Is Solar PV Worth the Investment
I don't know about you but if you had the opportunity to pay no household bills, why not start with your electricity bill and save on your future electricity usage with solar PV, right? Yes, so solar PV can save thousands of dollars. Sometimes not.
The truth is, whether solar is a smart long-term investment for you depends on a few major factors. So before you buy into the hype and get all excited, we recommend you use this simple guide.
Factors like electricity rates, solar panel system cost, installation, and financing method all play into how solar will be worth it for you;
Most property owners can break even on their solar investment in 5 to 7 years;
And solar will make sense for your household, considering:
How much you pay for electricity?
Your current electricity bill is the largest factor in determining how much you’ll save by installing solar. You pay your utility company for every kilowatt-hour (kWh) of electricity you use, and your rate varies significantly depending on where you live. In some parts of Australia, you can pay as little as 8 cents per kWh; in others parts of the country, you’ll pay 30 cents or more. Consumption during the cooler and hotter months will differ too and consequently your bills will vary.
When you go solar, you effectively install your own mini power plant on your roof as an alternative to the power plant where your retailer gets its electricity. That means homeowners with high electricity rates are the ones who save the most when they turn to solar power.
How much does solar PV system on your roof cost to install?
Installation prices will vary depending on the solar installer/company you choose and the equipment you install. While cheap solar equipment (panels, inverters and the like) might feel like the easiest way to save some cash and get a great deal, your total 20-year savings will often be higher if you invest in high-quality equipment.
Yes, solar systems today can have a life span of at least 20 years. It’s worth taking some time to review all of your equipment options and find the right combination of price and quality for your home. You can use an online solar blogs like Solarquotes to easily compare all products.
To help reduce the high cost of solar PV, Small-scale Technology Certificate's from the Federal Government are a form of rebate at the point of sale, for more details, see EnergyMatter. The second so called rebates are the feed-in tariffs, for when your produce excess electricity from your solar PV, your retailer will buy the electricity back less than what they charge you when you use their electricity.
And consequently, your house roof, space and which direction they are facing will determine the design, layout and number of panels you can install. Whether you need the simplest of string inverters, micro-inverters or optimisers, your solar installer will be able to determine the most affordable solar solution for you. A complicated roof with limited space and limited sun on it would be most costly.
How are you financing the solar PV system?
Whether you choose to buy or finance, your solar panels will have a major impact on your system’s long-term value. If you have in your budget enough to make a cash purchase, you’ll save more than with any other option – even with $0-upfront cost and a solar loan (which are popluar with households today), your savings could still be in the tens of thousands.
Typicallly with commercial clients, power purchase agreements (PPAs) require no money down and promise a maintenance-free option, your total savings could be 10 to 70 percent of your utility electricity bill.
So how does investing in solar PV should really play out for you?
Figure 1a. Cash Price Figure 1b. Financing $0 upfront
To illustrate, as an example, in Fig 1a, you can see that over the 20 year period, an investment of a 13kw solar PV system, valued at $6,390 the payback period is 2 years and 10 months. Estimated net savings (electricity bill before solar minus bill after solar including cost of the system) from solar is $40,655 and the net present value is $22,710. This simply means that $22,710 today from the 20 years of solar PV savings is greater than zero and it also means every dollar spent investing in solar will save you $3.5 in electricity savings. So it is really a 'no-brainer' to invest in solar PV.
Alternatively in Fig 1b, if $6,390 is financed for 7 years. With this financing option the net present value is lower and the payback period is longer at 4.6 years. Still a valid method to fund solar PV.
Furthermore, financing on solar works for you if the figure below is achieved.
Figure 2. Rule of thumb to finance solar PV
As can be seen in the figure, your current 'old' bill $550 quarter will be no more with solar PV uptake at $0 upfront cost/investment.
For the next bill quarter and the bills that follow that, a 'new' bill should be far less than the original bill. Now add in your quarterly repayments and both should add up to be less than your original bill for up to your repayment term, which is 7 years here. In this example, financing this solar PV is a viable option.