Ok, so you’ve noticed that solar is popular at the moment and you’re hearing from your friends that it’s a great investment and ads on TV are telling you to get in now.
What you need to work out is:
- Whether or not it’s a good investment in your circumstances,
- How long it will take to pay for itself before you start seeing a benefit financially,
- How the returns on the initial investment compare to putting your money into shares or even just putting it into the bank at 4%.
- If you’re paying for the system on finance, you want to be sure that the return on investment is quite a bit more than what you’re paying in interest or else what’s the point?
Let’s look at some different scenarios and we’ll show you how to work out the returns for yourself.
- You decide on a 1.5kW system (8 panels) and it costs you $2,500 out of pocket fully installed.
- You live in Melbourne where a 1.5kW system produces on average 5.4kWh per day. This assumes a north facing roof with no shade issues. (Go here to figure out what you can expect your system to produce per day)
- The price you currently pay for electricity is 27c/kWh
- You use all of the power your system produces and you therefore don’t export anything. Export percentage = 0%
- Yearly benefit = 5.4 units (kWh) x 365 days x $0.27 x 0% export = $532
- Payback period = $2,500/$532 = 4.6 years
- Investment return = 21% per annum
- You decide on a 3kW system (16 panels) and it costs you $5,000 out of pocket fully installed.
- You live in Melbourne and the system produces on average 10.8kWh per day. This assumes the system is facing north with no shading.
- The price you currently pay for electricity – 27c/kWh
- You use 50% of the power your system produces during the day and export the rest at 8c/kWh.
- Yearly benefit = (10.8 units (kWh) x 365 days x $0.08 x 50% export percentage) + (10.8 units (kWh) x 365 days x $0.27 x 50% usage percentage)= $690 benefit per year
- Payback period = $5,000/$690= 7.24 years
- Investment return = $690/$5,000 x 100 = 13.8% per annum
Your incentive here is to move as much of your consumption out of the middle of the day as possible so that you export as much as possible at the higher Feed in Tariff rate of 27c plus whatever your retailer pays you (up to 8c).
Because the rate that you recive for what you export is less that what you pay for your power, you’re better of if you push your power usage into the middle of the day where possible. If for example, you used 80% and used 20%, the numbers are quite a bit better.
- Yearly benefit = (10.8 units (kWh) x 365 days x $0.08 x 20% export percentage) + (10.8 units (kWh) x 365 days x $0.27 x 80% usage percentage)= $914.54 benefit per year
- Payback period = $5,000/$914.54= 5.46 years
- Investment return = $914.54/$5,000 x 100 = 18.2% per annum
- You decide on a 3kW system (16 panels) and it costs you $4,500 out of pocket fully installed.
- You live in Sydney and the system produces on average 11.7kWh per day.
- Price you currently pay for electricity – 29c/kWh
- You use 80% of the power your system produces during the day and export the rest at a 8c/kWh.
- Yearly benefit = (11.7 units (kWh) x 365 days x $0.29 x 80%) + (11.7 units (kWh) x 365 days x $0.08 x 20%)= $1,059.08 benefit per year
- Payback period = $4,500/$1,059.08 = 4.24 years
- Investment return = $1,059.08/$4,500 x 100 = 23% per annum
In Sydney and other cities where the Feed in Tariff is less than the amount you pay for your electricity, you should try as hard as possible to shift your electricity usage into the middle of the day.
In order to complete calculations, you need to gather some data first:
- Export percentage – The percentage of your total solar production that you sell back to the grid. You can do this by looking at your bill and figuring out how much energy you use during the hours of say 9am-3pm (peak solar production hours) and then dividing this by the system’s average daily production. E.g. you use 10 units a day but everyone is out at work or at school during the day, therefore you might use 3 units a day between 9 and 3. The system you’ve chosen produces 15 units per day so you should expect to export 12 units per day on average. 12/15 = 0.8 or 80%. This can only ever be an estimate so be conservative and experiment with different values.
- Current electricity price – Find out what you pay currently for electricity from your latest bill. E.g $0.27/kWh. You should also bear in mind that this rate is expected to increase substantially over the next 10 years.
- Feed in Tariff – Determine the rate you’ll be paid per kWh for what you export plus what your retailer pays you on top of this. e.g. 30c/kWh. Find out here
|Data Source: PV-GC spreadsheet based on the CEC GC Design Guideline
The Rated output is that achieved in perfect laboratory conditions. The CEC design summary software takes these deratings into