Solar energy (energy from the sun) can be used in a passive (see our Fact Sheet on thermal mass) or in an active way. Solar electricity (active) is often referred to as Photo Voltaic (PV) power as it is produced by PV cell collectors. The most common active uses of solar energy are for solar hot water heating and for solar electric power. Solar hot water heaters are usually roof mounted and can be flat-plate collectors with either an integrated hot water storage tank or a separate tank, or evacuated tube collectors with a separate tank. We asked local industry expert David Payne from SOLARGAIN to write an information sheet on solar hot water heating and solar electric power for us as we have dealt with him over many years, and value his industry knowledge immensely.
David Payne: Investing in Solar (the facts behind the myths)
Today more than ever investing in solar electric power & solar hot water is one of the best investments one can make. Dramatic reductions in the capital cost of solar systems have been seen over the past 5 years and coupled with the ever increasing cost of energy means anyone with access to capital should really consider solar has a part of their investment portfolio.
‘But with the removal of government high feed-in Tariffs, I’ll never see my money back’
This is a common opinion within the public when it comes to solar and has not been helped by the industry for many years telling you to “get in now while generous rebates are still in place”, sending a message that investing in solar is only worthwhile when such programs are in place. This was the case in the early years of solar but today, even without the large Feed in Tariffs (FITs), it is still a very strong investment.
A typical 3kw solar system using a quality inverter would set you back around $5000 here in the ACT region. This 3kw system will produce on average around 12.9kwh per day or 4700kwh per year (CEC figures for the ACT). Depending on how and when this energy is used will dictate how much of a return you will see on your system, but even if all the energy was sent to the ACTEWAGL grid at their current ‘Net Feed-in” rate of $0.075 the return would be $353 or 7% Tax Free.
No one should be sending all their solar power to the grid, because with some simple ‘Load shifting’ most people should be able to keep at least 30% of their production in the house, if not more. If this is the case here in the ACT the return on investment would be around $500 or 10% Tax Free. In NSW the figure would be even higher, $661 or 13.2%. Each time the cost of energy rises so too will your investment return because what you’re producing is worth more.
Replacing an old Electric Hot water system, which for most people represents more than 1/3 of their total energy consumption with a Solar Hot Water system like the very efficient Evacuated tubes collector system, gives even higher returns.( in most case in excess of 20% plus)
I like to give this analogy;
”if a Bank advertised it was offering 10% interest on your money Tax Free, who would not jump at that chance?David PayneSolargain
My friends don’t pay for electricity anymore since installing Solar. Will I be able to do that?
Unfortunately in most cases these days the answer will be, no. Both the ACT and NSW removed their generous ‘gross FITs some time ago and people who were on those FITs could have been able to design a system that could off-set all of the energy charges. Those days have gone I’m afraid.
Today we live in a ‘Net Metering’ world, where the solar power you produce is first sent into your home or business to be consumed internally by things like Air conditioning units, computers, dishwasher, stand-by power etc. The more solar power that the home can consume the higher return you will see.
Even if all the power you produced stayed within the home and no power was drawn from the grid (a situation that would never happen) you would still be paying money to your utility simply because of the daily connection charges. Most people don’t have the roof space or budget to install enough solar to remove their energy bill 100%.
Battery storage does hold hope for being energy independent but the economics of battery storage has a little way to go before an economic case can be made to invest in that technology. I’m hoping within 3-5 years we’ll see big increases in storage capacity and big reductions in cost.
Will solar continue to drop in price and should I wait?
I don’t have a crystal ball I’m afraid. Having been in the solar sector for going on 10 years I’ve only seen the cost of solar power drop. In fact back in 2006 a 1kw system would have cost you somewhere in the mid $25,000 range!
Since then however with the introduction of large FITs around the world the uptake on solar increased many, many times over and production costs dropped dramatically. Added to this the Australian dollar rose to above parity with the US dollar and given almost all solar is purchase by supply companies in US dollars a further reduction in costs where seen.
Currently the industry believes there is little to no further reductions to be made in manufacturing costs in the short to midterm and the AUS dollar has now dropped by close to 20% from its high 12 months ago and most people would agree it’s not likely to climb back up there again in the near future.
Possible changes to or removal of the ‘Renewable Energy Target’, the program that underpins the value of the renewable energy certificates and the only “rebate” still attached to Solar Power and Solar Hot water by the current federal government could see a large increase in the capital cost of Solar. A 3kw system quoted today for $5000, has built into it a $2300 STC rebate. Changes to the RET could see that disappear and put simply, current prices look as good as they will get for solar in the short to medium term.