How does solar feed-in affect your pension?

You want to install solar panels to reduce your emissions and offset your electricity bill. But how does it affect your pension?

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17 February 2022
Finance
Read Time: 4 mins

Key Points

Solar panels can generate electricity that can be sold back to the grid.

This can be used to offset your bill or to generate income for homeowners.
Pension payments can be affected, so it pays to understand the rules.

If you’ve been thinking about installing solar panels and are receiving Age Pension payments, you might be wondering how the money earned from solar feed-in tariffs could impact your pension payments.

Let’s take a closer look.

What is a feed-in tariff?

It is a rate you are paid from your energy retailer for excess electricity your solar power system has generated. Feed-in tariffs are only issued if your solar power system has generated more day-time electricity than your household has used. Rates can fluctuate depending on government subsidies and who your energy retailer is.

Do solar feed-in tariffs count as income?

The short answer: credits on your electricity bill don’t but cheques in the mail do.

While a solar power system can significantly reduce electricity bills, it is unlikely without battery storage that you’ll have zero electricity charges from your energy retailer. This is due to the need to pull energy from the electricity grid at night. In this case, a feed-in tariff payment will be received as a credit and will further reduce the electricity bill for that quarter.

When a feed-in tariff is received as a credit on an electricity bill, it is not counted as income and therefore does not affect pension payments.

However, if the feed-in tariff puts you in surplus credit – meaning the energy retailer owes you money – and sends you a cheque in the mail or direct deposit into your account then that can be classified as additional income, and could jeopardise your pension payments.

However, according to one solar retailer, Solarmarket, there is a way around this. Some energy retailers will allow you to nominate that quarter’s surplus credit to be put towards your next electricity bill.

If this is not an option and it is affecting your pension payments, you can add battery storage so that you are able to store your excess electricity to use in times your solar power system is not generating enough energy (such as at night or in winter).

Due to the costs of adding battery storage, it is only recommended if you find your solar power system is generating superfluous energy consistently. Also, if you are on one of the more generous feed-in tariffs used to encourage take up of solar, you may lose this tariff if you alter your set-up in any way.

If the surplus credit you receive from the energy retailer is small, it should not affect your pension payments by much, but will still be worth monitoring.

If you don’t store the electricity, then these are other options:

1) Maximise electricity usage when the sun is up

Since you cannot store your solar electricity without batteries, this means it’s important to self-consume as much of your solar energy generation as possible to prevent it from being fed back into the grid.

In practical terms, you should aim to use electricity-guzzling appliances (such as washing machines and dryers) during the day, instead of running them at night.

2) Buy a smaller-sized solar panel system

Get advice on installing a suitably sized solar system that guarantees it will not export enough solar energy to generate a credit on your bill payable by cheque. But this doesn’t provide the best bang for buck.

3) Clean Energy Bonds

National Seniors believes there’s an income-generating opportunity for retirees to invest in nation-building large-scale renewable energy projects.

Not everyone owns a home or sees the benefit of investing in solar rooftop but may still like to invest in projects that meet our emissions targets.

Our idea is that government issued Clean Energy Bonds would allow older Australians to invest safely in the many projects needed, such as Snowy Hydro 2.0.

Our research found that 60% of older Australians have already invested in one or more type of renewable energy (e.g., rooftop solar, solar hot-water, renewable projects etc.).

Interestingly, a significant majority have chosen to invest in rooftop solar – eight times more than the number of older Australians investing directly in large-scale renewable energy projects.

The need to sustain retirement income, combined with the desire to act on emissions, provides a real opportunity to supercharge the renewable energy sector in Australia.

How it would work:

The federal government would create a ‘Better Future Fund’ to invest in environmentally friendly investments through the Future Fund.
The ‘Better Future Fund’ would pay a dividend to the federal government to pay for renewable energy infrastructure projects, as well as a modest return to investors.

To invest in the fund, older Australians would purchase Clean Energy Bonds through Australia Post.
Bonds would be available to any Australian citizen over Age Pension eligibility age, including self-funded retirees.
Bonds would be sold in $5,000 lots to allow those with limited savings the opportunity to participate.
Participants would be able to purchase bonds up to a maximum value (approximately $50,000 per person).
A range of maturity options could be offered to investors with different rates of return.