It now takes up to three times longer to recoup your solar costs compared to the start of the year. Here are ATA’s latest solar payback calculations, including reasons for the rapid turnaround and future trends.
Most people buying a solar power system will do some ‘back of the envelope’ calculations to work out when their big investment will one day pay off and provide free energy. Alternatively, they might ask their installer or company managing the installation, with some telling consumers the payback times can be as short as two to three years.
In reality, finding out how long a system takes to pay off is a complex equation. Location is one of the biggest variables, due to the differing levels of sunshine across this wide country. However, sunshine levels are probably more predictable than the other location-specific variable – the eight different feed-in tariffs across Australia’s states and territories. Darwin residents, for instance, enjoy the highest levels of sunshine in Australia, yet have no feed-in tariff to celebrate this rich resource. The ‘Sunshine State’ of Queensland, by comparison, currently has one of the highest feed-in tariffs available.
Then there is the question of the up front Federal Government incentive, the Solar Credits Scheme. Did you manage to access the five-times multiplier for your STCs (Small-scale Technology Certificates), or did you miss out and only receive an STC multiplier of three, thinking that it was only meant to drop to four in mid-2011 anyway?
In February this year the Alternative Technology Association’s Energy Policy Team crunched the numbers on just how long a standard 1.5kW grid-connect solar power system would take to pay off around the country. The study was carried out in the midst of a solar installation boom, spurred on by the Federal Government Solar Credits Scheme, where households were able to receive five times the amount of STCs that their system generates. At the time, many states had strong feed-in tariffs, with a number of these being gross, including NSW and the ACT, with 60c/kWh and 45.7c/kWh paid to solar households for all their electricity generated. With estimated payback times as low as four years in New South Wales at the time, it’s little wonder solar power systems were in demand.
Only six months later ATA’s Solar Payback Calculator has been revised showing a significant increase in the payback time of grid-connect solar power systems in most states.
What’s happened?
Since the beginning of 2011, feed-in tariffs in SA, WA, NSW and ACT have been reduced or scrapped, with at least one other state currently considering its feed-in tariff options. Last year these governments were applauded by clean energy advocates for their progressive solar feed-in tariffs. In turn, payback times in these states have increased by up to 15 years, while the reduction in the Federal Government’s Solar Credits STC multiplier from five to three means payback times in all states have increased.
In February a 1.5kW grid-connect solar power system installed in the ACT had an estimated payback time of five years based on a gross feed-in tariff of 45c/kWh and a STC multiplier of five. The scheme is now closed to new customers so the same system could take over 20 years to recoup.
Similarly, in NSW the payback time has increased from around three to four years under a 60c/kWh gross feed-in tariff before the mid-year STC multiplier drop, to in excess of 20 years today with the closure of the feed-in tariff.
Payback times are expected to increase to at least 11 years in SA with feed-in tariff changes in October. In WA, the net feed-in tariff of 47c/kWh reached its capacity and was closed to new applications. Electricity retailer Synergy will pay a 7c/kWh hour net feed-in tariff to WA customers under that state’s Renewable Energy Buyback Scheme, yet payback times for new customers will be around 20 years.
Where’s the potential?
Victoria, Alice Springs and Queensland currently offer feed-in tariffs to new customers in the 45c/kWh to 66c/kWh range, with payback times around seven to eight years on a 3kW system, based on only exporting half the electricity produced to the grid. Increase that grid export to 75% and a system in Queensland might pay back in six years.
The last six months show that feed-in tariffs can change overnight, so get in quick. In fact, ATA’s Solar Payback figures for Victoria include a second, lower feed-in tariff of 23c/kWh, which has been in place for many years now and will hopefully remain in place, despite potential changes to the premium tariff of 60c/kWh.
Price of PV
Ultimately one of the biggest factors in payback time will be the price paid for a system. While feed-in tariffs are disappearing, the retail price of a solar power system looks set to drop, says ATA Energy Policy Manager Damien Moyse.
