I published a video recently demonstrating how wholesale energy markets work. The video showed consistent negative wholesale energy prices during the middle of the day. Solar is wonderful, but a clear downside is solar panels produce energy at the same time. Energy supply increases during the middle, demand is not very high and prices go negative.
If wholesale prices are negative, this means energy suppliers need to pay to supply energy to the grid. This seems strange that someone should be charged to supply the good/service they are designed to supply. But it’s for a good reason – there is too much electricity in the market and this can cause problems.
Market operators are putting in place disincentives to produce energy at these times. One of these disincentives is charging households to export solar.
This is already happening in NSW and Queensland. In July last year, Ausgrid, a large distributor in NSW that serves Sydney, introduced a two-way tariff for new solar customers. Customers are charged 1.2 cents / kWh for electricity exported between 10am and 3pm. Customers are paid 2.3 cents / kWh for exports between 4pm and 9pm.
Ausgrid is trying to incentivise people to put electricity into the market at peak times and stopping putting so much in the middle of the day.
This issue is more prevalent in Queensland and NSW which receive more sunshine and have a higher uptake of solar.
But as clear as the sunshine itself, it’s coming to Victoria as well.
While being charged 1.2 cents / kWh is unlikely to break the bank, it’s prudent to start thinking about what can we do with falling export tariffs. How can you get more out of your solar?
I’ve prepared a list of just about everything I can think of for people to optimise their solar. I’ve listed these below from what I think are the easiest to the hardest.
1. Load shifting
The easiest change is called “load shifting” – shifting when we use our electricity. Running the dishwasher, washing machine, dryer and charging our appliances during the middle of the day makes more sense than doing so in the early morning or at night time.
An under-appreciated example is running your air conditioning or heating. If your house has a good thermal envelope (that is, it retains heat/cooling well), it might make sense to run heating and cooling during the day with the plan that the house will stay cool or hot into the non-solar hours.
2. Heat pump hot water
Now clearly I was tempted to put this at the top of the list as the majority of our business is selling heat pumps, but heat pump hot water is a fantastic way to optimise your excess solar. I encourage all our customers to run their heat pump hot water units during the day. Solar is one of the reasons. Running your heat pump hot water unit during the day will effectively mean you have free hot water. This is a double win. It means your hot water costs will effectively fall to zero and it will soak up some of your excess solar.
Some heat pump hot water units even connect in directly with solar inverters. If excess solar is produced, we can direct this energy to keep heating water. The next generation technology is to run the heat pump according to the weather forecast. If it’s likely to be sunny in the morning but cloudy in the afternoon, the heat pump will run in the morning. Whether you use smart tech or a simple timer to run the unit between say 10am and 3pm, heat pump hot water and solar compliment each other perfectly.
3. Electric heating
Gas heating is ubiquitous around Melbourne. We can get more out of solar by switching to electric heating and running the units during the day, powered by our free solar electricity. But it will depend on your circumstances. Melbourne winters can be a bit bleak and cloudy, not generating a huge amount of solar when we most need our heating. It will of course also depend on whether you are home during the day and how well your home retains the heating/cooling.
4. An electric vehicle
I have written previously that anyone with an income should look at purchasing an EV through a novated lease. EVs use and store a huge amount of energy. They combine beautifully with solar. We can set up our EV charging software to direct all excess solar into the car battery. If you turn on the air conditioner which draws a significant amount of power from your solar, the EV charger will ‘dial down’ and less will go into the car. Only the excess production is directed to the car and nothing gets exported to the grid.
For most people most of the time, this works seamlessly. We don’t need to charge the EV to 100% every time. For most of us jaunting around town, whether the car gets to 60%, 70% or 93% doesn’t matter – it will be sufficiently charged for the next day’s use.
We of course need to be mindful that this may not work 5 out 7 days of the week if you drive to work and the car is not at home.
Buying and charging an EV is a great way to consume more of the solar you produce and export less. And it will of course be orders of magnitude cheaper to run and maintain than your old petrol car.
5. A battery
A battery is probably the first option that comes to mind for many people looking to get more out of their solar. Instead of sending excess solar to the grid, let’s store it locally and use it later. I think there are two ways to view batteries.
On one hand, batteries are fantastic as they can store our excess green energy and increase our energy independence. On the other hand, the financial case for batteries is not as strong as solar. The general rule of thumb for batteries is they require a 10 year payback period and generally come with a 10 year warranty. I have also explained my view that the $10,000 – $15,000 invested in a battery is better spent on a EV that will allow Vehicle-to-Home charging (bi-directional charging or “bi-di” for short). However, recent election promises may flip this around. If significant rebates become available for home batteries, this will likely change the economics for battery installations. Watch this space…
For people considering solar
One of the keys to installing solar is choosing the right size system – not too big that you’ll be producing loads of excess solar, not too small that it won’t produce enough.
I have seen various online forums saying “fill your roof with solar panels,” but with export prices falling and probably going negative, it’s clear you can oversize your system. People looking at getting solar will be guided by their solar installer. Send them your energy bills and match the system to the bills. Take into account your future usage – are you likely to buy an EV in future? (Short story here – if you have an EV or are thinking about one – then “fill your roof with solar panels” is probably right). But don’t be afraid to question the sizing and assumptions used in the quotes.
A clear assumption to question is the export tariff you will receive. How much will you be paid, according to the solar installer, for your excess solar. I have seen some numbers which are best described as outdated. And of course these numbers incorrectly assume the Feed-in-Tariffs will continue for years to come. I encourage prospective solar customers to question these assumptions – and indeed require the installers to use 0 instead (or even negative).
The summary here – ask your solar installer to explain how and why they have recommended the size quoted. What self-consumption rate will it produce? What assumed feed-in-tariff rate have they used and what is most realistic for your present and future circumstances?
Summary
We can now all take a deep breath. The reality is we’re not talking about ‘sheep stations.’ If we are charged for our solar exports, it won’t be much. And your solar investment is almost certainly worthwhile and a clear financial gain.
It’s important to realise that electrification is a gradual process. No one rolls out of bed one day and says “I’m going to electrify my whole house in a week.” It happens in stages. Solar is a wonderful first step as everyone uses electricity and it effectively subsidises most other steps. Solar improves the case for gradually but surely electrifying other appliances: cooking, heating and hot water. EVs and batteries will also hopefully come into consideration. All these will hopefully combine to lead to a much healthier, greener, cleaner and more cost effective home.
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