Solar Power: A Reliable Investment In Uncertain Times
I’ve never seen anything like this before. Don’t get me wrong, there have been some crazy times in the past with government’s shutting down rebates and the like, but what a start we’ve had to 2020.
We’ve had catastrophic fires, 4 big storms across Sydney that caused widescale blackouts – many of our customers reported being without grid power for up to a week.
And now there are drops in both the stock market and the Aussie dollar, and a global pandemic that’s not only going to disrupt our daily lives in the short term, but it looks like there may be long term issues with supply chains for anything made overseas.
With difficult times ahead for so many of us, it’s no surprise, to me at least, that a lot of people are rushing to install a solar system.
In this article, I’d like to go through:
- Why so many people are buying solar at the moment
- How solar is both a safe and a potentially high-yielding investment
- The dangers of cheap solar, and
- How a good quality solar system can eliminate your power bills and pay for itself in well under 5 years
Before we get started, it’s important I mention this disclaimer. None of what we are going to discuss today is personal financial advice. Our expertise is in solar power and battery storage, not financial planning. Nothing we present is personal advice, all of this is just general information based on our opinion, our expertise within the solar power industry, what other households are doing, and what our customers are telling us.
If you decide after reading through this article that solar power is something you’d like to consider, the Team here at Solaray can help you by looking at your power bills, your energy usage and your circumstances to give you more personal advice.
We can help you size up a solar system, help you choose the right brands and technology, and whether battery storage will be a good fit, and then provide a full quote for installation. We want to make sure you have all the right information upfront so that you can make an informed decision.
What solar systems are people buying at the moment?
The way people are approaching solar is getting really interesting. The average system we are installing is now around 10kW, both with or ready to add battery storage later.
Some of the main reasons why this is the case include:
- The price of solar panels is at a record-low (this also means most people are choosing good quality panels, thankfully).
- Most people will have an electric or plug-in hybrid car within the life of the solar system
- Our energy prices are some of the most expensive in the world, and yet they continue to increase
- Battery storage is becoming an attractive option for many households, in fact in 2020 we are now starting to sell just as many batteries as solar systems
- And… there are some really good feed-in tariffs available from the energy retailers at the moment, over 20 cents a kWh
On the other hand, we have a lot happening in the markets. Investments that seemed like a good idea only a few months ago are now becoming riskier, and who knows how long this period of instability will last, with the COVID-19 virus rapidly spreading across the world, which may also affect supply chains for everything made overseas.
Solar power is a safer investment with a great ROI
More than ever before, I’m talking to people who are looking for ways to invest their money and are investigating solar as one of those options. Many of them have closed positions on the stock market, and although having your money in cash can be considered a safe haven, interest rates are so low for cash that many people are getting returns that are actually less than inflation. In other words, they are losing money, even on long-term deposits.
Other people are scrambling to reduce costs as an uncertain future awaits. If you have money now, it may make sense to use it to reduce your future costs. This is especially true for people who are about to retire.
This actually makes good sense in the best of times, but at the moment I’ve spoken with a number of people who are investing in smart solar power and storage rather than, for example, building a new deck or other common home-improvement projects. One guy told me about a month ago that he and his wife decided to replace their power bill with solar power instead of going on a cruise this year. Probably a smart move with the way things are panning out.
I’ve also heard from people who are getting refunds on holidays that have been cancelled. It’s almost like tax return time, where people are getting money deposited back into their bank accounts and are trying to make the most of it.
Again, for a lot of people, getting rid of your power bill for the next 20-25 years is a really attractive proposition for money that would otherwise be sitting in a cash account, and we are going to get into those numbers in a minute.
So why is solar considered such a safe investment?
With a solar power system, your investment rests on three main factors:
- Energy prices remaining high
- The sun shining
- And the solar system working
Of these three factors, 2 seem fairly certain. Energy prices have skyrocketed over the last 10 years and there doesn’t appear to be a political solution, at least not in the short term.
The sun, of course, should continue shining, at least we hope so!
The 3rd factor is the one within your control, and this is why we strongly recommend choosing a top-quality system with good quality panels and full support from your installer. I’ll expand on this point a little later in the article.
