Crunching the numbers
Solar will inevitably reduce your monthly electricity bill by reducing the amount of traditional grid-supplied energy you need to purchase. This will be particularly applicable in the summer months when solar generation peaks and residential demand for electricity is typically at its lowest.
From an economic perspective, the value of your solar generation is determined by a range of factors including generation output, your electricity usage patterns (which determines whether your generation is consumed or exported), the buy back rate you receive, and your retail price plan.
The length of time that you expect to remain in your house is an important consideration when evaluating the potential benefits of solar. Solar is a long-term investment which is important to think about in the context of the average amount of time New Zealanders spend in a house - which is six years. This is particularly important when considering a long-term solar lease, which may require you to pay it off if you need to terminate your contract earlier than expected.
Calculating the benefits:
- Cost of finance (interest on purchase, or foregone interest from investment).
- Cost of the system, installation, connection and maintenance.
- Generation potential (based on size, location and weather).
- Consumption potential (consumed vs. exported).
- Buy back rates and DG price category rates.
- The length of time you expect to be in your home.
Understand your electricity usage
It is very unlikely you will use 100% of the solar energy you produce, so you will need to factor in the price you receive for your surplus generation, compared to the price you pay for electricity supplied to your home (when your system is not generating any supply).
For example, your solar generation peaks at midday, and, if you are not home to use it, you will be exporting that energy at a buy back rate of around 8 cents per kWh. But, when you are cooking dinner, heating your home or having hot showers, your solar system will be contributing very little to your supply and you will be using grid-supplied energy at around 24-30 cents per kWh.
For businesses looking to install solar, it is particularly important to understand the price-plan tariffs underpinning your monthly electricity bills. Some businesses with higher electricity usage may be on large commercial pricing plans where line charges are determined in part by electricity demand during network peaks, meaning that unless solar generation coincides with these peaks, then solar may have little or no influence on reducing line charges. Similarly some retail price plans offer low daytime (off peak) energy pricing meaning that your solar is avoiding low cost energy purchases, saving very little.