The economics and usefulness of domestic rooftop solar PV installations

Today I thought I might take a skeptical look at an issue which is perhaps a bit different to the issues you normally see skeptics talking about. Hopefully you find it interesting none the less.

As most of you are aware, there are heaps of companies out there lining up to install 1 kilowatt (kW) kW solar photovoltaic (PV) grid-​​connected systems on your house, and the government rebate of $8 per watt of installed capacity for such installations seems pretty attractive.

The out-​​of-​​pocket costs for installation of these systems range from about $3000 to $5000, although some companies offer such systems for essentially nothing 1, only costing you $500 or so for the meter upgrade, after the $8000 government rebate is repaid. These guys 2 sell their basic 1 kW system for $5000 out-​​of-​​pocket after the subsidies and rebates, and these guys 3 sell their system for $3000 after the rebate.* For most of these systems, the average cost advertised, the out-​​of-​​pocket final cost after the subsidies have been taken off, is about $3000 depending on the quality of the system.

Personally, in the case of the systems advertised for zero overall cost, I’d be a little bit worried about the quality of the system, since they’d have to be honing the price down quite a bit to get it down to the point where they can pay for it, pay for installation, and still make a profit, just from the $9000 or so available in the $8000 government subsidy plus the value of the system in terms of Renewable Energy Credits (RECs). You wouldn’t want a shonky system that burns down your house, would you?

According to the BOM’s empirical satellite date, in southeastern Australia, including Melbourne, Adelaide, Sydney and everything in between, the average daily solar exposure is 15 megajoules per square meter per day 4. In other words, the total amount of solar energy received on the Earth’s surface, here, is about 15 megajoules per square meter, on average, in one day.

As most of you probably know, power is the rate of change of energy with respect to time; that is, the rate at which energy flows, measured in joules per second, or watts. Since we receive 15 MJ per square meter per day in the form of solar radiation, that’s an average power density of 174 watts per square meter, on average over the whole day. During the daytime it’s approximately twice that, approximately 350 W of power per square meter, but you get nothing at night.

Now, if you buy a solar PV module that is rated at 180 W, or whatever power figure it is, you get that advertised amount of power only if there is 1000 W per square meter of solar radiation incident onto the panel. If you’re close to the equator, close to the summer equinox, on a perfect cloudless, sunny day, with your starsigns in your favour, you might get 1000 W per square meter of power in the form of incident solar radiation if you’re lucky. On average, in the real world, you don’t get close to that at all for the majority of the time.

So, a “1000 W” PV array, in the real world with an average of 174 W/m^2 worth of incident radiation flux, will generate 174 W of power, on average.
(Averaged over the full 24 hours in a day.)

Therefore, you get about 1500 kilowatt-​​hours (kWh) of total energy generation per year. If you’re paying, say, 13 c/​kWh for electricity, you save about $200 per year on the electricity bills. If you pay about $3000 out-​​of-​​pocket for such a system, then, it will take 15 years to pay for itself.

However, after about 10 years, it’s entirely plausible that the grid-​​connect inverter will die, and there won’t be a subsidy paying for that, so that’s probably another $2000 or so you’ll need to shell out. (The inverter is the box full of power electronics that converts the low-​​voltage DC electricity from the photovoltaics into an AC sine wave at the higher grid voltage, and keeps that AC sine wave in phase with the AC waveform on the electricity grid. These inverters typically have a warranty of only five years.) So, that adds another 10 years to the payback time. You probably won’t even be able to pay it off before that second inverter reaches the end of its life.

There are installers that offer higher quality inverters with longer warranties, but they are the higher end of the price brackets for the systems — this is the catch with the extremely cheap systems.

So you’re looking at a payback time of 25 years, for a system where the silicon photovoltaic cells are unlikely to last more than 20 – 25 years. Such systems, in all likelihood, are never going to pay themselves off, even with the large government subsidies. All these businesses that are doing the installations are literally leeching off the large government subsidies that exist for these installations; if you took away the subsidies they would all disappear straight away.

