Are solar energy systems worth the cost?

October 26, 2013 by  
Filed under Green Energy News

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More people are installing solar power, but it is still expensive and might not be worth it for everyone, writes HAMISH MCNICOL .

Brian and Libby Richardson wanted a single energy source to power their home.

As parents to two young children, they targeted a warm, healthy house without the need to pay lots of bills.

Their previous home had used wood, gas and electricity.

“So we had a supply charge for all three and a maintenance charge for all three,” Brian said. “It’s really expensive.”

When it came to renovating the family’s new home, they decided the cost of firewood, gas and electricity no longer stacked up.

Furthermore, Brian had had enough of coming home after a long day’s work only to trudge out to the shed to collect firewood.

“We thought why not just get one energy source, because there’s only one charge.”

Given power bills have basically doubled in the past decade, the Richardson’s approach is easy to understand.

Households now pay an average annual bill of about $2000, despite prices in other OECD countries having decreased over the same period.

Earlier this year an “energy poverty” crisis was beginning to emerge, as about 12,000 homes had their power cut off in the three months to June because of overdue power bills.

The Government’s $347 million home insulation scheme, Warm Up New Zealand: Heat Smart, had insulated about 235,000 homes since it began in 2009.

But for the Richardsons, an entirely different, “self- sufficiency” approach was installed in their Paraparaumu home in April this year: solar power.

They installed a 5.5 kilowatt (kW), 21-panel photovoltaic (PV) solar system, capable of producing about 7200kW a year, nearly all of the typical annual household consumption of about 8000kW.

The system cost $18,000.

Brian said it was “reasonable money” but was a long-term choice, which he believed stood up economically.

They considered it a sunk cost absorbed in the purchase of their home, which was nothing in the scheme of renovating a house.

“What’s $18,000?; you negotiate that on a price of a house.”

Libby said in the six months since the system was installed they had just recently noticed the benefit to their power bill.

Since switching to PV it had dropped to about $160 a month, which included all their heating, cooking and hot water needs.

“Which is cheap,” Brian said.

The family is not alone in turning to solar PV power, as installations heat up around the country.

In the year to March 31, 2013, connections have nearly quadrupled since 2011, according to Sustainable Electricity Association of New Zealand (SEANZ) figures.

About 40 to 50 home solar power systems were being installed every month, creating a $44.5m a year industry.

At the same time, the price has dropped about 36 per cent, for an average system cost of about $10,000.

International Energy Agency figures expected 11 per cent of all the world’s power would be generated by PV by 2030.

SEANZ chairman Brendan Winitana, speaking at the association’s annual conference in Wellington earlier this month, said ther it was an exciting time for the industry.

The biggest barrier to entry remained the cost and availability of finance, as well as better education for consumers.

But one University of Canterbury researcher believed that despite a drop in price, the economics of domestic solar remained questionable.

Dr Alan Wood was part of a team which investigated the financial cost and benefit of solar electricity in a $6.3m GREEN Grid project funded by the Ministry of Business, Innovation, and Employment.

He said the project had worked on a web-based calculation tool, which was about to be launched and would help people work out if it was a worthwhile investment or not.

“You need to be careful; it’s quite hard to work out what you’re saving and what you’re not.”

He costs included installation, building consents, distribution company applications, wiring and inverter technology, which all-up could be at least $10,000.

“The panels have got pretty cheap; the other stuff hasn’t got so cheap just yet.”

He said as installations became more popular, the cost had to decrease.

The key question was how much solar power a home used and how much was exported to the grid during the day, and then imported during the evening when people were home.

Solar panels convert electricity for use in a home, but any excess, typically generated during the day, is sold back to the power grid.

Electricity prices currently ranged from about 25 cents a kilowatt-hour to 35c a kWh.

So if a consumer was at home during the day, avoiding such costs by having a PV system was “definitely worthwhile”, Wood said.

But no electricity company offered buyback rates the same as the rate it sold to houses.

There is currently no policy in New Zealand regulating the price electricity companies pay for power, so prices ranged from as low as 3.5c a kWh to 25c a kWh.

Meridian Energy buys solar electricity at 25c for the first 5kWh generated, and 10c after that.

Meridian customers lose their “prompt payment discount” for exported solar power, which Wood said offered nothing more than a “feel-good factor” for consumers.

He said Contact Energy, which offered a buy back rate of 17.285c excluding GST, was the best offer.

But even then, if you are exporting at this rate during the day and then buying back from the retailer at 25c at night, your return is immediately cut.

“If you’re doing it for just the financial returns, then grid connection, I think for the average household, probably doesn’t quite cut it. The value of your PV installation is hugely dependent on how much of the power you use yourself.”

One such household, retired couple Alex and Barbara Ferguson, recently installed a 14 panel, 3.5kW system on their home.

Alex, not Manchester United’s former manager, said their $12,000 system had a lot going for it.

They would crank up their power usage on a sunny day, and had spreadsheets which monitored daily usage and export rates.

Barbara said they hadn’t had it long enough to work out the economics, but the decision to install in July had been more of an environmental one anyway.

“We know the figures are down on what we were using.”

She said they rarely bought any power during the day time, describing the install as a current cost which would ultimately pay for itself in a few years’ time.

The Energy Efficiency and Conservation Authority (EECA) recommended people carefully do their sums before investing in PV.

Kapiti Coast-based Solarzone director Brian Sharpe said PV systems required optimising on a case-by-case basis.

for to provide systems which would generate 70 per cent of a home’s power if people were home during the day and about 50 per cent if the house was empty most of the day.

Sharpe said a system needed to be sized so most of the total solar generation was consumed by the home.

“What you want to look at is the base load that the house is using, add 1800kWh a year and that’s your best financial return.”

This was based on Meridian Energy’s scheme, which would pay 25c up to 1800kWh exported in a year.

Sharpe said a 3kW system would produce about 4800kWh of electricity, of which 1800kWh would be exported to Meridian and the remainder used by the house.

“The gain is going to be somewhere around $1400 a year, based on an electricity price of 31c.”

Solarzone’s calculations therefore meant customers effectively signed a contract to supply electricity to themselves at 12c a kWh for the next 25 years, the warranty period of the panels. “That’s basically half, so it’s a good deal.”

He said people needed to be able to afford it, however, and for many people, PV panels might not be a good proposition.

Prices had come down because of increased global demand and production in China. Despite this, he did not believe subsidised PV installations were a good thing.

Subsidies would see “cowboys” enter the market.

Sharpe would prefer certainty around buy-back provisions.

Regardless, the Richardson household is content with their solar PV choice, and would recommend it to others.

“We’ve taken that one-off capital cost and reduced our ongoing cost.

“There’s a bit of a feel-good factor.”

– © Fairfax NZ News



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