Electricity from rooftop solar is now very cheap in Australia compared to grid power. But just how much solar electricity costs a household over the life of a system is not an easy question to answer, as it depends on location, the cost of capital, feed-in tariffs, and other factors. As a service to readers, and to keep my parole officer happy, I have spent a lot of time this week crunching numbers to determine the cost of electricity from new rooftop solar for households in the population center of each Australian state. I have intentionally avoided being optimistic in my calculations and locked my rose-tinted glasses away in order to determine the cost of electricity from a mediocre solar installation. That is, one that is far from perfect, but assumes that people aren’t stupid enough to do things such as install the solar panels in permanent shade or upside down.
In order to determine the cost of rooftop solar electricity, I took into account the factors detailed below. All costs are in Australian dollars, but if you prefer US dollars, don’t worry, the two are very similar. If you want the precise amount in greenbacks, just add 5%.
The Cost of Solar (Solar $/watt): I have used the latest available figures on the average cost of solar in each Australian state, which are from December, and I used the cost of three kilowatt systems, as they are currently the most commonly installed size. Their average installed cost was $2.06 a watt. Without our Goods and Services Tax and Renewable Energy Certificates, they would cost households about 15% more.
The Cost of Money: Generally speaking, someone who owns a house roof in Australia can borrow money at about 6.25% or less, so I will use that figure for the cost of capital. If someone wanted to pay for a system with a credit card, a basic one can have an interest rate of 11.8%.
The Cost of Grid Electricity (Grid cents/kWh): Australians now pay an average of about 27.5 cents a kilowatt-hour for electricity, with considerable variation between regions. Determining what people actually pay in an area is difficult, as electricity retailers can be deliberately confusing. Personally, I’ve had four different retailers tell me that they are the cheapest in my area. Obviously, at least three of them are lying. For comparison purposes, I’ve provided the cost of grid electricity in different regions, and because of the intentional confusion, it is possible the figures may be slightly too high, and so, unfair to electricity retailers, but as far as I am concerned, electricity retailers can bite my not at all shiny and only slightly metallic arse.
Insolation: The amount of sunshine in Australia varies depending on location. Checking out a solar map of Tasmania, I see the place is quite shady by Australian standards, while Queensland is of course the Sunshine State, and Western Australia is the world’s largest oven. I have used a figure that is typical for where the bulk of a state’s population lives, and not a sun-blasted outback location where clouds are so rare that young children flee from them in terror.
Efficiency: It’s quite common for people’s roofs to not be optimally aligned for collecting solar power. Usually, the easiest solution to this problem is to use a slightly larger system rather than attempt to rotate or tilt the house. Australian solar averages around 80% of what it would produce if the panels were perfectly aligned, so this is the figure I’ve used even though it is brought down by the occasional stupid installation, such as under trees or facing south in the southern hemisphere.
Electricity Export: Very few Australians use all the electricity produced by their solar systems and normally export some to the grid. Just how much is exported mostly depends on the size of a system compared to total electricity use and whether or not people are home during the day. For everyone except Tasmanians (because they’re special), the higher the portion of solar electricity exported, the higher the cost of rooftop solar. I have assumed that 50% of the electricity generated by rooftop solar is exported. Just how much this electricity is worth depends on the feed-in tariff.
Feed-in Tariffs (FiT cents/kWh): These have a huge effect on the cost of solar electricity and vary from state to state, and can also vary within states. Just to make things nice and confusing, it’s possible for neighbours to have different feed-in tariffs. In Tasmania, a kilowatt-hour exported is worth the same as a kilowatt-hour bought from the grid, while in other states, feed-in tariffs can range from over 23 cents per kilowatt-hour down to 8 cents a kilowatt-hour or less. For my calculations, I have used the lowest feed-in tariff that applies to a large portion of a state’s population.
System Life and Maintenance: Rooftop solar lasts a long time and doesn’t need much in the way of maintenance. A 10-year warranty for inverters and a 25-year warranty for solar panels is the industry standard. So, if something goes wrong in the first 10 years, the homeowner shouldn’t be out of pocket, and for at least the next 15 years after that, it’s only the inverter that might require money to replace. I’ve allowed $25 a year per kilowatt of capacity to cover inverter replacement and any other maintenance that might be required. I think this is too much given how cheap and reliable inverters are likely to become in the future, but I’ve decided to err on the side of depressing miserableness. I’ve assumed the lifespan of rooftop solar is 30 years. I think it can be relied upon to last longer than this, but 30 years is already longer than a considerable number of Australian houses will last, so it will do.
The cost of rooftop solar to households in cents per kilowatt-hour is shown below for the capital city of each state:
As can be seen, throughout Australia, rooftop solar is cheaper than grid electricity, and in four states, it is less than half the cost of grid power. Due to cloudy skies, a low feed-in tariff, and relatively low grid electricity prices, Melbourne’s solar electricity cost is only about 20% less than the price of grid power. Hobart has the second cheapest solar electricity despite being less sunny than Melbourne, thanks to a high feed-in tariff, while Adelaide is the runaway winner because of a high feed-in tariff, high electricity costs, and sunny dispositions all round.
Recently in Australia, games of Kick the Support for Solar have been popular in State Parliaments, and there have even been surprise rounds played at the Federal level. While I’m confident that South Australia’s and Tasmania’s feed-in tariffs are safe for now, if they were reduced to the low 8 cents a kilowatt-hour often seen in other states, the cost of solar electricity per kilowatt-hour would be 14.5 cents in Adelaide and 18.5 cents in Hobart.
I have assumed that the lifespan of rooftop solar is 30 years. However, some people may be considering putting solar on an older house that might not last that long or on a beach house that might only have a decade or two before the ocean eats it. For these people, I’ve worked out what the cost of solar would be per kilowatt-hour if the system only had a lifespan of 15 years:
So even with its lifespan cut in half, rooftop solar is still cheaper than grid electricity in most states, about the same in Brisbane, and only more expensive in Melbourne. In Adelaide, it is still below half the cost of grid electricity.
Although it has been a bone of contention for centuries now, many philosophers (some of them called Bruce) agree that Australians have free will and so are not bound to pay the average price of rooftop solar in their state, but are free to shop around and buy the cheapest available if they wish to do so. Looking at newspaper advertisements this month, I see that the cheapest systems are around one third less than the average cost. So, electricity from a low-cost installation that is two-thirds the average price would cost:
So, for a low-cost installation, solar electricity is around half the cost of grid electricity or less in all state capitals and astoundingly cheap in South Australia.
And for my final trick, I will determine the cost of solar electricity from a low-cost installation if it is bought by credit card:
So, even if it’s purchased by credit card, rooftop solar can still produce electricity at below the cost of grid power throughout Australia, and in Adelaide it is less than one third the cost of grid power. That’s pretty impressive.
This article was originally posted on Cleantechnica. Re-posted with permission.
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