“PV prices are one of the good news stories with regards to this technology. The history of solar PV prices over 30 years has seen a halving of system price with every doubling of global installed megawatts. The current word from China, where most panels are currently manufactured, is that global silicon prices are likely to drop again in 2012, meaning that off-the-shelf prices for solar PV systems should again reduce further next year.”
The STC factor
Household solar prices are also affected by the STC price paid as part of the Solar Credits Scheme. To make it easier for everyone selling and buying a small-scale renewable energy system, the Federal Government fixed the STC price at $40. Yet, the price the consumer receives is actually less than that, probably closer to mid to low $20s and unfortunately this is unlikely to increase.
“The large electricity retailers, who buy the certificates direct from solar PV installation companies, use their significant purchasing power to offer these companies faster purchasing, but at a much reduced price than the $40 stipulated by government. Given the unwillingness of the Federal Government to force electricity retailers to purchase only through the dedicated STC ‘Clearing House’, it is unlikely that consumers will see prices close to $40 per certificate any time soon,” says Damien.
Does it matter?
To make a system pay off earlier, as always, it comes down to how energy efficient your home is in the first place. “Reduce your electricity consumption first, then install a small PV system. Get your consumption down to less than 10kWh per day and then all you need is about a 1.5kW system,” says Damien.
Most people investing in household solar have already travelled the energy efficiency path and are switching to solar to help the environment, not for financial reasons. ATA member Stephen Whately says: “We don’t need to justify the payback times of our cars or holidays, why should you justify sustainable improvements to the home?”
In other words, don’t dwell too long on ATA’s latest solar payback modelling below, the figures are likely to change, and solar households are in it for the love, not the money.
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Earlier this year: Solar payback calculations in February 2011 for a 1.5kW system | |||||
| State | FiT Rate (net/gross) | Electricity Price (per kWh) | Estimated Payback Period (50% export) | Estimated Payback Period (75% export) | |
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| SA | 44c/kWh (net) | 21c/kWh | 6 to 7 years | 5 to 6 years | |
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| VIC | 66c/kWh (net) | 19c/kWh | 5 to 6 years | 4 to 5 years | |
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| WA | 47c/kWh (net) | 20.17c/kWh | 5 to 6 years | 4 to 5 years | |
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| NSW | 60c/kWh (gross) | 19c/kWh | 3 to 4 years | 3 to 4 years | |
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| QLD | 50c/kWh (net) | 21.35c/kWh | 5 to 6 years | 4 to 5 years | |
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| ACT | 45.7c/kWh (gross) | 15.59c/kWh | 5 years | 5 years | |
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| TAS | 20c/kWh (net) | 20c/kWh | 13 to 14 years | 15 to 16 years | |
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| Alice Springs | 45.76c/kWh (net) | 19.23c/kWh | 5 years | 4 years | |
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| In February the ATA’s solar payback calculations were vastly different. These original estimates were based on $5 per watt installed cost (relevant 6 months ago), the 5 times STC multiplier and the feed-in tariffs applicable at the time. | |||||
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System size 1.5kW ATA Solar Payback Calculator | |||||
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| State | System Retail Price | FiT Rate (net/gross) | Electricity Price (per kWh) | Estimated Payback (50% export) | Estimated Payback (75% export) |
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| SA | $4425 | 44c/kWh (net) | 21c/kWh | 7 to 8 years | 6 to 7 years |
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| SA | $4425 | 22c/kWh (net) | 21c/kWh | 11 to 12 years | 11 to 13 years |
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| VIC | $4800 | 66c/kWh (net) | 19c/kWh | 6 to 7 years | 4 to 6 years |
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| VIC | $4800 | 23c/kWh (net) | 19c/kWh | 12 to 16 years | 12 to 16 years |
