Solar Power: Cutting the Cost of Electricity

I wrote a post called Cost of Living in Australia: Electricity, almost 3 years ago. Since then electricity prices have soared as you will read in my imaginatively titled post Australia’s Soaring Electricity Prices.

In that second post, I explained that prices had increased by 35.8% in Queensland over the last eight years and that I was tempted to switch electricity supplier.

Well, I never got round to it, but at the beginning of this week I did start arrangements to switch to a new supplier …… ME!

Solar Energy

The Sun

Solar power is not new, but for me, living in a country where the sun shines long enough to make it worthwhile is relatively new. I first looked at installing solar three or four years ago, but at the time ‘I think’ I calculated that payback on my outlay would have taken almost 15 years.

Since then the cost of solar panels and inverters has come down; you can find the best deal for you by using a company like switchee.com.au to compare the market. Government rebates are still in effect although ever-changing and, most importantly, there is a thing called a ‘feed in tariff’.

Remembering of course that Australia is a country made up of different states and that each has its own rules, the feed in tariff varies greatly across the country, so do be sure to check the latest deals available to you.

But what is a feed in tariff anyway?

Feed in tariff

Here’s the deal. If a residential customer installs solar panels to generate electricity, then the electricity generated by those panels is fed back into the grid.

There are for two reasons for this, I think.

Firstly, electricity produced by solar panels is DC, it needs to be converted to AC. By some magic of electrodes, solenoids, lots of wires and maybe a dial or two, the grid turns this power into AC.

Secondly, storing electricity is an expensive job, just look at the price of batteries. So what happens when lots of electricity is produced during a sunny day while you’re out? I think there is a rule of physics somewhere that states that energy (like electricity) cannot be wasted, it can only be converted into something else like, for example, heat.

Or it can be stored if you have the right equipment, and that’s the second reason for feeding back into the grid.

So when your solar produces energy during the daylight hours of a sunny day, it is all fed back into the grid. During that same day, you use energy in your house, so you end up with a credit and debit situation.

If you produce more energy than you use during these daylight hours, the excess is paid back to you as credits to use for electric during the night time when you’re solar isn’t producing, or in cold hard cash!

I am with Origin, they currently charge me 20.69 cents plus GST per kilowatt hour. When they buy my excess electricity, they pay me 44 cents, (to be more accurate, it’s actually a government subsidy) plus Origin top that up with an extra 6 cents, so I get back a whopping…

50 cents per kilowatt hour!

Here’s the full maths on my system, not yet installed, but will be within a month or so.

SAVINGS…

With my 5 kw system:

  • 5.75kwH solar usage @ .23c (inc GST) = $1.32
  • 14.53kwH solar export  @.52c = $7.55
  • daily saving = $8.87
  • yearly = $3237.55
  • system cost $11,795
  • ROI 3.64 years

Let me explain the above in rounded numbers.

  • The system I am having installed will produce just over 20 kwh per day on an average sunny day.
  • I will use about 6 kWh during the daylight period.
  • So I feed 14 kwh back into the grid whilst effectively paying nothing for my daytime electricity usage.
  • I get paid 50 cents per kilowatt, so $7 a day.
  • With that $7, I can buy 30 kwh of more electricity. (At 22 cents per kilowatt hour.)

My electricity bills are hefty; between $700 and $800 per quarter. With solar installed, for my one-off fee of $11,795, my electricity bills in future should be…

ZERO!

In fact, I might even get a small rebate.

This has got to be a great deal, surely? I get my money back on my system within around 3 1/2 years, and from then on in its savings all the way.

This deal gets better. My system should have cost $15,370, but the government give me a rebate for going solar of $3,575.

Different governments in different states give different feed in tariffs and they change all the time. For example, currently I understand that Victoria are offering up to 60 cent per kilowatt hour and both South Australia and New South Wales as much as 44 cents per kilowatt hour.

But Western Australia have now reduced their previous feed in tariff of 60 cents down to 8 cents. Each state also guarantees a period of time for those who have signed the contract, I’m guaranteed 44 cents for the next 16 years.

This current deal in Queensland is so good, I just had to sign up. It is also so good, that it ends at midnight, July 9, 2012, just a few days from now, at the time of writing.

After that, as they’ve done Western Australia, the feed in tariff reduces to just 8 cents!

I think all my above figures are accurate, but it doesn’t overly matter, and the rules are way more complex than stated here. The point is though, wherever you are living in Australia, solar power is worth checking out to see what kind of deal you can get at the time you are ready to go for it. It may save you a packet!

