PV profits made simple

I’ve had one too many people tell me they want to install solar PV on their homes, but as PV has not quite reached parity with coal they will hold off until its affordable. Well let me bust this myth once and for all. While parity pricing is important to organisations wishing to sell power to the grid, it has no bearing on the viability of domestic systems, because you are not trying to sell the power back to the grid at around 8 cents per unit, you are reducing your power bill at around 26 cents per unit, more than 3 times as much.

I am going to present some numbers, but hang in its not difficult. Generating capacity is subject to a fair number of variables, in these cases I have been conservative so as to not over state the case. It also assumes the PV is situated on a north facing roof with no major shading. Her goes, a 2kilowatt (kw) Roof Top PVPV system will cost around $3,800 to install in metro Perth at the moment. The kw rating is its maximum output, which is rarely achieved for many reasons, if it were the system would generate 48 kilowatt hours (kwh) each day. A kwh is also known as a unit of power. PV does not generate at night so let’s reduce that potential output by half to cover night time, so we are now down to 24 units. PV generates less on cloudy days and when the sun is at an oblique angle. Lets cut our capacity by half again to allow for this. We are now down to 12units per day, or 3,480 units per year. Synergy currently charges 25.7209 cents per unit. Therefore the annual dollar value you would save by installing a 2kw PV system is $895.

If you chose to add the purchase price to your mortgage that would attract an interest charge of around 4.7%. Given we cannot be sure of the future interest rates lets work on 5.5%. If you pay your power bill savings into your mortgage repayment, the PV installation would be paid off in 5 years. Your system will have a 20 year guarantee, so once paid off you have 15 years of payback, if you continued to pay savings into your mortgage by the end of 20 years you would have paid an additional $20,000 off your mortgage. This is calculated on constant power prices and interest rates. If either increase over the 15 years the savings would be greater. Alternatively you could save up the $895 per year and after 5 years double the size of your system.

Frankly anyone with a home, a roof and ability to borrow $3,800 and has not installed PV is burning money at a rate of around $900 a year. Now, what could you buy with that?

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