Investment Benefits

A SIMPLE COMPARISON

Solar electricity generation can be viewed as an investment. The best way to explain this is to compare the electricity expense of a household using electricity drawn only from the main electricity grid and then look at the same household after the installation of a solar PV system. We can then take this one step further and add a battery storage component to the solar PV system. A comparison of the results from the three scenarios will show us the financial benefit from the installation of a solar PV system and the additional impact of also adding the batteries. Finally, we will take a look at the time taken to pay off the solar system with the savings from the reduced electricity expense after the solar PV system installation.

It is important to note that everyone has a different situation when it comes to electricity consumption habits, so if you are serious about solar, you should get a personalised quote from Commercial Utility Solutions to ensure your system is customised to maximise your savings and returns based on your actual consumption habits

Household Electricity Consumption

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GRID DRAWN ELECTRICITY

The Household Electricity Consumption graph shows a household using about 38 kWh of electricity during the course of a 24-hour day.

An average household’s electricity consumption due to general lifestyle habits, tends to have a peak earlier in the morning, then settles during the day and peaks again in the evening before flattening out throughout the middle of the night.

SOLAR ELECTRICITY GENERATION

So now that we have seen graphically what a typical consumption pattern looks like, let us get an idea of what a typical day’s solar electricity generation looks like. The 4 kW Solar System Electricity Generation graph shows the typical production of 4 kW solar installation.

The total electricity generated in this example is about 19 kWh. As you will notice, the maximum electricity is generated in the middle of the day when the sun is nearest to directly above the solar PV installation. The generation tapers off either side of this in a typical bell-curve fashion.

Production from a same sized system will vary depending on the geographical location of the installation, the quality of the components used and also other environmental factors. Typically, a common calculation used to estimate solar PV system electricity generation is a very general average of 4.6 hours × system size in kW; this gives average kWh of production over one full day. This average includes a buffer for reduced production in the early and later hours of the day and other common variables that may impact the system.

4 kW Solar System Electricity Generation

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COMBINATION OF GRID DRAWN AND SOLAR GENERATED ELECTRICITY

Now we will subtract the 4 kW Solar System Electricity Generation graph data from the Household Electricity Consumption graph data which will allow us to see the reduced requirement to buy electricity from the grid as a result of the solar PV system being installed.

You will notice a negative area, this is when your solar PV system is actually feeding unused, excess produced electricity back out to the grid. Most electricity companies will pay you for this unused electricity. The rates are relatively low (compared to what you pay for consumption) for feeding electricity back to the grid, so it is most sensible to match a system to your consumption than to get an over-sized system for the purpose of selling electricity back to the power company.

The household in the example has reduced their requirement for electricity drawn from the grid by 14.4 kWh per day. Previously they were using 37.9 kWh from the grid, after the installation of the solar PV system they only require 23.5 kWh, plus, they have sold 4.5 kWh back to their electricity company.

Grid Consumption Offset by 4 kW Solar

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WHAT ABOUT BATTERIES? … YOU ASK

Most solar PV installations will end up sending some electricity back out to the electricity grid, unless the installation is particularly small for the household. The problem is, you don’t get much return for that from the electricity company. So one might think, if only I could store that electricity for later when the sun goes down and offset my electricity use at night, rather than receiving a measly 8 cents per kWh from the electricity company for it. Well the good news is you can! Batteries are getting cheaper and have finally reached a point where the option might stack up for you.

Let us now consider the same household from earlier, but this time we are going to increase the system size to 5 kW so more excess power is generated and add an 8 kWh battery storage component to store that excess power. This will reduce the grid electricity requirement further, although the trade-off is, the total cost of the system will obviously be higher.

The graph shows an even further reduced requirement for electricity from the grid. As you can see, around the middle of the day when the solar PV system is pumping out the most electricity, the battery begins consuming the unused quantity and charging. Then in the evening when the solar PV unit is no longer producing electricity because the sun has gone down, rather than pulling electricity from the grid, your solar inverter uses the stored charge in your battery as your household’s source of electricity. Once the battery’s charge is fully depleted, your inverter knows to start drawing electricity from the grid again to ensure power continuity for your household.

The new required amount of electricity for the household in this example has now fallen by 23.6 kWh from 37.9 to 14.3. That is a 62% reduction in usage from the electricity grid.