With a saving of close to $200 per annum off your electricity bill, if the customers had to pay the $8000 which is subsidized by the government, just that $8000 portion alone would take 40 years to pay off, and you would never, ever even come remotely close to paying it off. This scheme is seemingly just a huge money sink for the government; it’s completely unsustainable, and it doesn’t seem to accomplish anything meaningful.

Customers love it, since they’re effectively getting this huge investment mostly given to them by the government. It’s just like the Rudd government’s economic stimulus handouts — people are getting a generous free handout, so they think that’s fantastic, and people will very rarely stop and question whether this actually makes sense as a worthwhile thing for the good of the country. Nobody truly wants to be skeptical when they’re getting a free handout, but as always, skepticism is really important.

One of these systems generates about 1500 kilowatt-​​hours per year, as we’ve discussed above. In 2006, the electricity output sent to the grid from the Loy Yang A coal-​​fired generator in Victoria, just as a typical example, was 15,995 gigawatt-​​hours. (That is, 15,995,000,000 kilowatt hours.)

Therefore, if you wanted to generate the same amount of energy from 1 kW rooftop solar PV installations as just one coal-​​fired power station, you’d need 10.7 million of these installations. There are approximately 8.5 million households in Australia [5].

If you installed a 1 kW solar array on the roof of every household in this country, you would have an amount of energy output from those installations that is quantitatively considerably less than one single coal-​​fired power station. I hope that puts things in perspective.

Even if you could roll out 10.7 million solar installations, or increase the size of the systems we’re considering and to about 1.3 kW, and deploy 1.3 kW systems on 8.5 million Australian household roofs, that still doesn’t give you the means to replace the single coal-​​fired power station, because it isn’t high capacity factor baseload generation, where the energy is constantly assured to be available at all times. You still need that high capacity factor, reliable baseload generation to back you up when the photovoltaics are delivering less energy, or no energy at all.

If the government paid out the $8000 subsidies for 10.7 million 1 kW solar panel installations (or, equivalently, 8.5 million 1.3 kW systems at a rate of $8/​W) — which aren’t capable of replacing even one coal-​​fired station — it would cost 86 billion dollars.

That’s an enormous, incredible amount of money to think about. It’s far, far more expensive than just about any kind of energy generation I can think of. It’s far more expensive than nuclear energy, more expensive than wind energy, more expensive than hydroelectricity, more expensive than solar thermal or geothermal generation, more expensive than natural gas, and even far more expensive than centralised solar-​​photovoltaic power stations, which are themselves very expensive.

This is an incredibly expensive little enterprise which makes the governments give the appearance that they are promoting clean energy systems to replace coal-​​fired generation, in a way that makes customers happy by basically giving them heavily discounted infrastructure. However, in actuality, it does nothing, for all practical intents and purposes, to actually replace coal-​​fired power stations. There are multiple ways that the coal-​​fired generators could actually be replaced with clean generators, delivering very real cuts in Australian anthropogenic carbon dioxide emissions, for the same amount of money that is being spent on this program.

[1]: http://​www​.nuenergy​.com​.au/​p​v​s​o​l​a​r​.php

[2]: http://​www​.solarpanelrebate​.com​.au/​h​o​m​e​-​s​o​l​a​r​-​p​o​w​e​r​-​s​y​s​t​e​m​s​.​html

[3]: http://​jlelectrics​.com​.au/​m​a​i​n​/​p​a​g​e​_​s​o​l​a​r​_​p​o​w​e​r​.​html

[4]: http://​www​.bom​.gov​.au/​c​g​i​-​b​i​n​/​c​l​i​m​a​t​e​/​c​g​i​_​b​i​n​_​s​c​r​i​p​t​s​/​s​o​l​a​r​-​r​a​d​i​a​t​i​o​n​.cgi
[Select “average” to generate the map.]

[5]: http://​www​.abs​.gov​.au/​a​u​s​s​t​a​t​s​/​a​b​s​@​.​n​s​f​/​0​/​D​5​1​8​1​C​C​7​3​5​6​1​D​7​0​1​C​A​2​5​6​F​7​2​0​0​8​3​2​F​D​9​?​o​p​e​n​d​o​c​u​ment

* I have absolutely nothing against, or for, these particular companies. They’re just the first examples I happened to find on a Google query.