With the price of electricity rising, I have considered investing in a grid connected solar power system for my home. I developed a solar calculator to shine some light upon whether a grid connected solar power system for my home would be a good investment. You may also find the solar calculator useful, so I provide it for download: Solar Calculator (Excel) . The grey fields are variable and everything else works through a formula. I have found there are many variables when it comes to predicting whether a solar installation will pay off. That is part of the fun of the solar calculator because you can play with the variables to see what impact they have.
Inflation in electricity price
This is a tough one to predict. Here in Australia we have had a massive rise in the price of electricity over the past few years, but there are differing views on whether this will continue. I have used an inflation figure of 3% a year, though I know this would be considered conservative by many. You can of course check out some of the predictions about future electricity prices and punch those into the solar calculator to see what effect it will have.
How much electricity the solar power system will produce in kilowatt hours (kWh) each day?
Companies selling solar installations should be able to give you a good indication about how many kWh the solar power system will produce, considering the location and other things. Any solar power system will be unlikely to produce the maximum output indicated by the manufacturer. The amount of electricity produced is impacted by factors such as the slope of the roof, the direction it faces, temperature and of course the amount of sun hitting the solar panels. The performance of a solar installation also degrades marginally over time and when the solar panels are dirty.
It may be prudent to consider what happens if the output is a little lower than that indicated by the company selling the system by playing around with the solar calculator.
How much electricity produced by the system will be consumed by your household and what will this save?
Obviously, electricity produced by the system that you use, is electricity you do not have to then buy. You can have a guess as to what percentage of the electricity produced by the solar power system your household will use itself. This will be affected by whether you are at home when the electricity is produced. In my family’s situation, our electricity use ramps up from about 4pm on weekdays and on weekends. I made a bit of a guess that we would use about 60% of the electricity produced.
To work out how much money you will save, you will need to find out how much you pay per kilowatt hour and enter it into the solar calculator. Check your power bill for this information.
What you will be paid when feeding electricity back into the grid?
You will need to find out what you will get paid for selling surplus electricity back to the grid. This will often be tied into the deal being offered by the solar installation company. Government rebates may also be available.
The Cost of Financing a new solar electricity system
This could include either the costs associated with a loan to purchase the solar installation, or the opportunity cost related to not having the money available for other investment such as a high interest online bank account.
Maintenance and cleaning costs
Of the two solar power companies I talked to, neither of them mentioned the costs of maintenance and cleaning up front. When I asked, they advised the maintenance requirement was bi-annual and cost ‘around $150’.
Like maintenance and cleaning, depreciation is another potential hidden cost that may not be immediately apparent.
I would anticipate that a solar installation will depreciate quite quickly, because the technology is always improving and there is no real market for second hand or refurbished solar electricity systems. At best it may marginally increase the value of your house, but I am not sure I would pay much more for a property just because it has a solar power system. I could see a market emerging to recycle old systems for the silicon in the solar panels, so perhaps they will retain a small residual value over the long term. On this basis, I opted for a fairly steep depreciation schedule but you may want to play with different values.
Did I get a solar installation in the end?
On the current numbers I decided not to purchase a solar electricity system. I really wanted it to work and hope maybe in the future it will add up. Perhaps as they become more efficient, the price of electricity goes up and the initial cost comes down I will reassess. I am based in Brisbane and was looking at a 1.5 to 2 kW system. Now just because it did not work for me, perhaps you can get a better deal.