So a customer came in the other day and said “so I suppose solar is not worth it now the feed in tariff is gone” and this got me thinking that people dont understand how to run the numbers on Solar in Adelaide. Lets go through the numbers as if I were a typical Adelaide household looking to see what value solar offers me and my family.
We first need to put some relevant facts on the table. Number one, there is still an upfront discount on new solar systems installed in Australia as new systems are eligible to create STC’s (small scale technology certificates) and the installer gives you the value of the STC’s as an upfront discount on the cost of the system. There is more on STC’s in previous posts here http://www.solarwholesalers.com.au/need-know-stcs/
Number two, is that there is indeed a feed in tariff (or FiT) currently operating in South Australia. I think there is some confusion here so lets explain it in more detail. How the feed in tariff works is quite simple, the State government requires all electricity retailers to pay their customers for the excess solar generation that their solar power (solar PV, or solar panels) system puts back into the grid. The unit of measure for this is the Kilowatt Hour (kWh) and is the same unit of measure used to bill you for your electricity. So you are billed per how many Kilowatt Hours you use in the quarter. What is a kWh? well if your 1000 watt microwave oven is turned on and you run it for 1 hour it will have consumed 1 kWh (one kilowatt hour) of electricity. So the minimum amount an electricity retailer has to pay you per kilowatt hour is 6.8 cents, however some retailers will pay more. I for example get 8 cents per kilowatt hour from my retailer. UPDATE 2/8/2017, good news, AGL have announced that they will raise the rate they pay for kilowatt hours that you send to the grid, as of next month they will start to pay 16.3 cents per kilowatt hour that your solar puts back into the grid. So I have edited the numbers below, this will help to reduced the payback time for a Solar Power System.
Number Three is the extraordinary life span of a solar panel. All tier 1 solar panels sold and installed in Australia have a 25 year performance warranty. So what this means is the solar panel manufacturers are super confident your panels will be producing electricity well past 25 years, please note solar panels do degrade over time, as a rule of thumb you lose about 1% in the first year and then about 0.5% per year after that. This is another reason to get a slightly larger solar system than you currently need as its going to drop off a little in production as it gets older.
This brings us to the next thing you need to understand if your looking into solar for your property. You need to get a handle on how you are billed for your electricity and also you need to get a handle on how you use your electricity. Being that solar works to produce electricity during the daytime it can only run your day time loads (electricity loads, think kWh) or send power back to the grid. Now lets run some numbers based on two common scenario’s.
Household A, consists of two adults and two school aged kids and one baby. Parent A works Mon to Friday 9 to 5 parent B is predominately home most of the time with the baby and kids are at school Monday to Friday. Currently their average daily (24 hour period) electricity consumption is 25 kWh per day, you are billed quarterly so that works out to say 91 days in a quarter. 25 kWh x 91 days is 2,275 kWh per quarter. For the first 250 kWh they are charged at 31 cents per kWh the next 500 kWh @ 36 cents and the remainder at 41 cents. So the first 250 kWh cost them $77.50, the next 500 kWh cost them $180 and the last 1,525 kWh cost them $625.25 for a total of $882.75 plus a $50 per month supply charge, this gives us a grand total quarterly bill of $932.75
Ok so what will happen to their bill when Solar Wholesalers comes along and installs a 6 kW solar panel system (a 6000 watt system thats 24 x 250 watt solar panels) well the first thing to understand is solar is somewhat seasonal, this means you will make more power in the spring and summer than you will in winter. That being said for this exercise we will work off the yearly average solar production. The rule of thumb is that you will average 4.2 kWh per 1 kW of installed solar power, per day, so our 6 kW solar system will average 25 kWh per day over the course of a full 12 month season.
Being that parent A is home with baby and consuming electricity for things like lights, fridge, kettle, microwave, washing machine, radio, computer (anything else that uses electricity) etc they are consuming the power that their solar system is making and not exporting much to the grid, this is a good thing. So we need to work out how much power is used during the day versus how much at night this is VERY hard to do properly and would require the use of expensive metering /monitoring equipment, so lets just say that of the 25 kWh per day the house uses (on average over 12 months remember) that 16 kWh is used on average during the day, now being that the solar system averages 25 kWh per day and you use on average 16 kWh during the day time that the solar can make power, this means the solar is supplying the bulk of that 16 kWh and exporting 9 kWh to the grid.
Now here is a very interesting point and basically no one seems to understand it. Remember how you are charged for you power in tiers, e.g the first 250 kWh per month at 31 cents per kWh and it goes up the more you use. Being that you now have solar you are buying far less kWh at the top tier rates of 41 cents per kWh. So the 16 kWh the solar provided the house that day is really worth 16 kWh x 41 cents = $6.56 in electricity saving for the day, then you exported 9 kWh to the grid at 16.3 cents for a credit of 146.7 cents, so in total for that day the solar contributed a total of $8.02 to your electricity bill savings if you times that by 365 x $8.02 = $2,927.3 in yearly saving assuming everyday is the same (of course everyday is not the same but 12 monthly averages help to get some usable figures). If you paid $6,500 for this 6kW solar system your payback time would be about 3 years. A very, VERY good return on your money spent and if this is close to your scenario solar for you is an absolute no brainer . If you are in that house for 20 years (and your scenario does not change) you will have saved around $44,000, yep that is serious money, gota love the solar.
Another common scenario lets call this one house hold B and is probably more common than scenario A. In this scenario we have two adults and two school kids, Monday to Friday everyone is at school or work. Lets run the same kilowatt hours as the first scenario, so, their house also averages 25 kWh (per day), however rarely is anyone home during day light hours Monday to Friday, except of course for school and work holidays and weekends and in daylight saving time.
So although they use the same amount of power overall they use more power in the late afternoon and night time than they do during the day time (Monday to Friday that is, its generally opposite on weekends). When this is the case we look to install some or generally about half of the solar on a west facing roof, this way when the kids get home from school or the parents get home from work you are still making solar power this is especially true in the summer time during daylight savings.
Ok back to some numbers. So of our total of 25 kWh per day average over 12 months lets assume the house is fully running of solar and consumes 6 kWh to run the daytime loads think fridge, freezer,clock radios, any lights and computers left on stand by. So 6 kWh at 41 cents per kWh = $2.46 and 19 kWh at 16.3 cents is $3.09 for a total of $5.55 and if we go 365 x $5.55 = $2,025.75 this would equate to a payback time of less than 4 years. The other thing to remember with this scenario is we have just used averages, in the real world we explain to our clients that you can still maximize your returns on this scenario as you can arrange to use a lot of electricity on the weekends, for example I fall into scenario 2 and I always do my washing, vacuuming and anything else I can think of that uses electricity during the day while the solar can power it. So although this doesn’t have the amazing payback time of scenario 1, it certainly gives a much better return than money in the bank account does. If you are in this house for 20 years you will save at least $32,000 that’s better in your pocket than the power companies.
I hope that gives people an understanding about how to go about working out the solar numbers for your place. You can also call us and one of our people will be able to talk to you about your scenario, for the best results it is best not to take a cookie cutter approach and design a solar system that fits into the clients solar scenario.