By Teresa Kok, marketing director of the One Energy Group
For many businesses and households, the investment into a solar PV system has revolved around beating the crippling impact of load shedding on productivity, generating an income and for many, the inherent safety and security aspects that come with having no power. Other important factors are also coming into sharp focus – collapsing infrastructure, untenable service delivery failures, and the rocketing costs of electricity which will only get worse as more properties defect from the grid. With the cost of electricity rocketing up beyond R3,50/kWh and increasing exponentially year-on-year, getting the best return and payback on your solar investment should also be a key motivator and objective.
Getting the best return on your Solar investment. Image supplied by One Energy Group
It all starts with getting a thorough electricity usage and needs analysis done to determine the best system design to ensure that one not only has enough back-up when one needs it for power outages, but that one’s system can equally generate and supply enough power to reduce one’s grid electricity usage and cost, as much as possible.
One Energy provides the following guidance on how to scale your solar PV system to get the very best returns:
1. Match demand with supply
Proper monitoring and analysis of electricity usage will reveal when peak electricity demand happens and how much is used, on various circuits. From here, one can design a system that generates as much as possible of what would normally be used from the grid.
Monitoring shows which appliances or devices are pulling the biggest loads, allowing one to reconsider not only the time and duration of usage, but whether there are more energy efficient options to consider. For example, schedule energy-hungry appliances like pool pumps and geysers to only run when solar generation is at its peak – typically between 10:00 and 16:00. Also, consider putting timers on geysers to manage the time slots of when power for water heating will be drawn – or better still, convert to a solar geyser.
2. Add solar panels for electricity generation
Installing an inverter and battery system for back-up only without solar generation capacity (panels) means that one needs to use the grid to recharge your batteries when the power comes back on. So, although one is in no better or worse off position in terms of cost of grid electricity, one can also not save on electricity costs.
By adding solar panels for self-generation, every kW that you generate from your panels is one less that will be drawn from (and paid for) from the grid. For businesses where the main electricity consumption happens during daylight hours, which is also when the sun is supplying the bulk of one’s electricity needs, this is an absolute win. When selecting panels, invest in the highest-grade monocrystalline panels – premium efficiency translates directly into better energy output and savings over time.
If the PV solar array produces more energy than needed, certain municipalities now allow feeding back into the grid, and the utility pays for this excess power generated by one’s solar panels, essentially offsetting what one uses from the grid, against what one feeds-back in. However, many feed-in tariffs are not yet at a point where it is worth spending money on a larger PV system, and often requires a costly upgrade to one’s electricity meter. For now, the best savings are made by storing one’s excess generation in a bigger battery bank, and then using the energy when one needs it. The best option remains to get as close to 90% or more of one’s electricity usage coming from self-generation.
Teresa Kok, marketing director of the One Energy Group. Image supplied by One Energy Group
3. Add battery storage
There’s every reason to bulk-up on battery storage not only for when the grid goes down, but to reduce usage from the grid as far as possible as grid electricity costs soar. Essentially, an intelligent hybrid inverter will ensure that all the energy generated by one’s solar panels will first go towards powering the property and all the circuits that are connected to it, and then diverting any surplus or extra to charge one’s batteries up again so they are ready to carry one through the grid outages and when the sun is no longer shining. If battery capacity is enough and one’s system is programmed correctly, when the property starts to draw from the grid when the sun goes down, the battery will step in and supply the energy saved in your batteries from earlier, instead of drawing from the grid.
4. Understanding the lifetime cost/kW of Lithium-ion phosphate batteries
There is a perception that Lithium-ion Phosphate batteries installed as a key component of a hybrid PV system are expensive. This is simply not true if one calculates the average cost per kW over the life of the battery. It is clear that the battery energy cost is significantly lower than the cost per kW than that of Eskom or your local council supplies, and massively lower than the cost of a diesel genset KW.
Consider the following calculation based on a 5kW battery costing R30 000:
- With a Depth of Discharge (DOD) of 80% (i.e., 80% of usable capacity which is a protective mechanism to extend the lifespan of your lithium-ion battery) – therefore 4kWh usable power per cycle.
- Battery lifespan = 6 000 cycles
- Total power over life of battery = 6 000 cycles x 4kWh per cycle = 24 000kWh
- Average cost per kWh = R30 000/24 000 kW = R1.25 per KWh
Now compare this to the current Eskom residential cost of R3.51 (Ekurhuleni tariff B). Generator sets run at an insanely high average cost of between R6-R8 per kWh, and need regular maintenance which adds to costs. The strategy should be to cycle the Lithium batteries and increase the battery capacity to maximise the installed inverter and panel array capacity as close to daily electricity consumption as possible. Every kWh of solar electricity generated is another knocked off your electricity bill. With today’s high energy prices and the rapidly reducing costs of quality battery storage, more businesses and homes are better off looking at greater battery storage capacity.
5. A quality hybrid inverter is key
The inverter you choose is an important aspect for realising the best solar ROI – opt for a reliable hybrid inverter with a 10-year warranty. Remember that your solar panels and have long life spans of up to 25-30 years and require little service and maintenance, while lithium batteries offer lifespans of anything from 6 000-8 000 cycles (16-22 years at 1 cycle per day), so choose a good quality inverter that will perform as dependably, for as long.
