Solar Energy: How it works and if it’s really worth it

by | Feb 10, 2022 | Performance

Solar panels are a common sight nowadays in Australia – and for a good reason. Not only do they provide a cheap source of energy, they are also a more sustainable way of power consumption.

But even though solar energy is extremely popular for residential homes, many homeowners don’t know exactly how they work. Through jargon such as STCs, rebates, and kilowatt hours in the mix, and you’ll have a perfect storm of solar confusion.

To shed some literal light on this, we sat down with our friend Ben O’Brien from SolarPro Bendigo to talk about all things solar.

You can listen to our conversation in our podcast episode “Is solar energy really worth it?”

Table of content

  • How does solar energy work?
  • What are solar feed-in tariffs?
    • The problem with the grid
  • What are solar rebates?
  • How much does a solar system cost?
  • Should I get batteries with my solar system?
    • The cost of batteries
  • Can I put solar panels on my home?
  • Is solar really sustainable?
  • What is the future of solar energy?

HOW DOES SOLAR ENERGY WORK?

Solar panels are made up of layers of silicon solar cells that are protected by a glass sheet. The silicon is doped in a chemical that gives it a positive and negative charge. When light, or photons, hit the silicon, the electrons inside the silicon atoms then begin to travel towards each end of the silicon cell.

That’s when, essentialy,electricity begins to flow, because the electrons have been excited enough to jump to the other end of the cell. That’s electricity as we know it.

That steady flow of electricity is called a direct current and is the same as what we get in our little AA batteries.

But unfortunately, that’s not compatible with our home, because houses use an alternating current. If you have ever grabbed a camera and filmed a light in your house, you’ll notice that it’s flickering. You can’t see it with your eye but your camera will catch it. That’s because the current is alternating through the light, it’s pulsing back and forth pretty fast.

To make this energy from your solar panels usable by a house, it has to be put through an inverter, which converts it from direct current to alternating current and then can be used in a house. If there is anything extra left over, it will get sent back into the grid and you’ll get a little money for it (see feed-in tariffs).

So you’ll basically have your own little power station up on the roof!

Good to know: Solar panels are actually powered by light, not by heat. 25 degrees is around your optimal temperature.

WHAT ARE SOLAR FEED-IN TARIFFS?

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A solar feed-in tariff, or feed-in credit, describes how much money you can earn by feeding excess electricity from your solar system into the power grid, where it can then be used by other households that are connected to it.

How much you can actually earn back by feeding excess solar power into the grid has changed a lot over the last couple of years. 10 years ago, you could make as much as $0.66 per kilowatt hour, while we are closer to $0.06 at the moment, depending on your location.

Good to know: Kilowatt and kilowatt hour are two different things. A kilowatt is a measure of power (the rate at which something uses energy), while a kilowatt hour is a measure of energy (the capacity to do work).

THE PROBLEM WITH THE GRID

In order to feed into the grid, you must be connected to it yourself. These solar systems are called grid connected systems, opposed to off-grid systems.

However, Australia’s electricity grid has traditionally been a one-way street, and is not designed to have electricity not only sent out but also fed back into it. That means if too many people are supplying excess power back into the grid from their solar systems, it can push the voltage too high, which in turn causes inverters to automatically switch off to prevent further damage.

What is the solution for that problem? Sustainable systems engineer Ben O’Brien from SolarPro Bendigo believes it has to do with a mindset shift.

“I think we do need to transition away from thinking that we need to send electricity back into the grid. You can actually make the most money by using the electricity yourself in the middle of the day – or storing it in a battery so you can use it later on. 

People often blame the solar industry for the grid needing to be redesigned. But solar isn’t the reason the grid needs to be redesigned, the reason the grid needs to be redesigned is because our current method of creating electricity is really dirty and destroying our planet. We have to move away from coal power, because it’s destroying the planet, creating emissions, and all sorts of problems. So, while we are forced to redesign the system, let’s design it around renewable energy sources.”

WHAT ARE SOLAR REBATES?

Another popular term when it comes to solar energy is rebate. Because solar energy is a clean way to produce electricity – which also lowers the cost of living for – the Australian government supports people who want to invest in solar energy.

The first rebate is the federal rebate, also called STC (Small Technology Certificate).

This certificate is awarded to you if you invest in solar panels and an inverter at the same time – and it expands along with the system size.

The second rebate is given out by the state government, so for example the solar Victoria rebate in Victoria. Currently in 2022, you are eligible for a $1,400 rebate from the state government. On top of that, you can get a $3,500 battery rebate as well.

However, not everyone qualifies for these solar rebates. You have to meet some eligibility criteria. In Victoria, to qualify for the rebates your system must include an inverter and be smaller than 100 kilowatts. Additionally, if you have 2 people on the rate notice, their combined income can’t exceed $180,000 a year, and their property must be worth less than $3 million. That’s a pretty good problem to have! Finally, you can’t have participated in the solar Victoria program before in order to qualify for their rebate.

HOW MUCH DOES A SOLAR SYSTEM COST?

The cost of a solar system mainly depends on 2 different factors:

  • The size of the system
  • The quality of the components

Let’s take a closer look at these aspects.

THE SIZE OF THE SOLAR SYSTEM

How many solar panels you need depends on your electricity consumption. So the first thing a good solar engineer will do is have a look at your electricity bill to see how much electricity you are using at different times of the day, and at different times of the year as well.

Here’s an example.

If you are using about 20 kilowatt hours of electricity per day, with about four hours of sunlight a day, you probably need a five kilowatt inverter to cover that need.

A 5 kilowatt system refers to the wattage of the solar panels combined on the roof. If you have 3 kilowatt panels, and you have 18 panels in total, you’ll end up with 6,660 watts or 6.6 kilowatts (1 kilowatt = 1000 watt).

