Saturday, June 25, 2022

Was it worth it?

The solar power system at my house has now been running for 12 full months. That leads to an obvious question: After a year living with the system, was installing it worth it? The short answer is, “yes, absolutely,” but the story, and why I say that, is complicated. It’s so complicated, in fact, that it’s taken me quite a long time to get this post completed.

First, though, a reminder of why I did this at all.

When I had the system installed, my motivation was simple: I wanted to tread more lightly on the planet, especially so that the technology I use and love wouldn’t take electricity from the national power grid. This reflects the values that Nigel and I shared, though for this particular one he wanted to use a wind turbine, something I knew was too problematic in the urban environment where I now live. At the time he died, Nigel was researching how to build a battery powerwall, which he definitely could’ve done, and we were planning to move somewhat more rural so we could have a wind turbine. In my new reality, it was clear that solar power was the best solution for me. All of that—and especially the fact that installing the system matched the values and goals that Nigel and I shared—is why I can say that yes, absolutely, installing it was worth it.

Next, some background: While the system itself included items the installer offered at special prices, it wasn’t subsidised in any way whatsoever: There were no tax breaks, and no power company offered any subsidy (none of them ever have). However, as part of the installation package, I switched to an electricity provider that gave me larger credits per kWh of electricity that I generate and send to the power grid (every other other company at that time paid less, sometimes dramatically so). In a sense, that’s a kind of subsidy, however, even at that higher rate, the electricity company still sells the power they “buy” from me at a much higher rate than what they credit my account with (they don’t actually pay me any money). Also, I have no ongoing costs, like loan servicing or anything else. So, the system was installed, switched on, and that was that. The last part of the system was installed in late May 2021, and so, the entire systems wasn’t up and running until the June 2021 billing month.

With all that out of the way, it’s time to talk money. The most common way that people look at the financial cost/benefit of such systems is to compare apples to apples: What would my power bill be if I didn’t have solar panels on the roof? That’s easy to see through the bills, but it's not even almost the complete story. Still, it’s a good place to start.

Over the first 12 months that the completed system was installed, I would've paid at least (I’ll come back to the “at least” part soon) $1,677.48 if I didn’t have the solar panels. However, my account received $746.97 in credits for the electricity my panels sent to the power grid, which was roughly 44% of the total I’d have paid without the panels. Looking at that another way, without the solar panels, my electricity bill would’ve averaged out at 139.79 per month, as opposed to the $77.54 that the monthly bills actually averaged out to (in reality, some winter months were much higher than the average, and summer months were much lower).

From a purely financial perspective, then, it would seem that the panels don’t create a large, obvious financial return. After all, at that rate it would take some 19 years before I’d break even (ignoring depreciation). However, appearances are deceiving.

Much—even most—of the positive financial aspect is invisible, and here’s why: The bills from the electricity company contain charges for the amount of electricity I buy from them, minus credit for the electricity I send to them, and that’s what I’ve just been discussing. However, the power from the solar panels that I use as it’s made is free—no one charges me for that.

This means that the credits I get from the electricity company for the electricity I send to them are for what’s leftover after I’ve used solar power to run the house. None of that power (called “self-consumption”, which sounds weird…) is tracked by the power company, of course, but I can look at charts produced by the “smart inverter” that runs the solar power system. On a sunny day, the power I need to run my house comes entirely from the solar power system AND I send some to the electricity company. In summer, when the weather is usually sunny and there are more daylight hours, that can mean sending a substantial amount of electricity to the power company on top of what I use. At night, it’s the opposite, and on dark, rainy, or heavily cloudy days, especially in winter, it’s mixed. When all of my household power needs are supplied by my solar power system, as it is on every sunny day and many cloudy ones, I’m 100% self-sufficient.

This self-consumption is the part that some people often overlook when calculating the true financial benefit from a solar power system. The electricity company charges me 27.35¢ per kWh for the power I buy from them, but they only credit me at 16¢ per kWh for the power I send to the grid. So, every kWh of self-consumed power saves me the equivalent of 11.35¢ per kWh. That hidden financial benefit is significant.

Let’s put some numbers into that. Normally, I’d get the actual production data from the smart inverter, but I can’t: There was a problem with it last year, and it didn’t report data from late June 2021 to late November 2021 (there were Covid Lockdowns in that period and, frankly, I was busy and just didn’t notice for a long time), so a LOT of the data is missing. Also, the inverter records data by calendar month, while my electricity is billed around the 22nd of the month—not a perfect match, in other words, but if I had data for the full 12 months I could work out the annual financial benefit from self-consumption.

Here’s what I DO know: I know for sure that that I saved $487.16 through self-consumption in the seven months of November 2021 through May 2022, and that’s money that I would’ve paid to the electricity company if I didn’t have the solar power system—remember, that self-consumption is power I actually used and would’ve used with or without the solar panels. That works out to an average savings of $69.59 a month for those seven months. If I use that amount for the whole 12 months, it would mean a savings of more than $800 for those 12 months—more than the credits I got on my power bill. In fact, using power through self-consumption while still sending some to the grid means that it’s at least possible, and probably likely, that my true savings on power over the first 12 months was actually at least as much as what I actually paid. Let me say that again: Using as much of the power I’m generating as I can, and sending the rest to the power grid, means my actual power costs without the solar power system would have been roughly double what I actually paid: $1,677.48 (before credits) for the year is way better than paying some $3200! It also means that I’ll reach the break-even point (again, ignoring depreciation) in half the amount of time.

This is difficult to grasp—it has been for me, anyway. I understand that I’m billed for the electricity I buy from the power company, an amount reduced by the power I send to the grid. The solar power that I use to run my house—the largely hidden savings from self-consumption—is power that I would otherwise buy from the power company, but I don’t need to, and until I started work on this analysis, it never occurred to me to account for it. And that’s why the actual savings are much better than what it looks like when looking only at power bills, as I always used to do.

Obviously I’d say that yes, absolutely, it was worth it to install the solar power system, because that would’ve been true regardless of the financials: This was always mainly about living my values. However, when you look at the totality of those financials, it makes financial sense for me, too. Living our values doesn’t have to mean losing money in the process.

This post has been about my own experience with solar power, something I did as a values-based decision and not a money-based one. The are ways to make the financial side better (or worse…), but for me, being able to live my values while also getting any financial benefit at all? Yes, definitely worth it.


Andy said...

Does your system have the smarts to take power from self-consumption before dragging power from the grid? I'm guessing the answer is "yes". If so, you've saved big-time.

Nice score!

Arthur Schenck said...

@Andy Yes, it does use power I generate first, and I also got an additional device that prioritises the hot water heater to ensure grid power isn’t used to heat water. Since electric water heaters use 30-40% of a typical Kiwi house’s power, that can be quite a saving in itself. The same device also ensures I don’t use grid power to heat the water at night, and before you ask, yes, the water can get too cool by the morning. I can boost the heat with grid power at any time, and I use about an hour’s with in the morning as the sun rises, then the solar power system takes over and the water is hot by the time I have my shower. A side benefit is that if the grid operators send a signal to shut off hot water heaters, mine isn’t affected because the heater is off-grid (the device is connected, the heater itself isn’t).

The hot water heater is only a couple years old, so it wouldn’t make sense to replace it right now, but my long term plan is to adopt an an off-grid solution, and I’ll choose what’s best at that time.