How to unlock a great solar payback (even with crappy rebates).

solar panels and a key

The key to good solar payback is system sizing.

Occasionally I venture out of my straw-bale, solar passive eco-cave and meet real people, in person instead of over the interwebs. When they inevitably ask me the standard icebreaker “what do you do?” and hear that I’m in “solar power”, the usual response is: “Oh – that must be a tough industry, now that the rebates / buy back rates have all ended?”.

The reality seems to be that most people who don’t work in the solar industry seem to use the words “rebate” and “feed in tariff” interchangeably. And who can blame them? Both are essentially government cash handouts.

Of course the truth is that the Solar Rebate“, is actually still available through the Federal government. The government frowns upon anyone who calls it a rebate, preferring the term “Financial Incentive”. But all that really matters is that you can get about $700 off the upfront cost of every kW of solar you buy. For a typical 3kW, that’s a $2100 subsidy.

The subsidy that really has ended (for everyone except Northern Territorians) is the “Feed In Tariff“. This is the rate that you get paid for any solar energy you put back into the grid. i.e. all the solar energy that is not consumed by your home’s lights and appliances.

(If you are lucky enough to live in the NT you get paid 27.8c for every kWh you generate.  To cut a long story short, that means a grid connected solar system can currently pay back in around 5 years. That’s a return of 20%.)

But I’m guessing most of you don’t live in the NT! If so, then you will only get about 8c per kWh for every unit exported back to the grid.

And to rub salt into the wound, that electricity that you are exporting is being instantaneously sold to a neighbour for approximately 30c per kWh by your local electricity retailer!  But, hey, this post is not going to be a futile whinge about that little rort. Rather, I’m going deal with the real world, as it is right now,  and show how, despite the shockingly crappy buy back rate for most Australians, it is possible for many households outside the NT to still get 20% returns on a solar system.

The secret is in the sizing

There is a mob doing the rounds on TV at the moment who promise to get you 3 quotes for solar (hmmm… wonder where they got that idea from?).  If you call their number you get put through to an overseas call centre operator who will ask you what your last electricity bill was. Based on this, and only this answer, the call centre operator will “recommend” what solar system size you should buy. The higher your bill, the bigger a solar system they will recommend you buy. Oh and get this: the bigger the solar system, they recommend, the more they get paid by the companies they are referring you to!

caution-tape

This is just wrong, wrong, wrong on so many levels. I think it also is against the draft CEC code of ethics if I recall the draft I read correctly. The problem is that, with the current low Feed In Tariff levels, you cannot size a solar system for optimum payback based on only a customer’s power bill.

This is because the payback of a solar system will vary dramatically depending on how much solar energy you export at the 8c feed in rate compared to how much is saving 30c per kWh being used by the appliances inside your home. There is no way an overseas call centre operator (or anyone else for that matter) can accurately determine this by simply knowing the size of your last power bill.

In fact, the only way you can accurately determine how much someone will export is to do an energy audit of

  • the appliances in the home
  • the electric heating and cooling loads in winter and summer, and
  • who is at home during the day.

This will give an estimate of the electricity usage patterns throughout the day, which can be compared to the solar generation profile of various sized systems. Then a system size can be chosen to minimise exports. That is the only way to ensure the customer is being quoted for a system with the best payback.

Getting system sizing wrong can push payback out to over 20 years!

The Alternative Technology Association recently published their latest solar payback figures, based on the latest feed in rates. They found that exporting 10% of your solar electricity could result in a system payback of as short as 4 years. But… if your system is oversized and you export 90% of the electricity generated, your payback can push back to 20 years plus! That is a big difference. And a good reason not to trust a your solar system sizing recommendation to someone who only asks you for your latest power bill.

Here’s a graph showing how the payback blows out as your exports increase for a typical 2kW system in Sydney:

payback graph

Keep exports under 50% to maximise payback!

As you can see – if you can keep those exports to under 50% you are getting a 5-8 year payback, which is a 12-20% return.

(And if  you want to do your own payback calculations based on different export percentages and locations, then my solar calculator will crunch all the numbers for you.)

Here’s how a good solar installer will size your solar system to keep exports under 50%:

1) They will work out who is in the house during the day, and what appliances are typically used.

2) They will construct an estimated load profile (i.e. a graph showing approximately how much electricity you use throughout the day in winter and summer, at weekends and weekdays).

3) They will use this to estimate how much electricity you export over a typical year.

4) They will use this estimate to determine payback figures for a range of system sizes. Generally they’ll counsel you against getting a system that exports more than 50% of your electricity.

5) They will present this to you in writing so you can decide what system size you want to buy (if any).

Find an installer who follows these steps, and you are much more likely to be a happy bunny when you get your first “post solar installation” electricity bill!

(And if you want to get 3 quotes to compare from 3 great, local installers who know how to do this, simply fill in this form. I’ve spent 5 years finding the best installers across Australia so you don’t have to.)

So, solar can still be a good buy for many people, and get great returns but make sure that you are not exporting more than 50% of your energy, and above all make sure you get quotes from ethical installers who will take the time to understand your electricity usage patterns. Just looking at a power bill is not good enough – so don’t stand for it!

About Finn Peacock

I'm a Chartered Electrical Engineer, Solar and Energy Efficiency nut, dad, and founder of SolarQuotes.com.au. My last "real job" was working for the CSIRO in their renewable energy division.

Comments

  1. IT is all good and well until the government decided to introduce a Sun tax like they already have in spain setting precedence for the rest of the world

    • WA tried to bring in a tax on solar years ago. got ousted under severe pressure from people. Would probably get it through now, so it’s coming.

      • Big power companies are fighting to see every solar home hit with a charge just to connect to the grid. Tell our State Premiers and Energy Ministers that you won’t stand for a tax on the sun by signing our petition here
        http://www.solarcitizens.org.au/suntax

      • Did you see this headline in the Australian? They’re at it again – trying to tax solar.

        Big power companies are fighting to see every solar home hit with a charge just to connect to the grid. Tell our State Premiers and Energy Ministers that you won’t stand for a tax on the sun by signing our petition here: http://www.solarcitizens.org.au/suntax

        • What on earth makes you think State Premiers and Energy Ministers give a shit about what you’ll “stand for” ~ PARTICULARLY in terms of taxes??
          As he old story goes:- We’ve already established what you are; now we’re just haggling over price!

          When citizens start contributing umpteen millions of dollars to political parties (and/or individual politicians!), like the various industries do, the assorted governments might start listening.

          Until then, forget user-friendly politicians.

          Make plans to convert your grid-connect panels to a stand-alone system. If I still needed to work for a living (and had the electrical qualifications) I’d be setting up a ground-floor business (including importing components, etc.) providing just such a conversion service to people sick of being ripped off by the system.

  2. As stated elsewhere, relying on governments is nearly as stupid as electing them and paying tax to support them. This sort of crap was always on the cards, and I sized my system to be able to service the house year-round and to be able to disconnect from the grid simply and quickly, rejigging the wiring to turn it into a stand-alone system.

    Regulators, inverters, batteries etc. are all readily available and quite cheap.
    After threats and bullying from my electricity provider, I told them I was quite prepared to do so at a moment’s notice, and have not heard another word since.

  3. This cant be true really,I have had to install solar due to the cost of my energy due to having a spa, for heat therapy in my neck due a car accident. dabbles who do I contact about getting that done ? As I have just had 20 panels installed regards Diana

    • Hi Diana.
      I wouldn’t know who to recommend, but the technical stuff is much simpler than using a Smart Phone, believe me: a half-witted chimp could be taught to do the work.

      But that there ARE a few rules you need to be aware of (mainly to do with voltage limits ~ thanks to a greedy alternative energy industry): no big deal, and easily worked around, but you do need to know what you’re dealing with.

      And anyone doing anything should get themselves informed (basic stuff) about how to make such a system work for themselves as efficiently as possible: mainly to do with priorities and alternatives. Otherwise you can find yourself spending a lot of money unnecessarily; and usually on a diminishing-return basis. With 20 panels (about 4kw?) you may already have oversized ~ from an economical perspective.
      My suggestion is to talk, initially, to someone who knows the ins and outs of all this from experience and who doesn’t have an axe to grind/personal financial interest.

      I’ve had over thirty years of experience with the technology and the lifestyles that go hand in hand with it, including all the factors that need to be considered at the grass-roots level.
      You’re welcome to contact me ~> [email protected] if you want to have a yarn, as is anyone who wants to get away from the conventional high-tech-high-cost-highly-politically-charged environment.
      All the best
      Jason.

  4. Neil H. Reid says

    I have now enjoyed solar electricity for one year with excellent savings on my bills. However, I have noticed that my Tariff 31 Night Rate for hot water has gone up significantly. Recently, I have been turning off the Night Rate switch on my board, but continue to have hot water for at least four more days. I then turn on the Night rate switch overnight and turn it off again in the morning. Hot water for another four days.

    This must be having a very positive impact on my Night Rate costs. If it is the case with me, imagine how much money everyone could save if they did likewise. Why is this not more in the public mind?

  5. Good stuff: thinking outside the box should be a required part of any educational curriculum from Bubs up. There are ALWAYS better solutions than those self-interested parties try to peddle” up to and including governments.
    That said, you should know that heating water with electricity is about as idiotic ~ and inefficient ~ as it’s possible to get.

    Best DIY option:- chuck a coil of black poly-pipe ($100) up on your roof and connect it you your hot-water cylinder. (include a small solar-driven pump if you want to get flash) Then connect your hotwater cylinder to an ‘instantaneous’ gas hotwater unit. You can get these on line for about $300, and they’re so simple they’ll last forever. A (45kg) household bottle of lpg will set you back about $100 ( I bought two recently at that price) and will last about a year ~ a bit less if you have 3-hour showers @ 400degrees. (hint y’DON’T need hot water to do your laundry these days.)
    The adventurous can find other ways to make the units work ~ woodgas (I did that years ago), a broad wick burning diesel etc.
    They’re only glorified chip-heaters, after all….and don’t forget your water is preheated; y’may not even need to use the heater in the summer.
    Go for it: you’ve got nothing to lose except your dependence on the government/industrial complex.

    • Dabbles, liked your DIY option, but turning off the power for Tafiff 31 keeps the water hot for the next four days, then turn it on again. Nothing could be simpler than that and I can’t wait to get my next quarter’s hot water bill with this DIY option. Why is it not more in the public arena, although no doubt the electricity company doesn’t like it….. We must be spending a fortune on unnecessary water heating.

  6. Glenys Durrant says

    We have a 1.5kw solar system installed. Every time we turn on the air conditioner it trips the solar system. We have had the inverter changed 3 times now, with no difference, except the last one appears to be providing us with higher solar credits on our bill. Can anyone offer any advice on what could be causing the problem?

  7. We put 22 panels,250 watts each, on the roof 5.kw with 8kw Sunny inverter
    Since installation we have averaged 12.144 kWh a day over 292 days. We live in Sydney. Half the panels face north and half West owing to roof layout. Large 4 bed and large air con for whole house. Our latest bill $880.00

    • Quick question. Can you elaborate on why bigger systems have so much longer paybacks? Is it just that the initial investment is so much larger? Because my thought there is that wouldn’t the energy created also be increased?

      I think what you’re saying is that the major portion of return on investment comes from the fact that your fridge, freezer and air con in the summer are paid for by the solar (at a not-paid 30c/kWh) and electricity that you generate over and above those needs are only fed back into the system at 8c/kWh. Is that right? The return on a small system is based on the 30c/kWh while the bulk of the return on a big system is calculated at 8c/kWh.

      Probably I haven’t phrased my question right. Does it make sense?

      • Hi Brent,

        Yes – you are bang on.

        For most people – the bigger the system the more they will export. Exported energy earns most people about 8c per kWh. Solar energy used in the home saves about 30c per kWh.

        More details here:

        http://www.solarquotes.com.au/do-i-get-paid-for-my-solar-energy.html

        Hope That Helps,

        Finn

      • Yep. It appears juggling usage is the key, given the yo-yo-ing of FITs and other policy.
        I’m on the ‘Premium’ FIT ) 66c/kwh NET (Gross elsewhere), and do best by using the minimum power possible during the day.. and making up for it by using the grid during off-peak hours.

        I’ve even set up extra (non-grid) panels ( $1 per watt – ebay) to directly run the computer and a 170litre chest-freezer and/or some fans in the hot weather since I’m home most of the time.
        That set-up has been returning about $1600 pa ~ in cash ~ after the costs (‘service-charge’). night-time use (mostly off-peak at about 22c per kw), etc.

        At the FIT prices, jacked up costs and all the other bullshit currently in play, I’d be inclined to convert the system to a stand-alone’ one. Components are cheap these days, and the idea of paying to export power to the grid would be the best motivator I could think of!

        All the best.

  8. ps… my grid-connect system paid for itself in about 28 months.

  9. I think solar panels are still too inefficient to commit too.

    • What inefficiencies there may be are easily compensated for by the VERY cheap price of components.
      eg. Today’s cars are perhaps 5 times more fuel-efficient (?-calculating mpg) than when I was a kid. But then we drove 5-litre V8s, not little toy cars with lawnmower-sized engines that do as they please because a computer-chip says so. The kicker is that petrol prices much more than made up for the efficiency shortfalls.

      You can offset perceived inefficiencies in a solar-system by bunging an extra panel or six on the roof.

  10. To cut down on your night rate for hot water, install a solar heated hot water service with a instantaneous in line gas heater. Over summer in Gippsland this year I have turned the heater off and not run out of hot water. I have a 5kw solar system on the roof and apart from the six months of bull…! between my electricity company and the grid management company trying to get connected to the grid, it’s the best thing I have done.

    • ….or use a roll of poly-pipe and old hot-water cylinder to the same effect, and save the cost and possible complications of a commercial solar water-heater

  11. I have a 1.5Kw from AGL and in 3 years has not broken down like my neighbor’s he’s had 3 inverters. I was spot on going for a good lot of panels and paid a bit more.

    Last 2 years have broken even on electricity costs (so not paid for any electricity) and also pay 1 gas bill per year from the credits. 2 of us in 16 sq. house in Melbourne – we got in on maximum rebate of 66cents. Great for pensioners like us.

    Hoping they do not introduce a TAX on solar.

    Nor a TAX on our 2 x 1,000 litre tanks of water which they are bringing in USA !

  12. I have a few questions. But an important point is that your panels must be cleaned each year and inspected by a qualified person. When Ikea (who only pay about 2% tax in Aust each year) put PV’s on their stores they had a cleaning contract for the panels every few months. They have now developed a robot that cleans the panels monthly using collected rainwater and runs on panel energy. I have noticed a sharp increase in power generated on my Watson monitor since the clean.
    Next, I like the suggestion of polypipe on the roof for hot water, but no one mentioned how much and what type of pipe. I assume the blueline 25mm pipe to be the best to handle the pressure and fittings back to copper are available, but what length? 20 metres, 40 metres?

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  1. […] reduction in their power bills. And to pre-empt a gazillion comments – yes – this is achievable with a crappy Feed-In -Tariff too! […]

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