This is often paired with a five kilowatt inverter. The reason for this oversizing is that we don’t have full sunlight all the time. If we have 80% sunlight, but we’ve got 130% oversizing of our inverter, then we can still get that 5 kilowatt output we’re hoping for.

However, you shouldn’t just focus on your current usage, but also consider any future purchases that might drive up your power usage. If you want to put in a pool, buy a new split system air conditioner, or have got an electric car on the way, your energy usage is going to increase a lot. So you should always allow room to grow and future proof your system, as doing so later on can become quite expensive. If you want to add to your solar system, you have to buy a second inverter as well as additional panels. So it really is cheaper to just do it right the first time.

THE QUALITY OF THE COMPONENTS 

Just like with everything else you can buy, the price of a solar system is highly dependent on the quality of the products you go for. If you’re looking for a car, you technically only need something that has 4 wheels and an engine, but there’s different things that work better for your needs.

SO, HOW MUCH DOES A SOLAR SYSTEM COST?

A 6.6 kilowatt solar system usually costs something between $5,000 to $7,000. That system will pay for itself in about 3 to 6, maybe 6 years.

“I’m very interested in investing and finance”, says Ben O’Brien. “Normally, the return on cash for a solar system is between 25% to 30% a year. If you invested $5,000 in the ASX 200 index (the top 200 companies in Australia), the average return is only 7% a year.”

On top of that, there is a state government loan, offering $1,400 as an interest and fee free loan. So if you decide to pay back $40 a month, you’ll have paid back the load in just under 3 years.

So in many cases, investing into a solar system turns out to be cash flow positive, meaning that your new electricity bill as well as your finance repayments will actually be cheaper than a non-solar electricity bill. Do that for 5 years, and you will have paid the complete system off. So you really can’t afford not to get solar.

SHOULD I GET BATTERIES WITH MY SOLAR SYSTEM?

While batteries may not seem as if they are as attractive a return on investment as a solar system by itself, the right setup can still help you with your day to day cash flow. This is especially true if you decide to downsize your home, or retire. In these cases, investing in a battery early on means that you won’t have an electricity bill to pay.

Another great reason for a battery setup is the positive impact on the environment – or rather less impact altogether. You will have clean green, renewable energy, while being completely self sufficient and not producing any emissions.

Finally, a battery means that you will have a backup system for your whole house, so if something happens to the grid and you lose power connection, most batteries can still back up your entire house. You basically just get a text message from your battery saying, “Hey, I’ve got your back, my friend.”

THE COST OF BATTERIES

Again, the cost of batteries varies greatly depending on the quality of the product. One of the most popular batteries according to Ben O’Brien is the Tesla Powerwall, which costs about $15,500 at the moment. Apply the rebate to that, and you’ll come down $3,500 to about $12,000.

However, if your individual site calls for additional work, such as running cables to the other end of the suburb, you’ll be facing additional costs. Australia has quite strict safety regulations about where you can put a battery, so that’s something to consider as well.

Another battery Ben O’Brien and his team like to use in Australian brand Redback. Having a hybrid inverter built into it, you can plug your solar panels straight into the battery, saving you the cost of buying a solar inverter, as is necessary with the Tesla battery. The Redback comes in at about $7,000 or $8,000 for 7 kilowatt hours.

CAN I PUT SOLAR PANELS ON MY HOME?

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There are not many houses you can’t put a solar system on. All you need is four walls and a roof, and not too much shading that would permit the sunlight from hitting your solar panels.

If your house is completely in the shade, it will probably be nice and cool in summer, but you’re not going to get much solar generation from it. However, you still have the option then to put the system on a shed that is nearby and not as shaded. So you should probably get an expert to come to your house and have a look around for potential options.

The only thing that would send solar engineers running though is probably a pressed aluminium tile roof, as they are notorious for getting roof leaks after solar installers have a crack at them. Luckily, they are pretty rare.

IS SOLAR REALLY SUSTAINABLE?

It is true that solar panels do come at an environmental cost. Manufacturer have to mine to get the right materials for the solar panels, and batteries use lithium, which is a finite resource.

However, if you are looking at the environmental impacts throughout the lifecycle of solar panels, you will find that in just 3 years, you will have saved so many carbon emissions by using your solar system, that you have off-set the emissions used for their production.

Ben O’Brien explains it like this:

“Let’s just say one panel takes about 900 kilograms of carbon dioxide equivalent emissions. That panel in its first year will create enough electricity to offset 300 kilograms of carbon dioxide emissions. So in three years, normally two to three years, it saved enough emissions to match its production, its manufacturing and mining. So it’s actually really similar to the financial aspect. In about three years, it’s paid for itself, in carbon and in dollars and cents. So yes, it checks out everybody, it’s all above board.”

WHAT IS THE FUTURE OF SOLAR ENERGY?

Now that we have assessed how a solar panel works, how much they cost and if they are actually as sustainable as people think they are (they are), it is time to look ahead and talk about what’s next for solar.

One thing to keep an eye on are virtual power plants. In this scenario, all batteries are connected to the grid and work as one to release energy and soak it up as required.

Think of it this way: You charge your electric car using a so-called bi-directional inverter. That inverter basically goes two ways, so you can charge your car but also charge your house and power the grid.

This could be a solution for using all the excess electricity produced during the day. If everyone plugged their electric cars in at work and soak up the electricity from the roof of their office or warehouse, they can not only drive home, but also plug the car into their house and power it for free.

Ben O’Brien is very excited about these possibilities, but also cautious to make any decisive predictions:

“A year is like seven years in the solar industry. Things move very fast. And it’s a full time job to try and keep up with all the new technology. A lot is happening, and it’s all pretty exciting.”

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