Electricity prices in Australia are among the highest in the world, and this is very bad news if you rely on the the power grid to supply all the electricity used by your property. However, expensive electricity is great news if you are a solar power user, since it means you will be saving more cash for each kilowatt-hour generated. While utility rates are likely to continue increasing, solar photovoltaic systems become more affordable each year. In 2016 alone, solar power accounted for half of all new generation capacity installed in the world!
The main advantage of solar photovoltaic systems is that their energy input is free and guaranteed to be available for as long as the sun exists, which is billions of years into the future! In addition, lack of moving parts means that solar panels have minimal maintenance needs: basically they just have to be kept clean and free from shadows. The only major expenses when owning a solar PV system are the initial investment and eventual component replacements. However, these costs can be mitigated with a solar Power Purchase Agreement (PPA).
Reducing Utility Bills with Power Purchase Agreements
When you sign a power purchase agreement, the solar PV system provider assumes the full installation cost, as well as maintenance and equipment replacements. Then, you agree to purchase the energy generated at a rate below utility tariffs. This can be a very smart move from the financial standpoint, for several reasons:
- The price of solar PV systems will continue to decrease, which allows PPA providers to guarantee a low electricity cost. On the other hand, power grid electricity will most likely continue to increase in price.
- A PPA provides energy savings from the first month of operation. Owning a PV system yourself is also viable, but you must assume a high initial expense and must then wait through a payback period.
- The PPA provider assumes any expenses associated with component failures. If you own the installation, even if your equipment is covered by warranties, you may lose plenty of time coordinating reparations.
As utilities continue to increase their tariffs, the price difference between power grid electricity and solar PPA electricity will continue to broaden, leaving higher savings in your pocket each year. If you want to reduce your electricity costs even more, you can use those savings to upgrade your lighting, heating and cooling systems and consume even less electricity from the grid. Energy storage is another viable upgrade, allowing you to use solar energy at night or in cloudy days.
Expensive electricity affects homes and businesses alike, but solar PV systems have a modular design that allows any system size, from a few kilowatts on a residential roof to several megawatts for an industrial site. In addition, PPAs are available regardless of system size, and large commercial or industrial energy users can take advantage of economies of scale with a lower generation cost per kWh.