How a 79% Increase in Electricity Rates has changed the Business Case for Solar PV And Batteries.
A business case for anyone considering renewables or dreading their next electricity bill (particularly South Australians)
What’s happening to retail energy prices!?
In less than 12 months my household electricity tariffs increased 79%. Just to be clear on this significance, the 17 years from 1995 to 2012 retail price of electricity increased 130%, including the increases due to carbon tax.
David Richardson, Australia Institute
South Australia has the most expensive electricity rates in the country and it’s right up there on the global scale. While this is bad for consumers it does stimulate innovation.
These new rates have caused a turning point in the cost benefit analysis (CBA) for solar PV and batteries.
My house, it’s occupants and energy info
We are 2 adults and a golden retriever, and we live in a 4 bedroom sandstone house in Adelaide that was built in 1905. The house contains a;
5 kW solar PV system
5 kWh Tesla Powerwall battery
10.5 kW ducted electric heating & cooling for the bedrooms
7 kW split system unit for the kitchen and living area
Gas stove and gas instantaneous hot water system
My partner worked from home in 2023
Total electricity consumption in 2023 was 4850 kWh
Grid purchased electricity was 830 kWh (17%)
Annual electricity costs $437 incl GST
Average electricity invoice since July is $25 per month
Solar Energy Generation and Electricity Sources
Side by side these doughnut charts can be confusing however they paint a picture of generation and supply. On the left is solar generation and where the energy is distributed. Note there is more solar generated than what the home actually consumes. The doughnut chart on the right displays the energy sources that power the home.
* The battery is 86% efficient, meaning some electrons are lost during the recharge and discharge process.
Electricity habits and consumption breakdown
We moved into the house in January 2022 and the solar PV array and battery were already installed but it wasn’t until Sep-22 that I got the Tesla app and could monitor energy generation and consumption in real time. This changed our energy use patterns considerably, whenever the battery is full and the sun is shining it’s party time, and we’re turning everything on. Even when no one is home, the dog gets an air-conditioned house (yeah, I know). Once the sun sets, we switch back into manage mode.
Net Present Value (NPV) for solar PV and battery
Using the data from my own home I modelled a solar and battery system suitable for most homes that use between 6500 - 8500 kWh pa. When managed well this should supply around 90% of your energy needs.
8 kW Solar PV array (30yr life cycle) coupled with a
13.5 kWh Tesla Powerwall 2 (20yr life cycle)
Total installation cost of $25,000
The calculations factor in time of use (TOU) for solar and battery discharge, Alinta Energy rates (slide 2), solar feed-in tariffs, grid purchased electricity, asset life cycles and a 12% discount rate on the NPV.
*The NPV helps you decide if an investment is likely to give a sufficiently large return to be worth pursuing. Generally speaking an NPV >0 is good.
Cost Benefit Analysis
Why the difference in unit rate?
The weighted average cost per kWh is based on the time the energy is used. Therefore solar energy will be consumed during the shoulder and peak times only – when the sun is shining, whereas the battery will be discharging at all times of the day and night but primarily the peak times.
Disclaimer:
These figures are based on my personal experience, energy use patterns and tariffs and may not be suitable for you. Understanding your energy load profile, tariffs and future electricity use (including installation of EV chargers and heat pumps) is key to calculating a system with the right specifications for your personal or business needs.
My Green Business provides energy and sustainability consulting services and does not sell any products nor have any affiliation with companies that do.
Please reach out if you’d like to know more.
