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Cost of electricity from rooftop solar by Australian state

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Cleantechnica

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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  • Andrew Thaler

    Have you taken into account the daily connection costs, which are scheduled to continue to rise? And the fact that the business daily connection cost (service availability) for Flat Tariff rate (currently 36.18c/kwhr) is around $1.52 per day in rural NSW and time of use (which i am under the impression you have to be connected under to be on Nett metering), can be $3.50 per day which will seriously skew the numbers. This difference in daily cost renders it uneconomic for my businesses to be connected to TOU and so we are on flat tariff and don’t load schedule.
    As most solar systems need the backup reliability of the grid for low output days, the daily connection cost is likely to be the gouge that the electricity companies use to get their money back from small and ‘low use’ businesses, even if they are connected to solar- unless you dump the grid.
    And if we start dumping the grid in sufficient numbers, how long will the Gubment hold out from bringing in a new law charging every premise for the “service availability” where the grid wires go past but are not necessarily connected- such as we have with sewer and water.
    This cost risk is not reflected in your price estimates detailed above…
    And for posterity… business daily access charge in October 2007 was 61 ccents.

    • Paul

      I believe the $0.30 kWh charge quoted for NSW includes the network access charge!

      • Kincuri

        I bet it doesn’t. My personal connection charge is around 61 cents per day, on top of what I get charged for consumption.

        But. It doesn’t matter. You are going to have this charge regardless of whether you have solar panels or not. To go off-grid, we starting talking about a completely different system with additional costs (extra panels and battery backup).

        The results would be the same whether you factor in the daily charge or not.

        Also, I suspect that the SA figure for “low cost” solar generation per kWh is a little dodgy. 1.7 cents per kWh? That’s less than half the cost of coal-fired generation, it’d be a miracle if someone can install a system that cheap.

        • http://ronaldbrak.blogspot.com.au/ Ronald Brak

          The low cost for rooftop solar electricity in Adelaide is due to South Australia’s feed-in tariff and not because of an extremely low installation cost. Low cost systems that are about a third below the average cost, and will do the job, are certainly available. I have a newspaper ad offering to install one in front of me. Well, actually it’s not really in front of me, it’s more to the right.

      • Andrew

        Daily access charges are Added to the bil for power use and definitely not included.

    • http://ronaldbrak.blogspot.com.au/ Ronald Brak

      I worked out how much it would cost to produce electricity from a rooftop solar system so people could compare that to whatever they happen to pay for grid electricity. The grid electricity costs I provided are only for comparison and don’t include connection fees. I had some difficulty determining just what Australians pay for electricity, for while the rates are easy to find, there are often discounts that apply for various reasons and then there are surplus charges such as for green power. So I’m afraid the figures I gave are only approximate. If anyone knows where solid information on what Australians actually pay for electricity can be found, please let me know.

  • Paul

    To accelerate the payback on PV systems – use them to charge an EV. A 1.5 Kw system is enough to power a Holden Volt more than 12,000km a year and by displacing petrol instead of grid power will pay for itself in under 6 months!

  • john porritt

    OK, but you’re going to have to do it sometime -
    costs please for a regional 20,000, a 50,000 and a 100,000 population town or group of towns.
    I know its a lot of work for you, but there are areas, such as Ballina-Byron-Lismore in NSW in which there is scope for many more people to go rooftop and a lot of hopeful installers.
    John

    • http://ronaldbrak.blogspot.com.au/ Ronald Brak

      I feel very chuffed that you want me to do that. But I’m afraid it’s a question of finding the time. And insolation tables.

  • Bob

    Excellent summary, thank you. However it is not valid to assume 50% is sold back to the grid. I think most systems would still need some grid power. My 4kw system is about what I use.

    • http://ronaldbrak.blogspot.com.au/ Ronald Brak

      It is assumed that the household is still connected to the grid and uses half the electricity produced by their rooftop solar themselves and exports the other half to the grid. The household can use however much grid power they like without affecting results.

