Thursday, September 25, 2014

Renewable energy as an investment

Summary: My wife and I have invested about $8000 in solar PV, a solar hot water, and a better fridge. I estimate the return on this investment to be 17.5%, which I think makes a compelling case for people to do similarly.

I moved into my house in early 2013. Just before Christmas, we had a 2 kW solar PV system installed. We decided to get a good one, with an SMA inverter, and it cost about $5000. I realise there are similarly-sized systems that are much cheaper, but I wanted to be more confident in the longevity of the system.
Since buying it, I've been monitoring our power use quite closely, but we have always been quite careful in our use. We generally don't use heating or cooling (though we do have an electric blanket on the bed, and an electric throw for the very chilly evenings) -- the house doesn't get below 13 C or above 30 C so it's pretty bearable.
When we bought the house, it had an electric storage hot water system (300L), which I knew was a very inefficient way to heat water. My goal was always to switch to a solar hot water system. My feeling was that the existing electric storage unit would likely use about 3 kWh/day, which I thought was pretty wasteful and uneconomic. To install a hot water heater in Australia costs nearly $5000. For what it is, this is a lot of money (a solar hot water heater is something that can be built pretty easily). I started investigating cheaper options, and found that a Chinese-made 240L evacuated-tube and built solar hot water systems can be bought in Australia for about $1300. I bought one, and installed it on the roof. The setup I've gone for is quite complicated, because I decided to get a separate smaller unit to supply the kitchen, and also wanted to switch the house to rainwater (other posts to come).

We finally did this two weeks ago, and I've been surprised. It appears that the electric storage hot water system was using more like 6 kWh/day -- a huge amount of power! Without it, our average daily consumption (admittedly only over a 2 week period) is 3 kWh/day. I have done a bit of modelling of the estimated savings that we are gaining from the combination of the solar PV and hot water system, and I estimate that we are saving, on average, almost AU$4/day. At this rate, we will repay the investment in just over 5.5 years (ignoring any kind of future discounting, or cost of finance) for a ROI of 17.5%. Assumptions:
  • 0.35 c/kWh cost of electricity drawn from the grid (this is the rate in SA)
  • 0.22 c/kWh paid for electricity exported to the grid (we got in for the last available Feed in Tariff (FiT), so for people installing now the economics will not be quite as good. Also our FiT will end in 2016 which will affect the future economics. By this time though, the system will have paid for half its cost.)
  • boosting of the system (using electricity to heat the water when the sun is insufficient -- eg. the middle of winter) is sufficiently rare not to affect the overall statistics. I think this is likely.

The last assumption might seem unlikely to you -- when we've been through winter, I'll comment on the frequency with which we need to boost the system. However, the analysis I've performed so far ignores that some of the electricity produced by the PV is consumed directly (ie. it's offsetting our consumption), which means that our savings are actually a bit higher than $4 / day, and hence our ROI is actually a bit higher than I've calculated.


This post was written by Angus Wallace and first appeared at guesstimatedapproximations.blogspot.com.au

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