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| WA | $4425 | 47c/kWh (net) | 20.17c/kWh | 6 to 7 years | 5 to 6 years |
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| WA | $4425 | 7c/kWh (net) | 20.17c/kWh | 16 to 18 years | 20+ years |
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| NSW | $4425 | 60c/kWh (gross) | 19c/kWh | 4 years | 4 years |
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| NSW | $4425 | 26c/kWh (gross) | 19c/kWh | 10 to 12 years | 10 to 12 years |
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| NSW | $4425 | No FiT | 19c/kWh | 20+ years | 20+ years |
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| QLD | $4425 | 50c/kWh (net) | 21.35c/kWh | 6 to 7 years | 5 to 6 years |
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| ACT | $4425 | 45.7c/kWh (gross) | 15.59c/kWh | 6 years | 6 years |
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| ACT | $4425 | No FiT | 15.59c/kWh | 20+ years | 20+ years |
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| TAS | $4800 | 20c/kWh (net) | 20c/kWh | 15 to 16 years | 20+ years |
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| Alice Springs | $4050 | 45.76c/kWh (net) | 19.23c/kWh | 6 to 7 years | 5 to 6 years |
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System size 3kW ATA Solar Payback Calculator | |||||
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| State | System Retail Price | FiT Rate (net/gross) | Electricity Price (per kWh) | Estimated Payback (50% export) | Estimated Payback (75% export) |
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| SA | $10,400 | 44c/kWh (net) | 21c/kWh | 8 to 9 years | 7 to 8 years |
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| SA | $10,400 | 22c/kWh (net) | 21c/kWh | 13 to 15 years | 14 to 16 years |
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| VIC | $10,875 | 66c/kWh (net) | 19c/kWh | 7 to 8 years | 5 to 6 years |
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| VIC | $10,875 | 23c/kWh (net) | 19c/kWh | 14 to 18 years | 15 to 19 years |
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| WA | $10,400 | 47c/kWh (net) | 20.17c/kWh | 7 to 8 years | 6 to 7 years |
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| WA | $10,400 | 7c/kWh (net) | 20.17c/kWh | 19 to 20 years | 20+ years |
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| NSW | $10,400 | 60c/kWh (gross) | 19c/kWh | 5 years | 5 years |
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| NSW | $10,400 | 26c/kWh (gross) | 19c/kWh | 13 to 15 years | 13 to 15 years |
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| NSW | $10,400 | No FiT | 19c/kWh | 20+ years | 20+ years |
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| QLD | $10,400 | 50c/kWh (net) | 21.35c/kWh | 7 to 8 years | 6 to 7 years |
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| ACT | $10,400 | 45.7c/kWh (gross) | 15.59c/kWh | 7 years | 7 years |
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| ACT | $10,400 | No FiT | 15.59c/kWh | 20+ years | 20+ years |
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| TAS | $10,875 | 20c/kWh (net) | 20c/kWh | 16 to 17 years | 18 to 19 years |
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| Alice Springs | $9900 | 45.76c/kWh (net) | 19.23c/kWh | 7 to 8 years | 6 to 7 years |
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Solar Payback Calculator
Assumptions
The calculations above are based on the following details.
Size and Price
• System size: 1.5kW and 3kW
• Installed cost, fully installed, before value for STCs is recouped: $4.50 per watt, or $6750 for a 1.5kW system
• System Retail Price to customer. This is calculated using the Capital City STC Zone. In SA for instance, a system is expected to produce 31 STCs over 15 years. Multiply this by the Solar Credits multiplier of three to get 93 STCs worth $2325. This makes the retail price in SA $4425 for these calculations.
Small-scale Technology Certificates (STCs)
• STC price for above modelling: $25
The fixed $40 price for STCs from small renewable energy systems is the price that liable parties (i.e. electricity retailers) are mandated to purchase these certificates for. The actual price received by the end PV consumer is currently significantly less than $40 due to off-market transactions established between certificate traders and liable parties that occur outside the SRES ‘Clearing House’, which provide greater liquidity to solar PV suppliers /installers but less value to the end consumer.
