If you think solar power is a good investment, you're hardly alone. Solar panels will generate close to 10 per cent of the nation's daytime electricity this summer. In South Australia, it will reach 30 per cent. In all, 1.15 million Australian homes and businesses have installed solar electricity systems and demand is growing.
Industry pundits will tell you there has never been a better time to use more sun and less grid. It's not just about the environment, it's an investment no-brainer. You can forecast the returns. Systems have never been cheaper, they say, and the returns will come flowing in.
Alas, if only all investment plans were so simple.
Can you ever make cash off a hot tin roof? Photo: Erin Jonasson
For solar to be a viable investment - and it has the potential - it needs to be understood. Five years ago, in the days of generous feed-in tariffs, solar pioneers were paid handsomely to export their unused solar electricity back to the grid. In some states they were paid two to three times the cost of retail electricity - as much as 60¢ a kWh. A 5 kilowatt system producing 25 kWh of electricity a day would not only drastically lower bills but pay out $350-$400 a month for the privilege. The only drawback then was that the system cost upwards of $15,000 - about 60 per cent more than it does now.
What the government once gave, it has since taken away. Feed-in tariffs have been drastically pared and now average 6¢-8¢ across all states. Making the investment work has become a lot trickier.
Zoya Sheftalovich, a researcher at Choice magazine, which has been examining solar investment returns for the past four years, says solar modesty is now the best policy - the best system is one which simply matches basic household needs.
A small family might opt for a 1.5kW system at about $2500, a large family possibly twice that size and cost. From the start, the way to expedite returns is to use more solar electricity during the daytime and export as little as possible to the grid.
''If you use washing machines/dryers/ dishwashers during the hottest part of the day - and even cooking during the day - you'll be getting much of it for free and avoiding the 25¢-45¢ peak time power rates that the grid will charge,'' Sheftalovich says.
The solar equation has changed. When the tariffs were high, early users made money by avoiding daytime power use. Now they're low, it's about using it to the maximum in sunlight hours to offset high grid prices. Use 70 per cent of the solar-generated electricity in the house or business and only export 30 per cent to the grid and it could pay for itself in five to six years. If you export half to the grid, you could add three to four more years to your payback time.
As solar panels last at least 25 years (although the AC-DC inverters will need replacement by about year 15), the payback will come. It's just a question of when.
Damien Moyse, policy manager at the Alternative Technology Association, says a $10,000 energy budget would be best spent on a smaller solar system ( $2000-$4000) with the rest going on draught sealing, insulation, more energy-efficient appliances for space and water heating and LED lighting conversion. ''If you spent the full amount on a 5kW solar system, for most homes 90 per cent of it will go into the grid. It will take 15 years at least to get your money back on this investment,'' Moyse says.
Solar is beset by variables, both human and natural. Returns can depend on system quality and set-up (angles to the sun, shade problems). Feed-in tariffs also differ from state to state. In the Northern Territory you are paid for all of your solar electricity generated (a generous 27¢ per kWh for exporting energy to the grid) but in all other states it is now paid only for that proportion which is exported to the grid, after on-site consumption.
Don't forget geography. Warwick Johnston, managing director of industry consultancy Sunwiz, says the payback times for a median-priced system tend to be fastest in South Australia (at 4.6 years - where sunlight is abundant and a 9.8¢ feed-in rate holds) and slowest in Canberra (7.9 years - where local electricity prices are relatively low). In all states other than NSW and Queensland, feed-in rates are mandated (see table opposite).
Solar is often cited as the solution to persistent retail electricity price rises, but Moyse says he does not believe they will continue to rise at the same rate. ''In the last five years we've seen very large electricity price increases, but market projections to 2020 are currently much less steep. At this stage, it doesn't look like we'll be seeing 3¢ per kilowatt increases every six months that some people envisage.''
The big question relates to fixed costs. If solar power usage continues to rise and demand for grid-supplied electricity continues to fall, how will the transmission and distribution network asset owners recoup their operating losses? Many believe they will target fixed prices, the per-kilowatt charge for using the network. Fixed costs are negligible now, but that may not always be the case, although Johnston believes they're unlikely to rise for political reasons.