“Bring Me Sunshine…”

Update: July 2014

I’ve now had my solar system fitted for nearly 2 years, does it work? Was it worth it? Find out in my post…

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{ 10 comments… add one }
  • Paul July 5, 2012, 5:16 pm | Link

    Not to rain on your solar parade here Bob, but I found it enlightening to substitute references to government rebates in the above for “Australian tax/rate-payers”, and re-read.

    • BobinOz July 5, 2012, 10:20 pm | Link

      Fair point Paul, but even if I do save the full $3237.55, that is only a fraction of the income tax paid between me and my wife each year. So it will be nice to get some of our own tax payers money back. So I’m still smiling 🙂

  • Kay July 4, 2012, 11:06 pm | Link

    HI Bob

    I hope you have had the figures verified of what you should achieve KwH wise. It’s just that if your system doesn’t produce the amount of energy you anticipate your savings will be less. I live in NSW and I have heard some people complain that the figures that were stated to them didn’t eventuate. I know we don’t have as much sunshine here as you do. Years ago (I should say decades) when we built our home we had a solar hot water system installed system with the usual solar booster. We have trees which was OK in summer due to the higher angle and longer hours but in winter some shade was cast and with the shorter hours as well not enough heat was generated. So our booster was always on for half the year. When we started having problems with the panels (leakage) and the pump we discovered it wasn’t worthwhile replacing them as the cost which had increased significantly from the origonal system made it not worthwhile with the limited savings we would make. I realise your system is something different again not being a hot water system and I don’t know if any maintenance would be required. I was just wondering where you got the figures from.

    • BobinOz July 5, 2012, 10:17 pm | Link

      I think there is always a risk with anything anyone buys that it might not work out as good as they thought. The figures have been officially verified by, I think they are called, the Greener Energy Council, so I am hopeful they are accurate.

      Some say they might even be prudent and the actual outcome could be even better, especially here in sunny Queensland.

      I already have solar hot water on the roof, I don’t even turn the booster on and have never needed to. So there is hope 🙂

  • Kirri July 4, 2012, 11:03 pm | Link

    And you’re helping mitigate climate change which you don’t actually believe in. This makes me happy 🙂

    • BobinOz July 5, 2012, 10:14 pm | Link

      Well, I’m glad I have made you happy Kirri, but would I spoil it if I said my intention is not to mitigate climate change, but to save money? I certainly don’t think putting solar panels on my roof is going to save the planet, after all, these panels do have to be manufactured and I’m sure there is a carbon costs to that somewhere down the line.

      Seriously though, I am not against being kind to the planet and saving resources, I just think the carbon tax is a rip-off, that’s my only beef on that one.

      • Kirri July 5, 2012, 11:22 pm | Link

        Not at all, I’m perfectly aware that you’re financially motivated in this but why does that matter when the effects the same. If I tell someone that turning off appliances at night can save them over $100 a year, cut their carbon emissions by 500kg and help prevent fires breaking out it doesn’t matter which reason they listen to, they’re richer, the worlds better off and noone dies in a house fire. Win all around I’d say.
        No one persons actions are going to save the world, but put every individuals actions together and it can make a difference. And who knows how many people you’ve inspired to look into getting solar power through this blog or any discussions with family and friends you’ve had. Maybe your impact will be larger than you think.
        As to the carbon cost of solar panels, it’s established to be somewhere around 20-80g per kilowatt hour compared to about 1000g/kwh for coal produced electricity. Quite an improvement.
        As to the carbon tax, maybe we shouldnt go there. I’ve heard a number of comments that its probably set a bit high but I agree with it in principle. They said on the radio the other day that big business thought it was unfair that they had to pay for their own pollution. That’s one of the stupidest things I’ve ever heard. It’s entirely fair. The ones putting dangerous chemicals into the air and endangering lives have a responsibilty to do something about it.
        Anyway sorry about the rant, I have entirely too much time on my hands these days and much of it has been spent researching climate change in preparation for a job interview next week so I’m a little hyped up over this topic at the moment.

        • BobinOz July 6, 2012, 12:26 am | Link

          Never apologise for a rant on BobinOz, we love them 🙂

          As for the carbon tax, no, we really shouldn’t go there. I’ll only say though that when the top 500 polluting companies have to pay extra to the government, we all know they will pass on their extra costs to the end user, us. So whilst in principle it looks like a good idea, it’s actually one that the people will end up paying for.

          It’s just like as Paul has pointed out below, I’m not getting a government rebate for my solar system, I’m getting subsidised by Australian taxpayers.

          We are the ones that end up paying for everything.

          I do hope you get that job though, good luck with the interview.

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