Benefits of Generating Electricity Onsite with Solar Panels

06 November 2020

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The electric power industry remained unchanged for over a century: electricity was generated at centralised power plants, and delivered to consumers with a distribution grid. However, this has changed with technologies like solar panels, which make generation viable at the point of use. There are many benefits when generation and consumption happen in the same place.

For most homeowners and businesses, the motivation to install solar panels is reducing electricity expenses. A solar array requires investment and maintenance, but purchasing all energy from the grid is often more expensive, especially in Australia. Onsite generation brings the following advantages:

  • Generation can be distributed among many buildings, instead of being concentrated at power plants. When an individual system malfunctions, there is little or no impact on the grid, while a power plant malfunction can cause a major blackout.
  • Electricity travels a much shorter distance between the generation system and the point of use, which saves the transmission and distribution losses of a power grid.

Electricity consumers who prefer to avoid the initial investment can sign a solar PPA instead, where the system provider is in charge of financing and operation. Instead of paying for the solar PV array, the user pays for electricity at a price below the local tariffs.

Improving Power System Resilience with Distributed Generation

A conventional power plant can be taken offline by a fault in a key substation or transmission line. A single 100-MW power station can be disconnected by a fault, but a generation capacity of 100 MW across many buildings is unlikely to go offline at once. For example, if a 400-kW generation system in a commercial building is disconnected, there are still 99.6 MW available.

Solar power systems can now compete with fossil fuels in cost, but they are still limited by dependence on sunlight. However, several emerging technologies could help remove this limitation:

  • Demand side response is an innovative concept, which consists of “shaping” electricity demand according to the resources available. Power-consuming activities with a flexible schedule can be programmed in hours when there is surplus generation from solar farms or wind turbines.
  • Energy storage has become a buzzword in the energy industry, and there is a strong reason why. Affordable energy storage could eliminate the only disadvantage of solar and wind power against fossil fuels – the variable output.
  • Virtual power plants are an innovative concept, where distributed energy resources are linked together and coordinated with a smart platform. This system operates like a conventional power plant, but capacity is not limited to a single physical location.

Currently, the intermittent output of solar panels and wind turbines limits their use, regardless of how much their cost has decreased. If energy storage achieves a cost reduction of the same scale, it would enable a larger share of renewable generation. With demand-side response and VPPs, these distributed resources can be used even more efficiently.

Onsite Solar Generation Reduces Power Grid Losses

Electricity has a heating effect when it travels through power lines, and some energy is lost in the process. These losses can be reduced but not eliminated: the best grids in the world normally have around 5% losses, and they can exceed 30% in the least efficient grids. However, even with a 5% loss, one of every 20 kilowatt-hours is wasted.

When solar power systems are installed in buildings, there is no power grid between the electricity source and the point of use. As a result, the losses associated with the grid are avoided. In the case of Australia, where coal is still a dominant power source, onsite generation also eliminates the carbon footprint of grid losses.

Technological innovation is difficult to predict, but the power grid of the future will likely use more distributed resources and smart controls. Grid losses are eliminated when generation is moved to the point of use, and variable generation can be used better when consumption is flexible. Finally, if energy storage is added to the mix, it can balance supply and demand. Solar panels with battery systems are a promising combination, since both have a modular design that adapts to any building size.

Australia has some of the highest electricity tariffs in the world, but this is caused mostly by grid costs, which represent over 50% of the kWh price in some tariffs. Contrary to popular belief, electricity generation has reasonable costs in Australia, but delivering that energy to the point of use is expensive.

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