fossil fuels. With a current payback period under five years in most states, installing solar is now a question of ‘why not’?

What about households without solar?

There are lots of reasons people can’t access the benefits of low-cost solar energy. Renters, apartment dwellers, shaded homes, and low-income earners all face challenges. But now there’s an electricity tariff set to change this. The recent introduction of solar sponge tariffs across many states in Australia means everyone can access cheap daytime electricity.

Why solar is helping to reduce electricity costs

There is an increasing supply of solar across the country. As a result, wholesale electricity rates for grid electricity have been falling. The fall in wholesale power prices is biggest in the middle of the day, thanks to the flood of solar power. Below is a chart showing solar and renewables by hour in the Australian National Electricity Market (NEM) from 22nd-29th July 2021.
NEM wholesale electricity rate versus renewable generation 22-29 July 2021

Diagram: Low-cost solar drives down midday wholesale electricity rates in the NEM (ACT, NSW, QLD, SA, TAS and VIC) – average hourly rate and % of renewable generation from 22nd-29th July 2021.

What are solar sponge tariffs and how cheap are they?

Solar sponge tariffs are Time Of Use (TOU) electricity tariffs, primarily for households. The big difference is they have low off-peak electricity rates in the middle of the day. Typically, these tariffs have off-peak electricity rates around 15c per kWh for 5-18 hours per day, every day. These off-peak rates can offer a substantial saving over the standard flat/anytime rates. In fact, in most electricity networks, solar sponge off-peak rates are around 5-8c per kWh (25%-40%) cheaper than a regular flat/anytime rate.

What’s the catch with solar sponge tariffs?

Just one. When higher peak rates apply – between 3pm-9pm in Victoria, you need to be mindful of using more power than necessary. It’s about shifting energy usage that doesn’t have to occur at peak times to another time of the day. Some examples are running laundry appliances or firing up the air conditioner to warm or cool the house before the peak.

When are the peak and off-peak times for solar sponge tariffs?

Peak and off-peak hours depends on which electricity network your property is connected to.

New South Wales (Endeavour Energy network only – Western Sydney, Blue Mountains, Southern Highlands and Illawarra)

  • High-Season Peak (Nov to Mar) = 4pm-8pm weekdays exc. Public Holidays, Low-Season Peak (Apr to Oct) = 4pm-8pm weekdays exc. Public Holidays, Off-Peak = all other times

Queensland (Energex & Ergon Energy networks)

  • Off-Peak = 9am-4pm, Shoulder = 9pm to 9am and Peak = 4pm-9pm.

Note there are two time of use tariffs South East Queensland (Energex):

  • Tariff 6900 is the newer solar sponge tariff that has off-peak from 9am-4pm (~50% from solar at midday)
  • Tariff 8900 is the older tariff that has off-peak between 10pm-7am (80%+ from coal).

South Australia

  • Off-Peak = 10am-3pm, Shoulder = 1am-6am and Peak = 6am-10am and 3pm-1am

Victoria

  • Off-Peak = 9pm-3pm and Peak = 3pm-9pm

Other states & networks

As of July 2021, not all networks/states have solar sponge tariffs yet – ACT, Ausgrid & Essential Energy networks in NSW, Tasmania and WA are yet to implement them. Coal is the dominant fuel in electricity generation in NSW and the ACT grid. At the same time, Tassie is led by hydro. But solar is making inroads every year, so we should see solar sponge tariffs in these states in the next 3-5 years, as more solar floods the energy grid. WA already has a good portion of daytime solar. So the regulator/network there needs to move quickly to offer a solar sponge tariff rather than restricting exports (which is their current modus operandi).

What are the solar sponge rates?

Here’s an excerpt from our dedicated solar sponge tariff page showing the retailers and plans rates they offer. Click on your state below to see the retailers offering solar sponge tariffs in your network:

Getting beyond “peak rate fixation”

In our experience, Time Of Use rates are something that consumers, at first glance, don’t always appreciate the potential savings. Often the focus is on the higher peak usage rate and prompting the thought, ‘why would I sign up for that?’. Start instead with the off-peak rate. It’s the off-peak rate that provides the opportunity to make savings over a flat/anytime rate. Here are the numbers to show you.

