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Solar self-consumption: why it’s important and how it saves you money

Solar self-consumption: why it’s important and how it saves you money

Solar self-consumption is a term that’s bandied around a lot in the solar industry. To be honest, the term – solar self-consumption – sounds a bit boring and techie

But knowing about solar self-consumption is important. That’s because understanding solar self-consumption is the key to understanding how to save more off your electricity bill with solar panels systems.

This article explains the essential concepts you need to know about solar self-consumption to maximise your solar savings.  It covers:

  • What solar self-consumption is
  • How solar self-consumption works
  • Why solar self-consumption is important now
  • Financial benefits of maximising solar self-consumption

 

What is solar self-consumption?

Solar self-consumption means using the solar electricity produced by your solar panels to power your home (with any surplus exported to the electricity grid).

Solar self-consumption is often expressed as a percentage, known as the solar self-consumption ratio. Maximising your solar self-consumption means using the highest possible percentage of solar energy in your home.

Achieving 100% solar self-consumption means you’re not using any power from the main electricity grid. It’s the way to get a near-zero electricity bill although, in practice, extremely hard to achieve without battery storage.

Solar self-consumption ratios: what they mean

 % of electricity used in your home% of electricity exported to the main electricity gridImpact on your electricity bill
100% solar self-consumption100%0%Highest possible savings
50% solar self-consumption50%50%Average savings
20% solar self-consumption20%80%A poor result – could do better!

 

How solar self-consumption works

Solar electricity produced by your solar system will go first into your home to power any appliances that are running. This reduces the amount of energy you need to buy from your electricity retailer.  Any extra will be sent to the electricity grid earning you a feed-in credit.

For example, it’s 1.05pm and your solar power system is producing three kilowatts of electricity per hour. You have your dishwasher on and laptop charging; together that’s using two kilowatts of electricity an hour.

The way it works is:

  • Your solar power system will first send solar electricity to your home meet your power usage (i.e. for your dishwasher and laptop).
  • The extra electricity will be exported to the grid.
  • In return for exporting your surplus solar electricity, you’ll be paid a solar feed-in tariff.

The name of the game is to use the extra electricity in your home instead of exporting it to the grid.

Why do that? Why miss out on the feed-in tariff?

It boils down to the difference between what you pay for grid electricity versus how much you get paid for your solar exports.

As you can see from the table below, the difference is around 20 to 23 cents per kilowatt hour. That means you are 20-23 cents per kilowatt hour better off – in net terms – if you use the solar energy generated by your solar panels rather than export it to the grid.

Average Australian rates for electricity and solar feed-in tariffs

Electricity purchased from the grid, per kilowatt hourSolar feed-in tariff, per kilowatt hourDifference, per kilowatt hour
27-30 cents7 cents20 – 23 cents

 

Why solar self-consumption is important now?

The reason why maximising your solar self-consumption is important now is because the value of solar feed-in tariffs have dropped, whilst electricity prices continue to rise.

Around ten years ago, solar feed-in tariffs were as high as 66 cents per kilowatt hour. This was more than what you’d pay for grid electricity. As a result, it made perfect sense to export as much solar energy as possible and minimise daytime electricity usage. For example, a lot of people would try to save their clothes washing, running the dishwasher etc to the evening.

But that’s all changed now.  When you buy a solar power system, you’ll get the current feed-in tariff offered by your electricity retailer (as a side note, it’s always worth shopping around to find the best electricity deal.

Unfortunately, there’s not a single electricity retailer in Australia offering a solar feed-in rate of 66 cents per kilowatt hour – or even close.  That’s because the legislation about feed-in tariffs has changed – we can’t blame the retailers!

The average Australian solar feed-in tariff is now around 7 cents per kilowatt hour.  Whereas the average Australian electricity tariff is around 27-30 cents per kilowatt – sometimes as high as 40 cents per kilowatt hour, depending on where you live and the tariff you’re on.

At the end of the day, it’s just question of maths – you save around 3x times more by using the solar energy when it is being produced than you’d make by exporting it to the grid.

Financial benefits of maximising solar self-consumption

The two main financial benefits of maximising solar self-consumption are:

Let’s take each in turn

  1. Electricity bill savings and solar self-consumption

As the table below shows, when you maximise your solar self-consumption you also maximise your electricity bill savings.  At 20 per cent solar self-consumption, annual bill savings on a 10kW solar power system installed in Melbourne are around $1,543. That’s assuming a solar feed-in of 7 cents per kilowatt hour and a grid electricity buy rate of 27 cents per kilowatt hour.

Whereas, at 80 per cent solar self-consumption the electricity bill savings more than double to $3,227.

10kW solar system. Difference that maximising solar self-consumption makes on electricity bill savings

Self-consumptionBill savings yr 1 (est)
20%$1,543

 

50%$2,385

 

80%$3,227

 

 

  1. Solar system payback and self-consumption

Taking the above example for a Melbourne home with the estimated bill savings as shown above, we’ll assume that they’ve picked up one of the great solar deals from Solar Run and bought a 10kW solar panels system costing $7,800 before any Solar Victoria rebate.

Here’s what the payback is on their 10kW solar system, based on the different solar self-consumption ratios – and also factoring in what the payback would be if they’re eligible for the solar panels rebate from Solar Victoria.

 

10kW solar system. Payback based on different rates of solar self-consumption

Self-consumptionPayback in years – without Solar Victoria rebatePayback in years – including Solar Victoria solar panels rebate of $1,400
20%5.14.1
50%3.32.7
80%2.42.0

 

As you can see, the payback improves as the solar self-consumption ratio increases.  The best payback in this table is two years – based on 80 per cent self-consumption and the household being eligible for a $1,400 solar panels rebate from Solar Victoria.  Plus of course the competitive price for the 10kW solar system from Solar Run!

 

Keen to know more?

If you’d like to chat to a solar expert to find out what bill savings you could get from going solar, get in touch.

We’ll model your electricity usage and estimate the solar self-consumption ratios you could achieve.  We’ll work out the best solar system to achieve your goals – whether that’s bill savings, energy independence or the environment.

Don’t delay – contact us today!

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