Finding the Optimal Size for a Solar Power System

13th Jul 18

Written by James Doyle

A solar photovoltaic system can achieve a significant reduction of your electricity expenses, especially when you consider the high kilowatt-hour prices in Australia. This applies regardless of how a solar array is deployed: owning one is cheaper than purchasing electricity from the grid equivalent to its production, and a Power Purchase Agreement offers you a kWh price discount of up to 50%.

However, like many other building upgrades, a solar power system must be designed properly to offer the best performance possible. With poor design and planning, you can end up with a very expensive installation and a long payback period.

Many factors are considered when designing a solar photovoltaic system, including the rooftop condition and the presence of shadows at the project site. Another important design decision is specifying the optimal system capacity in kilowatts, which is strongly dependent on how the building uses electricity.

Optimal Solar System Capacity = Highest Return on Investment

When deploying a solar photovoltaic system, it is important to understand that there are variable costs and fixed costs. Variable costs are affected by solar system capacity, while fixed costs stay constant over a range of system sizes.

  • The solar modules themselves are an example of a variable cost, since the number required is determined directly by the system capacity. For example, if you use 300-watt modules, you need 20 for a 6 kW system and 30 for a 9 kW system. Complementary elements such as wiring and racking also represent variable costs, since they depend on the number of solar panels that must be connected and supported.
  • Although inverters also have a variable cost, their price does not increase in proportion to the number of solar modules. For example, the price of 40 modules is roughly twice the price of 20 modules, but one 10-kW inverter is much cheaper than two 5-kW units.
  • Fixed costs are those unaffected by solar system capacity, such as permitting and interconnection procedures. Monitoring equipment and some electrical protections also behave as fixed costs when dealing with small-scale installations.

Considering how inverter prices and fixed costs interact, it makes sense to use the largest solar power system that is viable for your property. You will find that the cost per kilowatt tends to decrease as system size increases. However, oversizing a solar array is not advised either:

  • Surplus production from your solar array can be exported to the power network, but you are not paid the full retail price of each kilowatt-hour. Instead, you get a feed-in tariff that can be up to four times lower than the kWh price.
  • Oversized installations have plenty of surplus production around noon, which means you reach a point of diminishing returns – increasing the number of solar panels is financially viable when you are generating below your power demand, but the value of additional capacity is much less once you hit the point of overproduction.
  • The fact that Australian feed-in tariffs will decrease between 2018 and 2019 is very unfavorable for oversized solar arrays, since their surplus generation becomes less valuable.

Therefore, the best strategy is to size a solar array as large as possible, as long as you can consume the energy output. Once you reach the point of overproduction, the business case for additional capacity becomes less favorable.

A common misconception is that you can reduce your power bills to zero if you size your solar array to produce electricity equivalent to your annual consumption. However, this is not the case because solar production peaks around noon, while residential energy consumption is the highest after sunset. Even if you are producing the same number of kilowatt-hours you consume, the power bill does not drop to zero due to the effect of low feed-in tariffs.

What Happens When Batteries Are Included?

If you are considering batteries for your solar power system, the outlook changes. Thanks to the storage capacity available, you can size a photovoltaic array larger without having overproduction.

  • Surplus generation from the solar array is stored in the battery system, instead of being exported to the grid.
  • You can then use the stored electricity when solar generation is low, or at night when it drops to zero.

The logic behind this is simple: you get a very low feed-in tariff for exporting your surplus electricity, but save the full kWh price of each kilowatt hour consumed. When the retail kWh price is much higher than the feed-in tariff, batteries make sense from the financial standpoint.

Australia is becoming a very promising market for battery systems of all sizes. Homeowners can use them to meet their nighttime consumption with solar generation, and electricity companies are starting to use them for power grid stabilisation.

Additional Factors that Limit Solar System Capacity

There are some cases where properties do not have enough space for an optimally-sized solar power system. For example, a single-floor house has roughly the same floor space and rooftop space, but a 20-storey building has 20 times more floor area than rooftop area. In the case of the building, even if the area available is blanketed with solar panels, their production will only be a fraction of consumption.

However, note that there may be a favorable business case for solar power with batteries, even when the area available is small. Electricity tariffs for businesses normally include a capacity charge, which is based on the highest demand peak measured over a specified billing period. Batteries can be programmed to supply their stored energy during peaks in demand, minimising the capacity charge.

Shadows are another factor that may limit the size of a photovoltaic array. If an area of your property is covered by the shadow of a large building most of the day, installing solar panels there is not recommended.

The space available for solar panels may also be limited by rooftop condition. For example, older fiber-cement roof shingles are brittle, which makes them unsuitable for solar panels and their racking.

Like with most other building upgrades, a professional assessment is the best starting point for solar power. Instead of rushing to purchase the first option available, make sure you get a solar installation that adapts to your site conditions and energy consumption profile.

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