      • Roy Ramage

        Hi there Ronald. Great copy. If you have the time have a look at http://www.solarprogram.com.au We are a 15,000 head city and now have abaout 4,200 houses under panel. I have a Uni Adelaide proposal to use PHD students to analyse all our numbers which are pretty impressive. I imagine it will not be quick but it will bear our much of your thinking. Meanwhile we are looking at batteries and a battery “equaliser” which we think is a first and will enable the choice of being on or off the grid. Until that is available we must hound our politicians better than the lobby groups.

        • http://ronaldbrak.blogspot.com.au/ Ronald Brak

          Thanks for the link, Roy. I’ll have to get down to Victor Harbour sometime soon and check things out. It’s been a while since I’ve been down there.

  • Jon

    Panels may last 30 years but inverter don’t. 10 years is realistic for inverters and they are a large percentage of the cost of the system.

    A very simple thing most engineers work off is if there is not a return on investment within 10 years, you might as well put the money in the bank and earn interest.

    For demestic installations there was some very good tariffs for a period which made a solar system worth while. But quickly state governments realized they were paying way to much for demestic solar power. One of my concerns is what happens when the average person who installed a 1.5kw system, which was heavily subsidized, comes to replacing the inverters – the person will find that the inverters (now not substised) will cost as much as the entire original system was. The panels may just be disconnected and become a white elephant.

    I have resonantly designed the electrical for a large industrial site, the client wanted solar so we completed a cost benefit analysis and found the best ROI we could get was about 20years. The client wanted the system against our advice anyhow and got another consultancy to work on it. When it came to connection the 125kw system to the grid, the energy authority would not let them export any power ever. If the system started to export the system was to disconnect. I’ve heard different reasons why authorities don’t want solar power exporting into their grids but they are all speculative. Either way the only way solar gets into a commercial or industrial sites is if it is sold to them by a salesman or if they ignor the financial figures and just want a system to be good to the environment.

    • http://ronaldbrak.blogspot.com.au/ Ronald Brak

      A quick search shows a new inverter for 1.5 kilowatt solar can be bought for $349.

    • http://thisnessofathat.blogspot.com.au/ Gillian

      Jon – this page gives details about various inverters and notes they can cost about 20% of the total cost of a typical domestic system. Retail prices range from around $2000 for a good 1kW inverter up to $9000 for a 10 kW inverter.(Sounds like more than 20% to me.)

      http://www.solarquotes.com.au/solar-inverters.html

      • http://gunagulla.com Gordon Garradd

        Not sure where they get their “$2000 for good quality 1kW inverter” from, but top of their list they have SMA, listed as “expensive”… an SMA *3kW* inverter sells for just under $2000.

  • suthnsun

    Ronald, you have shown your input assumptions but not how you are using them to calculate your costs. It would help me if you could provide a description of the way you are calculating.
    In my case, using your input assumptions, as I am interpreting them, I arrive at a nett negative cost for my system. (i.e positive cash flow each year after repayments and maintenance over 30 years)

    • http://ronaldbrak.blogspot.com.au/ Ronald Brak

      I’m looking over my calculations, suthnsun, and I think you’re right. I’ve been far too pessimistic. Let me go over what I’ve done and get back to you. Or more likely you’ll never hear from me again as I run away and cry and then pretend that this never happened.

  • Shane

    Ron, would it be possible for you to post the spreadsheet with your calculations somewhere? A key variable in the calculation is the future retail electricity price in each state through time. I am interested to see what you have assumed.