''It would leave people with nothing they can do about their electricity bill. Even if you installed energy-efficient lights, you'd never be able to change that portion of your bill,'' Johnston says.
If fixed prices rose, it could drive the market in solar batteries and can take people off the grid altogether. But those options are currently inordinately expensive. ''A system to both power your house and store excess solar energy might cost upwards of $16,000. That's probably an extra $10,000- $12,000 on top of the solar system … The value proposition isn't there yet,'' Johnston says.
What will it cost and what can it do?
So what savings can you expect? Origin Energy provides the example of NSW customer ''Mathew Test'', whose 3kW system will require 13 photo-voltaic panels and two inverters (which convert the DC solar electricity to household AC power). The total amount comes to $7372, but as every solar customer is eligible for Small-scale Technology Certificates (STCs) over the life of the system, Mathew will pay only $4990. His system produces 63 STCs and Origin pays him the going rate at $37.81 a for each STC - in all a discount of $2382.03 from the original price.
Origin's head of solar, James Seymour, says a 3kW system in NSW should on average produce about 11.7kWh of electricity a day, year round. ''While all households will be different, a typical household will use around two thirds of the energy it produces,'' Seymour says. On that basis, Mathew can expect to save about $865 in the first year. This assumes the cost of grid electricity at 27.39¢ per kW and that Origin pays back to the grid at 6¢/kWh.
If it's 35 degrees outside and Mathew wants to aircondition his house for four hours at 20 degrees, a 3kW system, producing as much as 15-17kWh of electricity on a sunny day should do this with ease - provided the airconditioner is energy-efficient.
''An old airconditioner might use 10-15kWh of electricity to do the job and a new one just 1-3 kWh - there are so many variables, and a lot depends on the size of the house,'' says the ATA's Damien Moyse.
The moral is: provided your household has efficient appliances and good thermal performance through the use of insulation and draught sealing, a quality solar system that is north-facing and with no sunlight impediments, should not only achieve good electricity generation but provide better-than-average savings.
But Moyse says there's roughly four times less solar energy available on the worst winter day in Melbourne than the best day in summer: ''You'll need a lot of panels to run a winter heating load, especially in the southern states. Winter heating is still a real challenge for solar.''
When things go wrong
Ever since solar became fashionable, it has been beset by problems. At first, the problem was fly-by-night operators who moved in on the initial rush, leaving it just as quickly with a legacy of disgruntled and out-of-pocket customers.
These operators are largely gone, but legitimate installers are still subject to an array of complaints. One need only look at consumer review sites such as productreview.com.au and notgoodenough.org to find complaints about solar installers.
True Value Solar, which claims to be the largest installer of solar systems in Australia, has had numerous complaints made for sloppy service and delays in installation. One complainant said the company took his initial down payment but then he received no service for six months. He demanded and received full repayment.
Another customer, Mark Upton, claims TVS upgraded his system from a 3kW system to a 5kW system but failed to check the new set of eight panels before leaving. Upton says the new array didn't work, leaving him out of pocket for the lost power generation.
In December ''Disgruntled Consumer'' posted on the site saying that he had had two systems installed by TVS. He says the quality of both installations was independently reviewed as being ''sub-standard''.
''Both systems have lingering issues which they [TVS] simply refuse to attend to and all attempts to contact them fall on deaf ears,'' he says.
But TVS has also received glowing reviews on the same site, and for every complaint posted it has responded. TVS told Fairfax that it was ''the largest company in our field, selling and installing four times the number of systems to our nearest competitor''.
It says it has installed 85,026 systems, with an installation rate of about 130 a day. ''If you consider the number of complaints versus the number of installs, our complaint rate is minimal at about 1 per cent of installs,''said a TVS spokesperson.
''Within this complaint level, some of the delays experienced are outside our control as we rely on the energy distributor to connect customers to their grid.''
For further information on good practice, visit the Clean Energy Council's website and its consumer guide to buying household solar panels.