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Solar’s inconvenient truth – it’s all about self-consumption

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Enegeni

shutterstock_133755755_solar_oz_news_featuredNobody can dispute that solar PV is positive for the environment. Here in Australia we have one of the dirtiest, most carbon intensive grids in the world; and blessed with the sunniest continent on earth, every 1kW of solar PV (roughly 4 panels) has the potential to displace up to 1.5 tonnes of CO2e annually.

Now that 1.3 million out of Australia’s 9 million households have solar PV on their roofs, solar is heading towards being a mainstream product. But unlike the early adopters, the mainstream consumer doesn’t care as much about the environmental benefits, or the coolness of the technology. The mainstream consumer only really cares about saving money. And while the environmental credentials of solar are strong, the economic benefits — from the perspective of the consumer — are less so.

It is true that solar has the ability to generate kilowatt hours at a very low cost — roughly 50% cheaper than the cost of retail electricity. But this is not the whole truth. And it is only when you look deeper into the way that solar actually works to save you money that you realise that it is an inconvenient truth that most households with solar are being short changed.

From an economic perspective, solar only works when it replaces energy that you would have purchased from the grid. This is known as “self-consumption”. Solar energy that is not used, is effectively sent back to the grid (known as “exports”) and is worth very little to the consumer. For example, 1 kilowatt hour of solar electricity used in your house during the afternoon can be worth up to 52c, but that same kilowatt hour sent back out to the grid may only be worth 6c. If you’re investing many thousands of dollars in an asset, it is fairly important to know whether that asset is going to return X or 90% less than X.

It therefore follows that you need to figure out, with a reasonable degree of accuracy, how much of your solar system’s production will go towards offsetting your grid consumption, and how much will be lost to the grid. It turns out that nobody — not the solar industry and certainly not consumers — knows enough, or could be sufficiently bothered, to “do the math”.

If you speak to a solar consultant (i.e. salesman) they will generally ask you some questions about your household and lifestyle in a clumsy, fumbling, attempt to help you quantify this split between self-consumption and exports. Even well-meaning consultants will ultimately resort to guessing in the hope that you’ll just agree to the purchase so they can make their margin and move on to the next prospect. Now guesses and instinct would be okay if they turned out to be right, but in reality these promoters vastly overestimate the level of self-consumption that will be achieved.

Solar is an incredible technology and has the potential to fundamentally transform the way energy is produced and consumed for the good of society. It should be promoted, developed and supported by all levels of government, and by the industry, to achieve this goal. But it is most concerning that consumers are being sold a product that will, in most cases, not deliver the economic benefits that were promised or alluded to.

There are many things that can be done to rectify this situation, and I look forward to sharing these thoughts with you in upcoming posts.

Darren is the CFO and Co-Founder of Enegeni, and is a former Director of Asset Finance for Sungevity Australia.

   

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  • Tim Forcey

    Self-consuming solar PV by heating your water with a heat pump reported here: http://reneweconomy.com.au/2015/get-more-out-of-your-solar-power-system-by-using-water-as-a-battery-26228

  • strez2Dmax

    The behaviour described in your 2nd last paragraph, may also be known as ‘deceptive and misleading conduct’.
    Deceptive and misleading conduct is a breach of consumer law.

    • RobS

      That would require it to be malicious or deliberate, the problem with non 1:1 feed in tariffs is it makes the timing of power usage vital to calculating the ROI. If you consume 100% of your generation then your ROI will be many times higher than if you consume none of your own output. If contractors use perfectly valid average models of domestic consumption to provide an estimate of ROI in a competent manner with assumptions openly acknowledged but the customers personal consumption patterns vary drastically from the average and the economic return does not meet expectations as a result it would be hard to argue that deliberately misleading conduct had occurred. If however the contractor was portraying their estimates as “customised” for the client or based on some sort of audit intended to determine actual household usage then you probably could argue deceptive or misleading conduct..