We will now take a look at the comparison of the 3 scenarios in a table to bring it all in together.

Grid Consumption Offset by Hybrid 5 kW Solar with 8 kWh Battery Storage

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Grid Consumption Offset by Hybrid 5 kW Solar with 8 kWh Battery StorageLS

VIEWING THE COMPARISON

For the production of this table we will assume the following:

Grid electricity purchase rate: 29 cents / kWh

Feed in tariff rate: 8 cents / kWh

Cost of installed 4 kW solar PV system: $8,000

Cost of installed 5 kW solar PV system with 8 kWh battery storage: $18,000

Some electricity companies charge a higher rate once you exceed certain quarterly thresholds. Having a solar power system installed can help keep you in the lower thresholds further increasing your savings.

Another consideration is that we can fairly assume the cost of electricity is going to continue to rise, especially if history is anything to go by; the less you need from the grid over time, will have an even greater benefit than just using the current rates seen in the example.

Description	Grid only	4 kW solar PV system	Hybrid 5 kW solar with 8 kWh battery storage
Electricity required from the grid per day	37.90 kWh	23.52 kWh	14.34 kWh
Multiplied by days in a quarter (90)	3,411 kWh	2,117 kWh	1,290 kWh
Quarterly electricity cost @ 29 c/kWh	$989	$614	$374
Electricity fed back to grid per day	0 kWh	4.47 kWh	0 kWh
Multiplied by days in a quarter (90)	0 kWh	402 kWh	0 kWh
Quarterly feed-in credit @ 8 c/kWh	$0	$32	$0
TOTAL QUARTERLY ELECTRICITY BILL (usage only)	$989	$582	$374
Savings per quarter	$0	$408	$615
Savings per year	$0	$1,630	$2,460
Cost of installed solar PV system	na	$8,000	$18,000
Years to pay off system with savings	na	4.9	7.3

PAY-OFF OVER TIME

Assuming electricity goes up 5% every year and taking into consideration the initial investment of $8,000, the savings over 20 years from the example household without the batteries would look something like the Pay-off graph detailed here.

It is estimated that after about 4.9 years, this household would reach their break-even point for this example. From then on, the initial investment is covered and the net positive savings begin. Over time you would expect those savings to get even greater as electricity rates increase. The shallow curve on the graph shows this basis electricity rates increasing by an average of 5% per year compounded.

Also, remember that once you have paid for your system, it becomes an asset you now own – if you decide to sell your house the value of the solar system should be included in your valuation effectively increasing the overall dollar value of your property, so the purchase cost of your system is not dead money.

Something that also needs to be considered is that solar panels will rarely run at full efficiency. This has been taken into consideration in the example above as a 20% reduction in maximum efficiency, this is why the 4 kW solar electricity generation chart peaks at 3.2 kW.

Pay-off over 20 years

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INSTALLATION DIAGRAM

The following diagram details the arrangement of the major components of a grid connected solar PV installation with a simple description of what each component does.

Hover above the pulsing numbers for the info box display.

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OTHER CONSIDERATIONS

Some of the things that can affect solar panel efficiency are:

Location, northern Australian states will achieve better results than the southern states due to generally longer sunnier days and fewer overcast days.
Solar panel pitch and orientation can affect efficiency; our solar installers will ensure you select the best facing roof option for maximum potential.
High temperature can reduce the solar panels power production, too much heat can reduce the output by more than 10% in some cases. Technological advances are gradually making this less of an issue.
Shade can be the enemy of solar power. A shadow cast on even just part of one solar panel in your solar array can potentially compromise the output of the whole system. A more recent trending technology called micro-inverters allows each panel to run independently and can isolate each panel reducing this affect. These are more expensive but may be a sensible decision in some circumstances, Commercial Utility Solutions will be able to determine the best option for your circumstances.
Front surface soiling, solar cells cannot absorb light as effectively when the surface of the solar panels are covered with dirt or bird droppings, which doesn’t get washed off by the rain. Making frequent physical inspections and spraying water on your modules can help reduce the problem.

The amount of electricity that households use depends on a range of factors, including:

The size of the residence
The number of people living there
The type and number of appliances
When and how appliances are used
Whether energy-hungry extras like pools, spas and air conditioners are on site.

Some good statistical information can be viewed on many government websites – for example: http://www.yourhome.gov.au/energy