Why is solar power considered such a good investment
Let’s get into the numbers to see why so many people are buying solar at the moment, especially in such uncertain times:
A solar system in Sydney will output around 4 times its size, so a 10kW solar system will output around 40kWh a day on average, but it will do more in summer and less in winter:
If you have a power bill handy, you could compare this to your own daily energy usage, but for now let’s assume you use around 30kWh a day, with 20kWh used during the daytime, which will mean on average you are only able to use 50% of the solar power from a 10kW system as it is generated.
20kWh of usage during the daytime looks like this, anything below the line is solar power used in the home, everything above the line is solar power that is sent to the grid:
You can see the system is sized up so that even in the middle of winter, if the weather is nice your home will mostly be powered by solar. In reality, a lot of households increase their energy usage in summer to run air conditioning and/or pool pumps, which is great as it means they are making the most of the solar power as it is generated.
In the past, we would have recommended a 5-8kW array or thereabouts, because a solar power system in Sydney outputs around 4 times its size, so a 5kW system would output on average 20kWh a day, covering your usage of 20kWh a day during the daylight hours.
A 10kW solar system outputting double the electricity you use during the daytime would have been considered overkill because when feed-in tariffs were low and solar panels were expensive to buy, you needed to be using or storing as much of the solar power as possible at the time of generation. But that was when feed-in tariffs were around 5-8 cents per kWh.
In 2020, electricity prices are high, but so too are feed-in tariffs, creating the perfect conditions for solar.
It is now common for households to be paying over 30 cents per kWh for power. This is either as a flat rate, or on a time of use plan, where the average of the peak and shoulder billing periods will be around 30 cents a kWh, or even more. We don’t factor in the off-peak billing period because this is typically overnight from 10 pm to 7 am:
If you are looking at your power bill now, be sure to add GST to the numbers on the graph as GST typically isn’t included in the tariffs. It is normally added at the bottom of your bill before the total.
Assuming half of the power generated from this 10kW system is used in the home and your cost of power is 30 cents per kWh – you will save 30 cents x 20kWh a day of solar power that you were able to use.
Over the course of a year, that’s 7,300 kWh for a $2190 reduction on your power bill. Importantly, you won’t see this on your bills, they will just be $2190 less over the course of a year than what they would have been without solar.
The other 50% of the 40kWh produced by your solar system gets sent out to the grid because you didn’t use it, and this is where you can get paid a feed-in tariff from your energy retailer.
21 cent feed-in tariff from Origin Energy
Origin Energy is currently offering a 21-cent feed-in tariff for households with an existing solar system.
From what our customers have told us and from what is on the Energy Made Easy website, it looks like you need to sign up to a 2-year contract to get the good feed-in tariff. And of course, this is just one example, if Origin is offering this, I’m sure other energy retailers are too.
On this Solar Boost plan, the cost of electricity is 29.52 cents a kWh in Ausgrid, with a daily supply charge of 86.38 cents. This is fairly typical from what I’ve been seeing at the moment.
And I mentioned Ausgrid, I should just clarify that Ausgrid is the distributor for the Eastern half of Sydney up through the Central Coast, Endeavour Energy is the distributor for Western Sydney. At a basic level, energy retailers (like Origin Energy in this example) buy power from the distributors and sell it to households and businesses.
With this solar plan from Origin Energy, it looks like there are some small fees here and there that you should double-check as well, such as a late payment fee of $12 and things like that.
But let’s not get too deep into the numbers of a specific plan, as they will probably be a little different based on your postcode and individual circumstances. What’s more important is to see how you can really take advantage of an offer like this to eliminate your power bills and get a really good return on the money you invest in solar.
So based on the cost of electricity at 29.52 cents a kWh, and a daily supply charge of 86.38 cents, the total yearly benefit of a 10kW solar system using only half of the solar power is $3723.
If you were to use all of the solar power a 10kW system generated, it could save you $4380 a year. We find a lot of our customers use around 70% of the solar power as it is generated, which gives you a saving of about $4000 in this example.
- Use 50% of the solar power: Save $3723
- Use 70% of the solar power: Save around $4000
- Use 100% of the solar power: Save $4380
Again, this is the direct saving on your power bill from not buying electricity from the grid, plus the money you earn as a feed-in tariff for any solar power you don’t use.