One of the key issues with cheaper ‘off-grid’ inverters is that they are unidirectional so the solar power can only address the essential services circuits, and savings cannot be made on the higher load items that are not on the backup side of the distribution board (DB). More sophisticated hybrid inverters are bidirectional, so they allow savings both upstream and downstream of the inverter, drawing power from both the grid and battery storage in a co-ordinated exercise to maximise the power you use from self-generation, and only drawing from the grid when it’s absolutely necessary.
Cheaper off-grid inverters will also switch completely to grid power if the load exceeds the solar supply and cannot only pull the portion of excess demand from the grid, while using your solar power first. This can dramatically reduce the savings from solar.
6. Convert your electric geyser to a solar geyser
An electric geyser typically accounts for 30-40% of your monthly electricity usage and cost, so this is the most crucial starting point to reducing one’s daily electricity load, which means one can also buy a smaller and more affordable PV solution. On a R3 000 electricity bill, one will save around R880 per month, amortising the outlay in just over two years – and that is without even taking annual electricity cost increases into account.
7. How to calculate the ‘solar payback period’
The ‘solar payback period’ is the time it takes to recoup the initial investment in a solar power system. Most residential renewable energy systems end up performing as a solid investment, in which one yields a return. The payback period length can vary due to differences in peak sunlight, solar array size and other factors. Many homeowners report breaking even on their investment within 5-7 years, but with the skyrocketing cost of electricity each year, this payback period is coming down all the time.
Calculate the solar payback period with the following formula:
Initial system cost/annual electricity savings = payback period (break-even)
8. How to calculate ROI for a solar PV system
Return on investment (ROI) is related to the solar payback period but instead of calculating the time it takes to break even, ROI calculates the total amount of money and savings that a PV array will provide over its lifetime and the expected utility costs for the same period.
Consider the following example: On an electricity bill of R2 450 per month, which is around 700kWh usage per month (23kWh/day) at a tariff of R3.50 per kWh (2023), the system spec and cost looks like this:
System spec:
- 5kW inverter
- 10kWh li-Ion batteries (upscale your batteries for reasons explained earlier – it is cheaper per kWh than Eskom/council)
- 4.3kW solar panel array
Price, fully installed with all materials and COC: app R148 000
This size system will generate between 20-22kWh per day – 90%+ of daily electricity needs.
On an upfront purchase:
- Based on an 18.65% electricity tariff increase this year and 12.74% for the next year and then a very conservative 5%/pa thereafter (this figure is going to be higher as it does not factor in the increases that local councils will add on top of this).
- The breakeven point is just over 5.5 years based on electricity savings.
- The ROI is based on a very conservative escalation of 5% in electricity tariffs from year 3. Cumulative savings on electricity costs will be R350 000 after 10 years and R940 000 after 20 years – this is a savings multiple of 6.3 on the original investment of R148 000.
On a finance option:
- Based on prime interest rate, with a finance term of 60 months with no annual escalation, the monthly repayment cost is going to be around R3 580/pm (figures may vary based on one’s credit rating and rates applied).
- Savings on one’s monthly electricity bill is around R2 200 per month in year 1, which then escalates as does the cost per kWh of grid electricity – this saving will offset a significant portion of the monthly loan repayment.
- The system will be fully paid off in five years (60 months) and one will own it, and for the rest of the 15-20+ years of the system lifespan, the generation of one’s electricity will be free, with less than a 10% reliance on grid electricity.
Choose a solar energy partner carefully
Getting the best ROI in renewable power, whether for a business or a home, will be based on the initial cost to install the system, the amount of energy it will produce and store, and what this will mean in terms of electricity bill savings as well as the quality and performance of the equipment, installation and ongoing management of one’s system. Enlist the help of a renewable energy installer that can fully explain the options and show the calculations. Remember, with the right set-up from the start, one can expand the system capacity as one’s budget allows and needs change.
Work with a credible, qualified and accredited renewable energy partner that will be around for back-up, support and ongoing consultation over the lifespan of the system – that is a good 20-25 years. Far too many consumers are finding out that the result of going with cheap systems and questionable installers is poor system performance, outright failures of battery systems, and a vicious cycle of constant ‘callbacks’ and maintenance requirements – until the original installer simply does not come back to fix the shoddy work or goes belly-up, leaving the business/homeowner holding the can. In some of the worst cases, fly-by-nights have disappeared with deposits, and the installations are an immediate fire and electrical risk to lives and properties.
The proper installation and management of a solar PV system is a complex undertaking that requires a deep understanding and experience of the various technologies on the market, that are suited to the specific circumstances of every client and site.
Visit http://www.oneenergy.co.za/ to download a comprehensive checklist of all the considerations and the important questions to ask of any prospective solar installer.
| About One Energy Group:
The company is a multiple award-winning and market-leading solar energy installer franchise with a national footprint of franchises and almost 14 000 perfect installations completed to date. |