Solar power is one of the fastest-growing electricity sources in the world, and also one of the cheapest. There are now solar farms with lower generation costs than coal power stations, and the installed price of a home solar system is significantly lower than the electricity costs it saves. In most cases, you can expect to spend less than $7,000 on a 6.6-kW solar system after subtracting the nationwide STC incentive, even with high-quality components. However, your accumulated savings will likely surpass $14,000 in less than 10 years, which is double your investment!
Solar panels are only productive during the day, with most production taking place around noon when there is maximum sunshine. However, homes consume electricity throughout the day and night, and as a result, solar panels often produce more power than is required throughout the daylight hours.
- Many governments use a simple solution for this: your electricity provider purchases your surplus energy, and the payment is deducted from your power bill.
- The rate you are paid for each kilowatt-hour sent to the grid is the feed-in tariff or FIT.
Before solar panels became popular in Australia, homeowners were offered very high FITs as an incentive to try the new technology. However, electricity providers now only pay a fraction of what they charge. For example, you may be charged over 30 cents/kWh when using electricity from the grid, while getting an FIT below 10 cents/kWh.
Feed-in tariffs are useful for making money with surplus electricity from solar panels. However, the economic benefit is higher when you consume a larger percentage of that energy. In other words, a kilowatt-hour saved is worth more than a kilowatt-hour sold.
What Percentage of Solar Generation Is Used at Home?
Homes with solar panels rarely consume all the electricity generated, since that would mean using all electrical devices at noon. The exact usage of solar energy will depend on your consumption habits, but many households fall between 30% and 50%, while the rest is exported to the grid. To demonstrate how this affects savings, we will assume that two homes have solar systems of the same size with equal productivity, but different usage habits:
- Home #1 uses 30% of the solar power generated while exporting 70% to the grid.
- Home #2 uses 50% of solar generation, exporting the other half.
The two systems in this example have a capacity of 6.6 kW, and they produce 10,000 kWh per year. Both homes are charged 28 cents/kWh for electricity consumed and are paid an FIT of 8.5 cents/kWh. The following table summarizes the savings and electricity sales in each case:
|Scenario||Savings ($)||kWh Sales ($)||Total ($)|
|Home #1 (30% solar consumption)||$840 per year||$595 per year||$1,435 per year|
|Home #2 (50% solar consumption)||$1,400 per year||$425 per year||$1,825 per year|
Savings don’t appear directly in your electricity bills, since they represent energy that never crosses the power meter – it goes directly from the solar panels to the inverter, and from the inverter to your home devices. After going solar, you will simply notice that the quarterly power bill decreases.
On the other hand, solar energy that is sold to the grid gets measured by the power meter, and the amount can be seen in the electricity bill. The kilowatt-hours sold are multiplied by the feed-in tariff, and that amount is subtracted from your quarterly payment.
If both homeowners have a quarterly bill of $600 before going solar, they would notice the following changes after the installation:
- The quarterly bill for Home #1 will decrease to around $390, and estimated kWh sales of $149 will be subtracted. The payment is reduced from $600 to approximately $241.
- The quarterly bill for Home #2 will decrease to around $250, and estimated kWh sales of $106 will be subtracted. The payment is reduced from $600 to approximately $144.
In both cases, the return on investment improves when surplus solar energy is sold to your electricity provider. However, your power bills become even lower when you consume a large percentage of solar power.
How To Choose the Best Feed-in Tariff Provider?
You may be tempted to choose the electricity plan with the highest feed-in tariff available, but the answer is not so simple. Some providers will try to lure you with an attractive FIT, while charging a high tariff when you consume electricity from the grid. Unless you have solar batteries, you will likely depend on the grid on cloudy days and at night.
The best approach is estimating your quarterly bill after going solar as we did in the example above. A qualified solar company like Arkana Energy can analyse your previous bills, so you get a better idea of your consumption habits. Based on your actual consumption and the expected solar generation, you can pick the electricity plan that minimises your quarterly bills.
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