So, here’s the key question for you – if you could save around $4000 a year, how much would you be willing to pay for a solar system?
Based on a 5% return on your money, which I’m sure a lot of people would be delighted to lock-in based on what’s happening in the world right now, that would be $80,000; invest $80,000 and get a return of $4000 a year, you’ve got a 5% return on your money annually. But of course, solar doesn’t cost $80,000.
Now throw in rising power costs – even if you just assume it will increase by 3% because of inflation, and you are set to save up to and over $100,000 over the 25-year life of the system. Not bad!
In fact, you could spend a fraction of $80,000 and not only get a top of the range 10kW system, but you could also get battery storage with blackout protection, so no matter what happens out there in the world, you can keep the lights on, the modem on, the phones charged, Netflix running and whatever else you need to keep running when the grid goes down, whether from another stormy summer like we just had or a zombie apocalypse.
Funnily enough, things like garage doors and fish tanks are often mentioned when I get calls from existing customers after a blackout, but of course, it’s water pumps, fridges, freezers, charging batteries, and mobile phone charges that can really turn a battery from an energy management system into a valuable insurance policy.
We’ve been installing batteries for long enough now to hear some stories that would make your hair stand on end. We had one customer who had to stay up all night during a blackout pumping water to stop the basement flooding, after installing 2 Tesla Powerwalls, he had 3 blackouts this summer, 2 that lasted a few days each, and 1 when he wasn’t home. His investment in battery storage is now paid off from the money he would have lost from the house flooding.
We have had multiple customers call us now to say that the Powerwall battery has saved them more money than the initial investment.
So whether you choose to install battery storage or not, a 10kW solar system can not only be a safe investment but also a very attractive one compared to other investments, and because of low interest rates on safer options such as bonds and long-term cash deposits.
The return on your money with a 10kW solar system
A good quality 10kW system can give you a return on your money in around 3-5 years, depending on which system you choose.
Assuming a $4000 yearly reduction on your power bill, that means you could spend up to $16,000 and get a top of the range 10kW system, and still get a return on your money in 4 years. And of course, you could get a really good quality system for much less than $16,000, you don’t need to go top of the range if you don’t want to. When you talk to the Solaray Team, we will happily go through the different price points and explain the benefits of each.
The potential 4-year return on a top of the range system is why so many of our customers upgrade to LG Solar panels with a 25-year product warranty, and/or Enphase micro-inverters that come with panel-level output, the best online monitoring platform available with full consumption monitoring, and because there isn’t high-voltage DC power running from the panels to your meter board, it’s much, much safer.
Again, our team would be happy to talk through the differences between an Enphase system and a string system and provide a price for both, and we have a lot more information that we can provide if you’d like to dive into the details.
In the long run, it makes good sense for most people to pay a bit more for a 25-year warranty on the panels, increased safety, performance and reliability. This is especially true if you are planning to live in your house long-term, but even if you plan on moving, choosing better panels adds value to your home, in fact, based on studies done here in Australia, solar only tends to add value to your home if you have good quality brands on your roof, just because of all the issues to do with cheap solar, which I’d like to get into now.
The problem with Cheap Solar
A 3 to 5-year return on your money with a good quality solar system is why wading into the murky waters of the cheaper end of the solar industry is no longer worth even considering – why risk all of the well-know issues cheaper systems come with when you can get such a good return on your money with a quality system?
It doesn’t make sense to try and shorten your R.O.I. down to under 3 years, knowing that around 1 in 5 solar systems are deemed defective by the CEC every year, and an incredible 1 in 3 systems across Australia are estimated to no longer have warranty support, because either the installer or the manufacturer have disappeared. Have a look at this graph that shows the reduced number of solar manufacturers operating in Australia:
The solar market in Australia is flooded with ‘cheap solar’ deals at the moment, especially 6 and 6.6kW solar systems being sold for less than $5000. This is making it difficult for households to work out the right price to pay for a good quality system that will perform as expected.
The largest solar installer in Australia in 2017 was renowned for selling cheap solar systems, and it came as no surprise to us when they recently went into liquidation. They join nearly 1000 solar installers in the last few years that have now left the industry.
