In our industry, the rationale for installing solar PV on your property is based either on the economic return or environmental reasoning – sometimes it is both.
In our office, a lot of time is spent calculating the return on investment for any solar system size in relation to the clients self-consumption of the generated solar energy.
We were looking at grid-connected battery storage options the other day and doing our number crunching on ROI. The numbers are getting better, but payback is near the expected lifespan of the battery. Say year nine on a product warranted to last ten years. That’s ok, but not great.
It dawned on us that with the cost of solar panels being so low, one could achieve a quicker payback on a much larger solar system based on a low feed-in tariff of say 10c per kWh.
How? Economies of scale are very much in play when you install a solar PV system. The larger the system, the lower the installed cost per kWh.
The current Federal solar incentive to install solar PV rewards you with STC’s (Energy Certificates). The larger the solar system installed, the more STC’s that will be generated. More STC’s = a larger rebate. Factoring in the economies of scale in regards to the installed solar price and the Federal Solar Incentive, solar systems have never been more affordable.
If you were to install a 10KW solar system and the cost to you was lets say $12k out of pocket, you could well achieve a quicker payback than if you were to buy a battery. If you generated a 10c feed in tariff for all the exported energy, then you would reap a return of around $1570 PA. This would offer an ROI of 7.6 years. However, you will self-consume some of that solar energy which will reward you with an offset saving of around 26c per kWh. Total savings potential could be $2k PA, and that will give you a six year ROI!
Ok, so why the need to act now?
1. The STC rebate could end. The Federal Government has the Renewable Energy Target (RET) in its crosshairs. They tried, under Tony Abbott, to abolish it and although it was saved by the Senate, they managed to change the rules in regards to large scale solar installations. The SRES (small-scale renewable energy scheme) was spared. It’s only a matter of time before the SRES is targeted by the Federal Government. The STC’s that you get awarded for installing a solar PV system are tied to the SRES.
2. The STC price is still very high at around $37 per STC (with a $40 ceiling). The higher the STC, the greater your rebate. The more STC’s you get (more panels), the higher the overall Federal Solar Incentive value. There is a consensus amongst those who trade STC’s that a price crash is on the cards.
3. Do you live in an area covered by the Essential Energy Network? If you do, then you are lucky, Essential Energy will only impose a solar system size limit if the voltage rise (solar energy fed back to the grid) might damage their infrastructure. If you can get away with it, put the largest system size you can on your roof. It is only a matter of time before Essential Energy follows other network operators and places a blanket solar system size limit on each dwelling.
4. Do you like renewable energy? Each kW of clean energy that you put back to the grid will offset the production of a kW of coal-fired generator energy. You are doing your bit for the environment by exporting clean energy back to the grid.
Summary: Get as many solar panels as you can now as it won’t be long before the opportunity to do so may come at a much greater cost, or you may simply not be allowed to do so.
By Mark McClurg, owner of Coffs Solar Energy