A few weeks ago my wife, Margaret, asked me whether the Solar Electricity System we installed in our house was a good financial idea. I decided to investigate and answer the question.
Later in this post I will describe the methods I used to investigate this issue, but the answer can be clearly stated: our Solar Electricity System is a great investment. I calculated that we saved $813.40 in 2023. I determined that the yearly cost of electricity without the Solar System would be $1,505.02 . The sum of our bills for the year was $691.62 : $1,505.02 - $691.62 = $813.40 .
If we were to invest the money we spent on our Solar Electricity System we would need a return of 11.5% to make the same money as we saved on our electricity bills with Solar. A return of 11.5% PA in an investment that is safe is extremely difficult to find.
Our Solar Electricity System had an out of pocket cost of $7,055. It is a high quality system, see details below, and the cost includes the Victorian Government Rebate of $2,225. Percentage return on investment is calculated by amount saved divided by cost of electricity system multiplied by 100: $813.40 / 7,055 * 100 = 11.5 .
The Data
I used two sources for the data required for the calculation - our Fronius Smart Meter and the Electricity Bills.
Fronius Smart Meter.
The Smart Meter is installed in our electricity switchboard as shown in the video below:
The Smart Meter sends data to the Fronius Site and can be accessed via an app on my phone.
The app shows instantaneous data as shown in the video below:
The app also supplies full day data as shown in the photo below:
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There are three pieces of information, reported in Kilowatt Hours (kWh).
Click on this
link
for an explanation of the meaning of the term Kilowatt Hour. Production: The amount of electricity produced on the day by the Solar Electricity System in kWh. Consumption: The amount of electricity used by the electrical appliances in the home. Self-consumption: The amount of electricity supplied by the Solar Electricity System to power appliances in the house. The app also generates a graph showing the levels of these amounts during the day. The date is also included at the bottom the output, in this case 19 Jan 2024. |
Electricity Bills.
The graphic below shows the section of our electricity bills that provides the information about electricity usage and the consequent bill charge:
The start and end dates of the bill and the number of days covered.
The supply Charge - $1.0767 per day (28 days equals $30.15)
The electricity Usage (imported from the grid) in kWh (113) and cost per kWh ($0.2436) and total cost $27.53)
Solar Credit (the amount of electricity our system exported to the grid) in kWh (433) payment per kWh ($0.08) and total amount subtracted from the bill ($34.64)
GST (calculated as 10% of sum of Supply Charge and Electricity Usage - $5.77)
Total charge (Supply Charge plus Electricity Usage plus GST minus Solar Credit - $28.81)
The Calculations
The Solar Electricity System reduces the cost of Electricity paid to the supplier in three ways
1) importing less electricity from the grid because some of the electricity used in the house is supplied from Solar, 2) payment of the Solar Credit which as shown above is a direct reduction of the bill and 3) reducing the GST paid as less electricity is imported
Importing Less Electricity
The cost of the amount of electricity we consume (Consumption in the app) can be calculated by multiplying Consumption by the cost of importing per kWh - $976.29
The amount of electricity imported can be calculated from the data in App (Consumption minus Self-consumption) and from the Bills. Both methods arrive at similar amounnts to within a 99% accuracy.
I calculated this saving as $340.22 .
Solar Credit
The value of the electricity exported can be calculated by summing the values of the Solar Credit on the bills. This results in a figure of $415.59 .
Using this method the saving would be $340.22 plus $415.59 which equals $755.81 .
Reducing the GST Paid
Another method of calculating the saving is by calculating the total cost of the electricity used and then subtracting the actual cost from the bill.
The bill is calculated by summing the value of the electricity imported and the supply charge and calculating the GST from that sum (which is 10%) then subtracting the Solar Credit.
The value of the total amount of electricity consumed (calculated from the app) can be determined by multiplying that total amount by the cost (per kWh) of the electricity. The total amount of the bill if we did not have solar can be calculated by summing the value of the total amount of electricity consumed ($976.29) the total supply charge ($391.92) and the total GST ($102.31). This gives a total of $1470.52 . As we are trying to calculate the total bill cost without solar, that GST value is too low. Without solar more electricity would be imported which would increase the GST value by $34.50 .
Consequently I calculate the total cost of our electricity without solar as $1,505.02 .
Given that the total cost of electricity from the bills was $691.62 the saving is $813.40
The Solar Electricity System
We purchased the Solar in two installments.
The initial purchase was from EnviroGroup. Usually the size of household solar electricity systems is 5 to 6 Kilo Watts. We initially purchases a smaller one as at that time we did not have access to a Solar Credit (sometimes called a Feed In Tarrif).
We purchased 8 solar panels that had a maximum output of 2,560 Kilowatts. We purchased a Fronius 5 Kilowatt inverter, as Fronius is one of the best brands and so we could expand the number of panels in the future. The cost of this system was: $5789.99 .
When a Feed In Tarrif became available we added another 8 panels from SolarGain with a maximum output of 2,600 Kilowatts. Giving a maximum output from the panels of 5,160 Kilowatts. We included the Fronius Smart Meter in this purchase. Total price: $3490.00 .
These two purchases totalled $9279.99 which might seem pricey, but we decided that a system with top quality components was the best solution.
We applied for the Victorian Solar Rebate and received $2225.00.
The out of pocket cost of our solar electricity system was: $7054.99
