How Much Will You Get Paid For Your Solar Electricity?

Hint: It’s a bit more complicated than you might think!

By my reckoning 25% of people buying solar power systems want to save the planet as a priority. The other 75% want to save their bottom line and saving the planet is a nice side-effect.

I get a lot of emails saying: “Help! My bills are [insert large number here] dolars a quarter – what size solar system do I need?”

The answer to this question is quite longwinded – but if you want to understand whether a solar system is worthwhile for you financially – you need to understand this stuff! So I made a video to help explain. If you are considering buying a solar system I strongly recommend watching this:

[Note: Since I made this video the Victorian and QLD Feed In tariffs are no longer more generous than the rest of the country – they are both 8c per kWh at time of writing!]

And here’s the transcription:

“Do you get paid for making solar electricity?” Well, the short answer to that question is thankfully “yes”, you do get paid for the solar electricity you make, and the longer answer to that question well, read on.

Okay, so you’ve got to understand that there’s 2 different ways you get paid for solar electricity. Those 2 ways depend on whether you are using the solar electricity in your house or you’re exporting solar electricity to the grid. To make this clearer, let’s have a look at this graph.

Okay, this is a graph of the electricity demand in your house, how much electricity your house is using compared to the amount of electricity generated by a typical solar system.

Let me talk through the graph, the blue line and it starts at midnight on the left – at midnight maybe there’s someone up watching late night crap TV. Generally there’s not gonna be much electricity used to power apart from maybe a TV and some lights. As people starts to go to bed, maybe that’s 1  in the morning in some houses, and that will be when there’s very little electricity being used apart from to power from a few appliances on standby, that’s the first dip.

When everyone wakes up, you get your first peak and they put the lights on, put the toaster on, put the heating on and you get your first peak of the day because everyone gets ready for work, gets ready for school. Then everyone generally (if it’s a domestic house) leaves the house and the electricity use again drops until people get back from work or school, stick the computers on, the TVs, the heating, the cooling (depending on the season) and then that’s actually when you get the biggest peak of the day in electricity demand. And that’s the second highest peak you can see and then as everyone’s goes to bed it drops off again and we start again. So that’s the blue line: electricity demand for a typical Australian house.

Now look at the yellow line and the yellow lump, that’s the typical output from a solar system which unsurprisingly is nothing at night, nothing in the evening, and it peaks about midday (solar noon) and that’s when you get the most amount of solar power. Now, the interesting thing there is that the peak in household demand and the peak in solar electricity supply don’t coincide, so generally in most households you’ll be exporting a lot of electricity in the middle of the day and that’s the orange shaded area.

The yellow shaded area is the solar electricity you’re generating that you use in the house. Now these two shaded areas showed the different amounts of money you get for your solar electricity. If you offset the electricity in your home; the amount of money you’re saving is very simple it’s whatever you pay for electricity. So generally in Australia or at the moment 2012, that’s about 28 cents per kilowatt hour.

Now, how much do you get paid for the electricity you export? Well, how much electricity do you export depends on the time of day, and it’s calculated on a second by second basis instantaneously and it depends on where you are in the country. Every state in Australia has a different feed-in tariff. It varies from Queensland which at the moment is very generous, you get about 44 cents of kilowatt hour,  to Victoria where is about 1 for 1, so that is quite nice because it keeps things simple, basically makes no difference whether you export offset to how much money you get in per kilowatt hour.

[NOTE: the Feed In Tariff has dropped to 8c in both QLD and VIC since we made this video!]

And then you get the rest of Australia, where basically you’re generally getting a lot less for the electricity you export than what you’re paying for your electricity.

For example, residents in New South Wales are getting about 6 cents kilowatt hour if they’re lucky, for exported electricity.

So how much do you get paid for depends on

a) what state you’re in and what your feed-in tariff is, if you wanna know that, have a look on the website and go through what the feed in tariffs are for each state, and it depends on your electricity use patterns. So it is actually quite a complicated equation and a good solar installer will work it out for you by looking at your electricity bill and looking when you use electricity in the day.

So hopefully what that graph’s put across is that you get paid 2 different amounts for your solar electricity, the yellow part of the graph, that was electricity used in the home and you save money at one rate. The orange part of the graph: that is what you export and that depends on which state you’re in and what your feed in tariff is.

So what I’m trying to say is that “yes,” you get paid for your solar electricity but it is quite complicated in equation, it depends on when you use your electricity during the day, how big your solar system is, what state you live in, what your feeding tariff is. Now, what that means is that you can’t just look at someone’s electricity bills say, “Oh you use $600 dollars a quarter, so you need a system this size”, bullshit! Okay, that’s a sign of a pretty lame salesman.

You need to actually look at when you use your electricity during the day and you need to do some fairly complex arithmetic to kind of make some educated guesses as to the size of solar system they need to maximize their payback based on the importing and exporting pans. Now what I’ve created, is a solar calculator so you can do this yourself to get a good idea, and which is a good first start, here’s the link.

What you can do in that calculator is you can put in your state, you can put in your solar system’s size and it will work out about how many kilowatt hours a day you’ll generate, you got to guesstimate, how much you think you’re going to export, how much you think you’re going to use in your home, a few other variables it crunches together, puts in electricity price inflation and quite few other things and comes out with a cash flow forecast and a payback. So that’s a good sanity check, if you’ve been told by some sales guy that the payback is “such and such,” stick the numbers in that calculator to see if he gets a similar number because it’s a pretty good calculator, I think it covers all the bases.

So that was a very long answer to a very short question, “do you get paid for your solar electricity?” As you can see, thanks to the Pollies having different feed in tariffs, different rates whether you buy the electricity or sell the electricity and different solar power generation at different times of the day, it’s quite a complicated equation and you probably want a really good solar salesman to talk you through the payback. And to do the sums properly not just, you know you got a 600 dollar bill you need this sized system, that’s not good enough in this age to calculate the payback of a solar system.