    • http://ronaldbrak.blogspot.com.au/ Ronald Brak

      Shane, I worked out what the cost of electricity from rooftop solar would be, but not how much money it would save. As a result, my calculations didn’t involve future electricity prices. I included figures for current electricity prices just for comparison purposes. If instead of just looking at the cost of solar electricity I wanted to work out how much rooftop solar would save a household, then I would have to take into account the future price of electricity. And some people would probably be cranky with me because I believe Australian electricity prices are reaching the crest of a wave and will soon fall, as they are falling in South Australia, and that connection fees will eventually be eliminated to stop people going off grid. But other people seem convinced that electricity prices will continue to rise until the heat death of the universe, an event for which we will be billed. To keep people happy I would have to do at least three scenarios, one where electricity prices fall, one where they stay the same, and one where they rise. And that would take a lot of work and I’m far too lazy, I mean busy, to attempt that for quite some time.

  • Jon

    I would suggest that a solar installer wishing to stay in business would not risk installing a $350 grid connected inverter. There are statuary requirements of which I would also suggest would not be meet at a price that low. And if installer is importing them they are responsible for making sure the inverter meets all the statuary requirements and are responsible for the ramifications when they fail.

    If a domestic customer called a solar installer for a price of a inverter that would last say 15 years, the installer would quote well above $350, and at minimum around $2000-$3000. Furthermore if the installer was asked to guarantee the inverter for 15 years I would be very surprised if they would.

    • http://ronaldbrak.blogspot.com.au/ Ronald Brak

      How can a solar installer get away with charging that much when the local electrician will do it for a fraction of that amount?

  • Jon

    Most inverters have a warrantee of 5 years as that is the minimum required. So if it is a cheap inverter you can almost guarantee it won’t last much longer than 5 years.

  • http://ronaldbrak.blogspot.com.au/ Ronald Brak

    I’m most dreadfully sorry everyone, but the article I wrote above is methodologically flawed. And it’s not just that I’ve made a simple mathmatical mistake, my entire approach to accounting for the effects of feed in tariffs is illogical.

    Now this doesn’t mean that electricity from rooftop solar isn’t cheap, I don’t have the power to change that, but I will have to use a completely different methodology to take into account feed-in tariffs. I have put my results for the cost of electricity from rooftop solar to households without taking into account feed-in tariffs below, measured in cents per kilowatt-hour:

    Adelaide (grid power 33): solar 12.3
    Brisbane (grid power 23): solar 13.3
    Hobart (grid power 23): solar 15.0
    Melbourne (grid power 22): solar 14.3
    Perth (grid power 28): solar 11.4
    Sydney (grid power 30): solar 12.1

    I will write a post on the cost of solar using proper methodolgy in the future, but for now I’ll just give you the fudge factor. The fudge factor is a fudge that takes into account 50% electricity export from rooftop solar and feed-in tariffs. Basically it’s what the price of solar electricity has to be less than to save money. The further below the fudge factor it is the more money will be saved. And it’s a fudge, so don’t read too much into it:

    Adelaide: Fudge factor 28, solar 12.3
    Brisbane: Fudge factor 15.5, solar 13.3
    Hobart: Fudge factor 23, solar 15
    Mebourne: Fudge factor 15, solar 14.3
    Perth: Fudge factor 18, solar 11.4
    Sydney: Fudge factor 19, solar 12.1

    And with that I will apologise to you once more. I have written an apology letter to the Cleantechnica site where this post first appeared and I hope I haven’t caused anyone here any major inconvenience. I will now depart to search for something to ease the sorrow in my heart.

  • just_chris

    Great article I think the important number is the cost of solar without fit. Why beacause battery technology is getting cheaper, factor in a smart meter and things get interesting. If you had a modest battery you could make a system that charged during the day when you are at work and then gave you power in the late afternoon when you need it and when you are paying above average peak power rates. You don’t need to store the full output and any excess can be dumped into the grid for the 8c an hour fit rate rather than the 30 to 40c peak rate you’d avoid with storage. Fit won’t last forever and I think we are fast approaching a point when it is irrelevant.

  • Roy Ramage

    Snowurries Ronald. Your approach is to be encouraged as in time it will be proven and we will wonder why we were so slow to travel down the solar path. It is inevitable that as PVP installs increase and batteries get better all subsidies will be withdrawn because the costs will simply not be affordable by governments already bankrupt.