  • RobS

    In this age of smart devices it is really not hard to increase self consumption to 100%. With dishwashers and washing machines with time delay functions these can be run a times of peak generation, smart air conditioners can be set to run at similar times to pre heat or pre cool the house when solar output is at it’s highest. Perversely this is the exact time solar output is the most valuable to offset peak grid demand but by lowering feed in tariffs we have created a perverse incentive for solar cutomers to maxmise their own demand at these times to favor self consumption of their solar output.

    • Shtoney

      It may not be entirely perverse, the disincentive will shift the dishwasher/aircon and other loads from the evening, to do the work during the day. This will help peak demand.

      • RobS

        Whilst I agree that the absolute peak is late afternoon and early evening early afternoon when solar output is at its highest is still pretty high on the demand curve. It would be far better for the system to incentivise the running of such appliances at 2 am than at 2pm. The absolute ideal would be grid interactive, load up the washing machine and dishwasher and hit a button that allows the grid operators to set it off whenever in the next 12 hours is most beneficial for them given grid conditions at the time and reward the customer with a discount for foregoing some convenience for the added utility.

  • Bob Fearn

    “most households with solar are being short changed.” BS. Typical attitude in a rich ‘western’ country. People don’t care about the environment they just want to save a few bucks. They are happy to spend twice as much on a BMW as a Toyota cause they WANT a BMW. Spending a few extra bucks on a solar system they NEED, nah, piss on that. They don’t really care that their grandkids will suffer because they were too greedy and failed to protect the planet.

    • JonathanMaddox

      On the contrary, an awful lot of people are investing in solar energy in Australia even well past the demise of generous FITs and without smart meters to tell them when they’re being short-changed or not. They’re doing it to save a few bucks *and* because it’s the right thing to do for the planet.

      Most of the people in question drive things like Fords, Mazdas and Toyotas, and not shiny new ones either. Not a BMW in sight on my street, most of the cars are quite old, but plenty of solar panels!

      • Bob Fearn

        Right, “They’re doing it to save a few bucks”. How many would be doing it if it cost 2x coal powered electricity?
        To suggest that Australia is trying to protect the planet denies the fact that Auz is one of the worlds largest per capita CO2 emitters and has a huge coal exporting business that your government works hard to expand.

  • Hugh M

    With a smart meter and a PowerShop account a households daily consumption patterns can be tracked at 30min intervals with ease.
    Do this for 6 months (including summer and winter patterns) and a household can intelligently choose a system size to suit their typical demand pattern, either optimising for summer use, winter use, or an average.
    Even better it can be done visually (eg average is red-orange, ok that’s 2kW system (made up colours/numbers for example purpose)) and doesn’t require maths, simply looking up the colour legend.

  • Guest

    The good solar salespeople simply work out the max savings (100%) export and min savings (100% self consumption) and advise the customer that they will fall somewhere in between, using their judgement to estimate a %.

    As long as the customer is comfortable with the range – no one is being misled.

    The bigger problem is that once they get the bill – the savings from self consumption are invisible and they only look at the credits to work out their payback like I describe here: http://www.solarquotes.com.au/fb-invisible-savings.html

    • JonathanMaddox

      With most new Australian installations enjoying FITs at rates *lower* than retail electricity prices, you have things the wrong way around.

  • Coley

    Anybody who really cares about the environment wouldn’t have a dishwasher in the first place!

    • JonathanMaddox

      Nonsense. Dishwashers are significant energy consumers, sure, but no worse than clothes washing machines. Modern ones don’t use much more water or detergent than you do washing by hand, and the energy consumption is dwarfed by heating, air conditioning, clothes dryers, and the big one, transportation. You may as well say that people who care about the environment should shiver under blankets all winter and bicycle everywhere. Some of the most passionate surely do (I’ve been an everywhere-cyclist in the past and have still never owned a car) but contrary to your expectations we aren’t obligated to freeze or to wash our clothes or dishes by hand.

      • Coley

        Rubbish, I’m not expecting or wanting anybody to go back to poss tubs, but dishwashers are an indulgence, I can wash and dry the dishes and pots and pans from a Sunday dinner in the time it takes most people to load,programme and unload their dishwasher.