• STC multiplier: x 3 for first 1.5kW of system size (current from 1 July 2011).
PV Generation
• System degradation rate: 0.5% per annum
• 20% generation losses are accounted for within the PV system
• Panels are assumed to be unshaded, facing north and tilted at the latitude angle ± 5 degrees. Generation from panels not within this optimal range would need to be derated to account for lower generation
• PV generation has been defined using Peak Sun-Hours (PSH) as defined by the Bureau of Meteorology (1990-2008 averaged data, converted to tilted angle of panels, tilted to latitude angle). The final ranges within each are attributable to there being more than one PSH zone within that state, with the lower end of the range reflecting the PSH zone for the capital city and the higher end of the range being reflective of regional locations with reasonable population density. Annual generation for the two locations within each state are calculated using the formula:
Annual generation [MWh] = System Size [kW] x PSH x 365 x (100% – Generation Losses) / 1000
Where: Generation Losses was 20%.
The results for capital city and regional locations are presented as a payback period range in each scenario in the tables. As it turned out, for all states, the longer payback period in the range for each scenario represents the capital city for that state.
Feed-in Tariffs (FiTs)
FiT rate assumptions are outlined in the second column of the tables.
NSW: Given the NSW FiT was scrapped for new entrants in June 2011, ATA has modelled three scenarios for NSW; one involving the original rate (60c/kWh); one using the interim rate (26c/kWh); and one involving no FiT.
SA: Given the recent changes to the FiT scheme in the South Australian Parliament, ATA has modelled two scenarios for the SA FiT; the first involving the original rate of 44c/kWh (due to cease for new entrants on 1st October 2011); and the second involving the adjusted rate from the 1st October 2011 of approximately 22c/kWh (16c/kWh plus retailer ‘fair and reasonable’ contribution for the value of the electricity).
ACT: Given the cancellation of the ACT FiT in early 2011, ATA has modelled two scenarios; the first involving the original rate (i.e. 45c/kWh), and the second involving no FiT.
VIC: Given the uncertainty around the future of the Victorian Premium FiT, two scenarios have been modelled; the first involving a Premium FiT of 66c/kWh, with the second involving the traditional standard FiT of 23c/kWh (in case the Premium FiT is soon closed).
WA: Given the recent closure of the WA government FiT scheme, two scenarios have been modelled; the first involving the previous total rate of 47c/kWh, with the second involving only the ‘Synergy’ buyback rate of 7c/kWh.
Other Model Assumptions
Electricity export rate
For net feed-in tariff jurisdictions (NT, QLD, SA, Tasmania, Victoria and WA), ATA modelled two scenarios assuming a household exports 50% and 75% of the total electricity generated from their solar PV system into the grid.
For gross feed-in tariff jurisdictions (NSW and ACT), ATA modelled 100% export of the total electricity generation from their solar PV system into the grid.
Zones
The following Zones were used for the purpose of STC calculation:
• NT: Zone 1 to 2
• QLD: Zones 1 to 3
• SA: Zone 3
• Tasmania: Zone 4
• Victoria: Zone 3 to 4
• WA: Zone 2 to 3
• NSW: Zone 3
• ACT: Zone 3
Value of grid electricity
See electricity price column. The ATA’s calculations assume a 5% increase in retail electricity prices, yet it could be higher. If grid prices go up, you’ll pay back a system in a net feed-in tariff zone faster. This is irrelevant in gross feed-in tariff states, as you are not offsetting your household consumption with your PV generation in a gross metered situation.
• The inverter is replaced after 15 years at a cost of $900 per kW.
• Discount rate: 6%. This is an allowance for the reducing value of money over time.
Article by Jacinta Cleary. Solar Payback Calculator and assumptions by Damien Moyse and Dominic Eales of the ATA Energy Policy team.
This article appears in ReNew 117.
This entry was posted on Friday, September 16th, 2011 at 12:34 pm