These days, getting the most out of a solar PV system means using the energy directly in your home – ‘solar self-consumption‘. By putting the solar energy go good use within your home, you avoid the need to purchase electricity from the grid – at a rate between 18-35c per kilowatt-hour (kWh), depending on where you are (as per the table below). By contrast, exporting solar energy into the grid will earn you only about 6-8c/kWh.
| Electricity price snapshot by capital city (Feb 2017) | ||
| City | Electricity consumption charge ($/kWh incl GST)* | Solar feed-in rate range ($/kWh)** |
| Adelaide | $0.34 | $0.07 – $0.12 |
| Brisbane | $0.26 | $0.06 – $0.11 |
| Canberra | $0.18 | $0.065 – $0.075 |
| Darwin | $0.26 | $0.08 (estimated) |
| Hobart | $0.26 | $0.067 |
| Melbourne | $0.26 | $0.11 (from July 2017) |
| Perth | $0.27 | $0.08 (estimated) |
| Sydney | $0.24 | $0.10 (estimated, from July 2017) |
*Based on data from EnergyMadeEasy.gov.au and other relevant websites.
It therefore follows that a smaller system will generally offer better value and returns than a larger one. In fact, this is the advice that Solar Choice and most reputable installers have been giving their customers since the last of Australia’s state-sponsored solar feed-in tariff programs closed a few years ago. The reasoning behind this is that it doesn’t make sense to pay more for a system whose energy you can’t make greater use of.
3kW solar system self-consumption example: Less solar into the grid
5kW solar system self-consumption example: More solar into the grid
One of the reasons that a 3kW solar system may is more attractive than a 5kW system is that the price will almost inevitably be lower for the 3kW system. The table below shows the approximate difference between average prices for 3kW and 5kW solar systems in Australian capital cities. On average, a 5kW system costs about $2,000 more than a 3kW system.
Even though 5kW systems have higher out-of-pocket costs, they also produce more energy. Often, the increase in price is disproportionately small compared to the increase in energy yields – which means greater value for money. On a dollars-per-watt ($/W) basis, 5kW solar systems are cheaper than 3kW systems across the board – by about 28c/W (as per the table below).
So let’s assume that you’re tossing up between a 3kW and a 5kW solar system. As per the table below, it turns out that the payback periods for both are often the same or similar – even taking into account the fact that you’ll probably use a smaller proportion of the energy produced by the 5kW system. This helps to explain why 5kW has come to be the average system size for Australia.
Note that we’ve taken a conservative approach and assumed that you’ll use exactly the same kWh of energy in both the low and high self-consumption scenarios. In reality, you’d probably end up with a slightly higher self-consumption ratio than detailed below for the 5kW system because it will produce a bit more energy when you’re likely to use it.
At this point we’ve established that 3kW and 5kW solar systems can theoretically be equal in terms of their investment-worthiness, even though the larger system comes at a higher capital cost. The benefit of going with the smaller 3kW system would be conservation of your savings. What are the benefits of going with the larger 5kW system?
Source: Solar Choice. Reproduced with permission.
This post was published on May 24, 2017 11:07 am
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View Comments
What's the worst thing that can happen if you buy a system which is in some sense "too big?" You might produce a bit more electricity than you need.
No one with a large PV system wishes he had chosen a smaller one. Everyone who has a small PV system wishes he'd gone for a larger one the first time around.
With the increasing uptake of electric vehicles there will always be something useful to do with any extra production.
I think you are right. With home battery storage becoming available and more affordable over time it should mean that households go for as large a solar system as they can afford to install. The coming of VPP's will make it an even stronger argument to go "Big" when installing solar.
Thanks, that is an interesting read.
I already have a 1.9kw system, and wanted to add another 5kw. Wondering how the new laws about the 5kw limit will affect me.