An example from Regional Victoria showing potential savings – warning maths ahead!

Here’s an example with the new Time Of Use rates in AusNet Services network (Eastern Victoria) for the retailer Powershop Market Offer in Victoria as of 29th July 2021.

Anytime rate = 25.27c per kWh

Peak rate (3pm-9pm)          =  32.31c per kWh (7.04c above the anytime rate)
Off-Peak rate (9pm-3pm)  =  17.30c per kWh (7.97c below the anytime rate)

In this case, the anytime rate of 25.27c is just slightly higher than the average of the peak and off-peak rate of 24.8c. Therefore, you might think that there’s not much to be saved.

However, the off-peak rate applies for 18 hours a day versus only 6 hours per day for the peak rate. In this case, using a simple average of the peak and off-peak rate doesn’t account for the off-peak rate applying for 75% of the day. Thankfully, the Essential Services Commission in Victoria has looked at the usage patterns of Victorian households to help understand when they use energy. Their conclusion was that a typical  Victorian household will use approximately 33% of their electricity in the peak period and 67% in the off-peak period. So, the average rate on the new time of use tariff for an average household would be:

33% x 32.31c + 67% x 17.3c = 22.25c per kWh

As you can see, the average TOU rate is 12% lower than the anytime rate of 25.27c per kWh!

In this example,  the average household would save over 10% by shifting from Powershop’s anytime tariff to their time of use tariff, without changing when they us power. And that is without a household changing their behaviour to shift electricity usage into the off-peak periods.

Here’s where Time of Use can get even better

If the household was able to shift  some usage from peak to off-peak periods, so consumption of grid power is spread evenly across the day then the average rate would be:

25% x 32.31c + 75% x 17.3c = 21.05c per kWh

With some load shifting to off-peak hours, the average TOU rate is almost 17% lower than the anytime rate of 25.27c per kWh!

Daytime off-peak hours are more useable than overnight

The old “overnight only” off-peak periods meant shifting load wasn’t practical. Running heating and cooling between 10pm-7am wasn’t of much value for most households. Plus, very few people are going to run dryers, washing machines and ovens during those hours.

However with the solar sponge tariffs off-peak hours during the day, homes can far more easily access cheap off-peak rates to heat, cool, bake, wash etc.

Top 8 energy saving opportunities with solar sponge tariffs

Here are some of the best opportunities to shift power usage into off-peak hours:

  • Hot water heating (especially heat pumps that are even more efficient in higher daytime temps)
  • Heating
  • Cooling
  • Pool pumps
  • Clothes dryers
  • Electric vehicle charging
  • Baking & slow cooking
  • Dishwashers

Every little shift gives you access to cheaper off-peak energy!

Solar sponge tariffs for all – yep, you bet
Solar owners can benefit from solar sponge tariffs too. Cloudy and winter days often mean that solar owners are still buying grid electricity during the day. Of course, many solar owners are on Time Of Use tariffs; they usually have their off-peak times in the middle of the night. That makes no sense when there’s cheap solar that your neighbours don’t use available to you in the middle of the day.

By shifting to Time Of Use tariffs, solar owners push up demand for daytime electricity. They also help reduce congestion in the distribution network where there is sometimes excess solar. Left unchecked, the oversupply of solar is creating new pressures, with regulators threatening to step in with new controls to curtail home solar (like the solar tax). So using cheap daytime energy will help everyone.

How do I switch to a solar sponge tariff?

Using the table above, check that your existing retailer offers a solar sponge tariff for your network. Then, if they do, you can contact them and ask to be moved to that tariff. In the case, your retailer doesn’t offer them, you can use the table above to find one that does. For practical tips  on switching tariffs see WATTever’s Changing Tariffs Guide. 

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