As many industry insiders say, the warranties that come with these cheaper systems aren’t worth the paper they are written on.
Only 3 years on, and we are seeing the same thing all over again on the TV with ads for $3000 to $4000 systems with words such as bill buster, tier 1 and premium.
What I find incredible is they advertise that the inverter has Wi-Fi but don’t mention what the brand is. Same for the panels, the output is advertised but not the brand. Imagine seeing an ad for a car that mentions the size of the engine and how the car connects to your phone, but then the ad doesn’t tell you what brand the car is!
The strange thing is, most people know all about the dangers of buying a cheap solar system.
The entire industry often gets a bad rap from the reliability issues with cheaper solar systems. From faulty components to dodgy installations and non-existent service. There are thousands of horror stories posted online, and we get dozens of calls a week from people trying to get their system back online after people give up on trying to get help from their original installer.
We’ve got more information about Cheap Solar if you are interested, simply ask the Solaray Team for more information when you make your enquiry.
The good news is cheap solar is so easy to avoid. Just stick to the good brands, and get the system installed by a reliable installer with a great reputation, whether you chose us here at Solaray or one of the other good quality installers. That way, on the odd chance that something does go wrong, you can rest assured that we will fix it for you, as a part of our service package that comes free with all our installations.
How Solar Power Can Eliminate Your Power Bill
So I mentioned previously how solar power can eliminate your power bill. Let’s get into some of those numbers because it’s really exciting just how effective solar power is at reducing one of a household’s main expenses.
Because I love round numbers, let’s assume you use 10kWh of power at night on top of the 20kWh used during the daytime, for a total of 30kWh a day.
This is a fairly typical day/night distribution because when you have solar power you tend to run your appliances as much as you can during the daytime, such as the dishwasher, washing machine, air conditioner etc. It’s free power after all so it’s good to run things during the day.
Based on the price Origin charge you for power in this example (30 cents a kWh) the 10 kWh at night cost you = $1095 a year.
The daily supply charge of 86 cents a day adds up to $315 a year, which, just so you know, can be covered by 1kW of solar (86 cents a day can be paid for by sending 4kWh of power to the grid because you will get paid 21 cents a kWh for it. 1kW of solar will output around 4kWh of power a day in Sydney, and hence cover your daily supply charge).
This gives you a total yearly electricity cost of $1410 (night-time electricity usage of 10kWh + your daily supply charge).
From your $1410 bill, you then get the feed-in tariff reduction of $1533… leaving you with a credit of $123 a year! Happy days 🙂 Solar has eliminated your power bill:
And in this example, you’ve only used half the solar power your system produces!
Wait… This Might Not Be Your Best Option
This is only one strategy our customers are using to make the most of their solar system.
Just to give you more context, many of our customers actually prefer to go onto time-of-use tariffs where electricity during the afternoon is more expensive, but it is much cheaper overnight.
Ausgrid state on their website that on time-of-use tariffs (where you have peak, should and off-peak tariffs), electricity is cheaper around 80% of the time. And then by installing solar panels both north and west, you can cover most of the peak billing period between 2 pm and 8 pm with the solar system working right up until sunset, and then either use power from a battery during the evening or just pay the shoulder and off-peak rates overnight.
There’s more than one way to skin a power bill!
Let us help you make the right call
If you’d like some help running the numbers for your household, fill out the form below and we will give you a callback at a time that suits. We do it all without the sales pressure and we won’t talk you into a larger system if it’s not a good fit.
Let’s see when you use your power and what you want to achieve with a solar system, then we can make some recommendations.
We currently have some great specials running on our Enphase smart solar systems, plus we can offer you a package deal if you’d like to include battery storage.
In terms of stock, we are currently at full capacity with all our teams at work, and we have good access to stock because we were able to lock in large purchases before things closed down in China and Korea. We can’t guarantee it will stay like this, so to avoid issues with supply, it is advised that once you are ready to install solar power, you do so as soon as possible so that we can get your system installed in case things change for the worse over the coming month.
Thank you very much for making it through to the end. My hope is that you found this information valuable, and above all else, please keep yourself and your family stay safe over the months ahead.
For more information and personalised pricing, you can book a call with the Solaray Team by filling out the form below, and please make sure you let us know if there is a good time to call: