Summary: We rent and so can’t install solar panels. If we didn’t rent, I’d likely get solar panels and a quality inverter installed as long as it didn’t cost much more money in the long run. This is because having some level of energy independence has benefits other than just financial ones – mainly that it just feels liberating to have some degree of freedom over energy supply and costs. On hot summer days I would get free use of an air conditioner during daytime. And at peak generation times perhaps there are things I could usefully do with the surplus energy. However, for others considering solar panels primarily for financial reasons there are some key things to know about the current and future situation.
Details:
Fixed energy supply costs will keep rising as a proportion of bills
Fixed energy prices (electricity and gas daily supply charges) will keep increasing as our energy supply is so poorly run and regulated with perverse incentives, falling demand and less consumers sharing the burden of usage charges due to more opting for solar panels. So simply staying grid-connected means the benefits of usage cost savings are reduced by a much higher proportion of energy supplier bills being fixed costs.
See: Reneweconomy: Tariff woes for solar households – it’s all about network charges
Feed-In Tariffs (FITs) are now low and will stay low so you’d need to ensure you don’t overinvest in panels
The generous incentives for solar installation are gone forever regardless of which stripe of governments are in power – federally or at state levels. These generous incentives were never sustainable once solar penetration started scaling up as they simply transferred more of the fixed network cost burden to those stuck with no solar (e.g. the 30% of households who rent, those who can’t afford the upfront cost, the less financially savvy). The low FIT rates (around 8 cents/kWh) mean you can only lose money by buying much more solar panel capacity than you need.
Low energy consumers have the least to gain from switching to solar
Unless going off-grid, low energy consumers have the least to gain from switching to solar due to the increasing fixed costs of being grid connected and the low FITs. Our household used 1582 kWh in 2014 and paid $588, with only $309 being due to usage costs. Once we’re off our 3 year contract in July, our fixed costs will increase (from 81.1 cents/kWh to 108.7 cents/kWh) and usage rate actually drop (from 19.55 cents/kWh to 17.9 cents/KWh). Simple mental arithmetic will tell you that it would take quite a few years to earn back the long term capital and maintenance cost of solar panels and inverters if staying grid connected.
Payback rates for switching to solar panels are now around 6-8 years
Payback rates for most residential households under current and future circumstances will be around 6-8 years in typical scenarios. Choice Magazine provides a really useful summary below which also illustrates that buying more panels than you need will take longer to break even. See: Choice Magazine: Solar panel payback times
You have far more to gain if you already do use a significant proportion of electricity during peak solar generation (or can switch to doing so)
With such low FITs, solar panel users who are at home during the day or can switch major energy use to peak solar generation hours have by far the most to gain. Conversely, those who use little electricity during peak solar hours will be financially worse off as they will be selling most of their solar power at around 8 cents/kWh and buying most of their usage at 23-35 cents/kWh.
Smart meters combined with flexible pricing or Time Of Use (TOU) tariffs are critical to consider regarding what rate you’ll pay for electricity
Smart meters make charging different rates at different times possible and most homes in Victoria now have them. For those with smart meters, there are Time of Use (TOU) tariffs and new “flexible pricing” tariffs as explained here: Switch On: Flexible pricing
Peak rates are usually significantly higher than “Anytime” flat rates with Shoulder rates being lower and Off peak being much lower. Obviously if using solar panels your ability to maximise usage of Off peak and Shoulder rates for when you do need to use grid power is critical. There’s little point switching to solar and ending up with higher total bills because your minor savings on total grid usage are offset by paying a much higher price at the times the sun isn’t shining (e.g. typical peak demand is 3pm-9pm weekdays). The complicating factor is that if you have a smart meter and solar panels you may only be offered Time Of Use or Flexible Pricing tariffs by many energy retailers.
If you won’t be getting rid of gas the financial benefits of solar panels are much less
Unfortunately, gas fixed costs will continue to increase as a proportion of total gas bills. Some households use the switch to solar to eliminate gas but any additional costs (induction cooktops, solar water heating, electric space heating/cooling) need to be factored into the total costs. If you won’t be eliminating gas then there is less potential to leverage your new solar-generated energy supply.
Household battery storage for solar power can enable going off-grid but isn’t currently economic for most
Quality batteries with decent lifespans to store solar power for use when the sun isn’t shining are still too expensive to be justified by most homes that are already grid connected. However, they are popular with those in rural areas who have to choose whether to pay a lot of money to connect to the grid or not. If you stand to benefit a lot by going off-grid it is worth monitoring future battery improvements and costs.
Solar hot water can be worthwhile even if solar panels are not
Even if using solar panels for electricity supply isn’t justified, switching your water heating to solar (which is quite different) can still be beneficial in financial terms. This decision will mainly depend on your climate, how you heat your water if you have solar panels, relative equipment costs, and the price of electricity.
See: Solar hot water systems buying guide
There are many considerations to factor in – positioning, quality inverters, additional fees, applicable FITs, tariff choices, etc
The more important the financial outcome, the more important it is to read quality solar panel buying guides carefully. I would recommend starting with these:
Choice Magazine
> Solar panels buying guide> Solar panel payback times> Saving Energy category
Further Info:
Alternative Technology Association> Make the switch from gas to efficient electric> Rooftop solar power booklet
Eco Online
Solar Panels Power System Payback Calculator
Whirlpool Forums
> Green Tech sub-forum
Voluntary Simplicity Melbourne
> How to choose the cheapest electricity provider and plan
Deep Green Resistance
> Green Technology & Renewable Energy
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