How does solar power cut back your electrical energy invoice?
How does solar energy reduce your electricity bill?
I almost got myself into trouble this week. This may interest you : Shane Warne backs solar and battery deal that might see energy payments drop to zero. A customer asked me how much cheaper their quarterly electricity bill would be based on their solar feed-in tariff.
My answer was, "about $ 20 … $ 30 if you're really unlucky."
Luckily he didn't hang up!
He asked, "So you expect me to pay thousands of dollars for a solar system to save $ 30 a quarter?" Not quite…
A number of people who are new to solar energy are confused by feed-in tariffs and where the real benefits of solar energy lie. So let's summarize how solar energy cuts your electricity bills and why getting a large solar loan on your electricity bill isn't the best outcome.
Please note that these numbers are an example of what is possible with solar energy. Your situation will almost certainly be different. For this reason, we recommend that you call the Solaray team for personal advice before deciding on a solar system.
How solar energy works in residential areas
Solar energy is fed into the house when it is generated and used first before drawing electricity from the grid. See the article : CLIMATE CHANGE ADAPTATION, MITIGATION, AND DECARBONIZATION – WHERE DOES SOLAR STAND?.
This means that for every kWh of solar energy that is consumed in the household, you reduce your electricity bill directly by the amount that you would otherwise have paid for the electricity. This reduction in your electricity bill is the main financial benefit of solar energy.
Electricity bills vary from house to house, and many households now have a billing time for usage, as shown below:
Billing of the useful life
When you have a billing time, take the average of your peak and shoulder rates to roughly estimate how much solar energy you are saving. You can ignore the tariff during off-peak hours as the solar power will not work during these times (10:00 PM to 7:00 AM). We estimate that you save an average of 25 to 30 cents per kWh through solar energy.
Flat rate billing
If you pay a flat rate for your electricity, you save with this solar amount for every kWh used in the household. Normally, the price in Sydney is 22 to 28 cents per kWh plus VAT.
If the solar power is not being used at home, it will automatically be fed into the electricity grid and your energy trader may pay you a feed-in tariff. This feed-in tariff is usually 6 to 10 cents per kWh. So it's important to look around and find the best deal.
It quickly becomes clear that it is better to save up to 30 cents per kWh than to make 6 cents per kWh from your feed-in tariff.
How Solar Energy Reduces Your Electricity Bill: An Example of a 10 kW Solar System
As an example, Tom installed a 10 kW solar array on a north-facing roof in Sydney. On average, the system produces 40 kWh of solar energy per day (averaged over the year, more in summer and less in winter). Although Tom works during the day, he can use 20 kWh of electricity during the day without any major problems. First, the base load of his home runs on solar power, with appliances like the fridge, freezer, and some lights left on all day. Read also : Other ways to make use of solar power in your house. Tom also turns on the dishwasher when he walks out the door and puts the washing machine on a timer that runs at 1 p.m. In summer, the pool pump runs automatically with solar energy in daylight.
Tom pays a flat rate of 30 cents per kWh for his performance including GST. This means that Tom will save $ 6 on his electricity bill on an average day (20 kWh x 30 cents). In a standard quarter of 91 days, that's roughly the equivalent of $ 550, which isn't bad considering it only uses 50% of the solar power it generates.
It is important to note that this discount is not mentioned on the bill, the bill is simply cheaper.
So if Tom typically pays $ 800 per quarter, the new bill is $ 250.
The remaining 20 kWh that are not used at home are paid out as credit.
In Tom's case, he receives a feed-in tariff of 10 cents per kWh, which corresponds to an average of 2 USD per day (20 kWh x 10 cents) or 181 USD per quarter. This means that the $ 250 bill will be reduced to $ 68 and that reduction will be noted on the bill as a "solar buyback".
So an 800 dollar bill is reduced to 68 dollars. Not bad!
This is an example of how purchasing an "oversized solar system" can have a huge impact on your electricity bill. You need to actively manage your electricity usage to ensure that most of your usage is during the day. It's also much more effective when you have a billing time, as any electricity you use at night is much cheaper than outside of the main billing period.
We want our customers to generally use 70% or more of the solar energy if the solar system is not oversized.
A real bill explained
Here is a screenshot of a real invoice paying a flat rate for its service.
This is a Solaray customer with a 3 kW solar system. The energy charges show a household with a flat rate of electricity, with three levels based on the amount of electricity used in the quarter. The first power block is the most expensive. Since the house consumes more electricity in the quarter, the electricity price drops slightly, in this case from 22.9 cents to 22.1 cents per kWh.
It is important to note that this is not a time-of-use billing. Many people are confused – blocks do not relate to the time of day that electricity is consumed. "Peak Consumption" refers to the main meter in your meter board and is used to distinguish from "off-peak hours" or "controlled load". This is a common setting for electric hot water where you pay a cheaper price for excess electricity generated by the grid at night.
The next lines refer to the feed-in tariff. In this calculation, an average of 4.3 kWh of solar energy per day was not used in the house and was therefore exported to the grid. The credit for this invoice is $ 22.61. The main advantage of the system is not mentioned on the bill, the bill is simply cheaper than without a solar system.
For more personal numbers, call the Solaray team on 1300 221 586. With an invoice on hand, we can give you all of the information you need to make an informed decision about the best solar system for your household.
Please note that the energy consumption of each household is slightly different. Therefore we only used average values in the above examples. In reality, the use of most households is different in summer and winter, as is solar production. It is therefore worth spending a little time with one of our consultants to determine your needs.
One last word about system sizes
Of course, all of the above assumes that you won't add any more battery storage later.
To keep it simple, we didn't consider the impact of batteries on your electric bill or the recommended system size. This gets a little more complicated as we can recommend several strategies based on the use of electricity and your attic space and your budget.
Again, it's worth talking to one of our solar and storage experts about how this can be taken into account: