Solar photovoltaic systems are among the best building upgrades available for Australian homes and business, given the high electricity tariffs in the country. However, it is important to note that their energy output depends on sunshine, so generation does not always occur simultaneously with consumption. Surplus electricity can be handled by storing it in batteries for later use, or by exporting it to the power network in exchange for a feed-in tariff, which is paid by electricity retailers.
Since you are paid for surplus electricity production, you might ask if it makes sense to use the largest solar power system you can fit on your rooftop, to have a huge production surplus and bill your energy retailer each month. However, this approach comes with a major pitfall: feed-in tariffs in Australia are much lower than retail electricity prices. In other words, residential and commercial solar offer a great return on investment if you generate energy for self-consumption, but the financial return is much lower if you install an oversized system with the sole purpose of charging the feed-in tariff.
When feed-in tariffs were first introduced in Australia around 2010, the rates paid where very high, reaching up to 60 cents/kWh for some electricity users. However, they were gradually phased out or eliminated altogether, with most going as low as 5 cents/kWh by early 2017. Australian feed-in tariffs have now increased with respect to their lowest point, but still remain much lower than the retail price of electricity.
Although feed-in tariffs change by location and by electricity retailer, in most cases you can expect to be paid between 7 and 16 cents/kWh. However, this is low considering than residential rates typically exceed 30 cents/kWh, sometimes going above 40 cents/kWh, while commercial clients typically pay above 25 cents/kWh.
Assume you are considering a commercial solar power system for a small business, and are currently paying and average electricity price of 25 cents/kWh. If 1,000 kWh are generated for self-consumption, the power bill is reduced by $250. However, if you have surplus production and export 1,000 kWh for a feed-in tariff of 11 cents/kWh, the economic benefit is only $110 – savings are 56% less than if you had consumed that energy!
If you want to avoid excessive energy exports to the power network, there are two approaches you can follow. One option is asking your commercial solar provider to size the array so that there is no surplus generation; for example, if you have a company that consumes 60 kW in the hours around noon, a 50-kW commercial solar array is unlikely to have surplus production. Another option is to complement your photovoltaic system with lithium-ion batteries, configured to store all surplus production. This way you can consume all the electricity generated: surplus kilowatt-hours are simply stored for times of the day when consumption is higher.
Each building is unique, and the commercial solar power configuration that yields the best performance changes accordingly. Get a professional assessment of your site to determine the optimal installed capacity, and to determine if batteries make sense according to you energy consumption patterns.
Cameron Quin has been heavily involved in business development from an early age. After founding and selling two online companies, Cameron found a strong passion for renewables and the opportunities it brings for the commercial and industrial sector. Sharing the possibilities of solar and the knowledge from the Solar Bay team is his favourite pastime.