How Does Solar Work?

In Australia, solar power systems help offset energy bills through a couple of key mechanisms: self-consumption and feed-in tariffs. Here's a breakdown: 

1. Self-Consumption:

• Direct Use:

  • When your solar panels generate electricity, that power is first used to run the appliances in your home or business. This reduces the amount of electricity you need to draw from the grid.   

  • Essentially, you're using "free" solar power instead of paying your electricity retailer for grid power.   

  • This is the most effective way to save money with solar, as the savings are directly related to the retail cost of electricity.

2. Feed-in Tariffs (FITs):

• Exporting Excess Power:

  • If your solar system generates more electricity than your home is using, the excess power is sent back to the electricity grid.

  • Your electricity retailer will then pay you a credit for this exported electricity, known as a feed-in tariff.   

  • This credit appears on your electricity bill, further reducing your overall costs.   

  • It is important to note that the feed in tarrifs are generally lower than the cost of the electricity that is purchased from the grid. So it is better to use the solar power that is generated, within the home, than to export it.   

• Variations:

  • Feed-in tariff rates can vary significantly between electricity retailers and across different states and territories in Australia.   

  • It's crucial to shop around and compare different plans to find a retailer that offers a competitive feed-in tariff. At PN Energy Brokers, we can assist you in selecting the best provider for your energy usage.

Key Factors Affecting Savings:

• System Size: The size of your solar system will determine how much electricity it generates.

• Energy Consumption: The amount of electricity your household or business uses will impact how much you can save.   

• Time of Use: Using appliances during daylight hours when your solar system is generating power maximizes self-consumption and savings.   

• Battery Storage: Adding a battery to your solar system allows you to store excess solar energy for use at night or during cloudy days, further reducing your reliance on grid power.   

• Smart Meters: smart meters allow for accurate measurement of energy used and exported, allowing for accurate billing.   

Example:

Vicky has an energy bill of $1000 with an average daily use of 30kWh. Vicky's cost per kWh is $0.34 Vicky then installs a 10kW solar system which supplies Vicky's home on average 35kWh per day.

Scenario 1: Vicky is able to use around 60% of her power in the day time. This means she will be running 0.6 x 30kWh = 18kWh completely off her solar system. This translates to an instant saving of 18kWh x $0.34. The excess 17kWh that her system produced will be sold back into the grid as a feed in tariff. The average FIT rate is $0.07 which will appear in the form of a credit on her bill. This means her total quarterly savings would be {(18kWh x $0.34) + (17kWh x $0.07)} x 91 days = $665.21 quarterly savings.

Scenario 2: Vicky is able to use around 40% of her power in the day time. This means she will be running 0.4 x 30kWh = 12kWh completely off her solar system. This translates to an instant saving of 12kWh x $0.34. The excess 23kWh that her system produced will be sold back into the grid as a feed in tariff. The average FIT rate is $0.07 which will appear in the form of a credit on her bill. This means her total quarterly savings would be {(12kWh x $0.34) + (23kWh x $0.07)} x 91 days = $517.79 quarterly savings.

At the time of writing a quality 10kW system installed post rebates is worth between $9,500 - $13,000 giving a payback period between 4-6.5 years.