Going solar is not for everyone

In the early days of this blog I wrote about whether going solar is always the best option and I have just revisited that question in real life after a Melbourne friend asked me for advice. Things have changed since I wrote that post – two and a half years is a long time in renewable energy development – so I thought that presenting her query as a case study might be worthwhile. Here it is; I have changed her name and lightly edited our emails for clarity, but that’s all.

solar pv advertisement

Paula lives alone in a unit in Northcote. She works as a nurse but is looking forward to retiring in the next five years and, sensibly, wants to set herself up for retirement by reducing her future expenses, which is where the thought of solar power came in.

She saw ads like the one at left and spoke to a salesman who recommended a 2.5 kW system on the roof of her garage, the biggest that would fit there, for a net cost to her of nearly $4000. He promoted it on the basis of how much it would reduce her power bills but she had second thoughts, writing …

I have gas ducted heating for winter and the air-conditioner is the cheaper-to-run evaporative type. My hot water service is gas. I rarely use the dishwasher, and the fridge and freezer are usually full so not a lot of power is used there. It is true I use my clothes dryer twice a week but apart from that it’s hard to see where the power goes.

I use lamps at night except in the kitchen and don’t have lights on all over the house, and I am in the process of replacing all the down lights with LEDs – which leads me to wonder how much can be saved.

Apart from the obvious long term considerations I’m starting to wonder how much of a good idea this is.

I asked her to send me a copy of her power bill and the solar power proposal, and took it from there:

Hi, Paula,

Thanks for sending the documents. They confirm what I was already beginning to think and, from your “I’m starting to wonder”, you were too: that going solar may not be the best thing for you.

(1) Looking at the pie chart showing average Victorian enargy use patterns on http://www.sustainability.vic.gov.au/services-and-advice/households/energy-efficiency we find 16% goes on water heating (but you’re using gas) and 32% on heating (but again, you’re using gas). That means only half of your total energy bill goes to electricity, and agrees with the fact that your current electricity consumption is pretty low – around 60% of a typical one-person household’s use. It also means, of course, that reducing it can’t save you anywhere near as much as it would if you were all-electric.

(2) The feed-in tariff you can get from a new solar PV system is only 8 c/kWh. Any PV power you generate but don’t use during the day only makes you 8 c/kWh (that’s what they pay you for it). Any power you generate and do use makes (saves) you 27 c/kWh (it’s free but that’s what you would have paid for it).

While you are working, the only electricity you use during sunlight hours most days of the week is keeping your fridge ticking over. That is far less than the 2.5 kW the PV system will put out, so 90% of your PV system output is only going to be worth 8c/kWh to you. And what’s the output going to be? Maybe 7.0 – 7.5 kWh per day, or 2700 kWh per year; at 8c, that’s only about $200 … not a great return on your investment.

(3) When you retire, you will probably run the air-con a fair bit during summer so more of the PV output will be worth 27 c/kWh to you (probably more than that, actually, since power prices are only going one way – up!). But your air-con probably doesn’t use 2.5 kW anyway, so a smaller system (1.5 or 2.0 kW) will be a lot cheaper and give you almost as much benefit.

(4) There is no particular advantage in installing solar PV now rather than in two or five years’ time. A few years ago, feed-in tariffs were set high to encourage people to install systems but those days are gone. Meanwhile, component costs are still dropping and the technology is still improving, so you will probably get more bang for your buck in a few years’ time.

As you know, I am pro solar and anti fossil fuels but I think in your present situation a solar PV system, especially one as big as the one you’re looking at, is not worthwhile. That could change when you retire, but there’s no reason to install a system ahead of that time and a few reasons to leave it until that time.

And if you do decide you still want to go ahead now, please (1) go for a smaller system, probably 1.5 KW, and (2) shop around, since $4000 for a 2.5 KW system seems a little bit on the high side.

Meanwhile, your best money-saving tactics centre on minimising waste – not over-heating your house or your hot-water, not over-cooling your house in summer, turning off appliances which are perpetually on stand-by, improving insulation, etc. http://www.sustainability.vic.gov.au/services-and-advice/households looks like your best resource, but you probably know most of it anyway.

That was enough to confirm Paula’s doubts and she decided not to proceed with the installation but I kept on thinking about the issues.

One thought: by the time she retires, the technology may have changed enough that she might go solar in a different way. For instance, she may be able to buy a plug-in electric vehicle as well as a solar PV system and use the batteries of her car as storage for household power. This kind of integration has been trialled for at least five years and must be ready to go mainstream soon.

Another thought: the 8c feed-in tariff seems way too low to be fair, and if and when that gets sorted out the long-term level for feed-in tariffs may be half to two-thirds of the retail domestic tariff, i.e. 16c on current rates. The library which lives behind my computer screen (I love the internet!) backs me up on that: RenewEconomy says:

Are Australian solar households getting ripped off?

Households in Australia adding solar PV arrays to their rooftops have an important question to ask themselves: Are they getting a fair deal from their local utility for the solar power that they export back to the grid?

Why is it, they might wonder, that households in regional Queensland which pay 26c/kWh (even after state-sponsored subsidies) for their electricity from the grid will get just 6.321c/kWh for their solar exports? In some areas, such as south-east Queensland or NSW, there is no obligation to pay households at all.

Yet in Minnesota, a state in the US (think of the film Fargo), households which pay a retail electricity rate of just 12c/kWh are being offered 10.9c/kWh for the solar that they export back to the grid.

In turn, that page references another RenewEconomy article called, Could a 500-house community go off-grid? which says, “Last year, a CSIRO study suggested one-third of consumers could go off-grid by 2050, based on the prospect that it would be economic for [individual] households and businesses to do so from around 2030 onwards,” and says that it’s economic right now for new housing estates to set up their own off-grid power supply.

Those pressures are going to radically transform the economics of electricity supply in much the same way that the internet has transformed (“trashed” may be a more accurate word) both print media and the post office. Utilities will find distribution costs per customer rising inexorably as customers go off-grid, and the resulting increases in supply charges will drive ever more customers off-grid – unless, perhaps, companies entice them to stay by offering very generous feed-in tariffs

There are going to be big changes and they are going to come more quickly than anyone would have predicted a few years ago.

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