Solar systems are often sold on how much ‘free’ energy they will provide. However, the overcapitalization of systems may mean you have to wait for many years before the system is paid off and the energy becomes ‘free’. On top of this, ongoing costs are incurred to support regular monitoring and maintenance of the system to ensure it is performing as expected.
So, what does this mean for solar systems? Are they all that they are hyped up to be?
Generally speaking, yes, solar systems are a good thing (when they are correctly sized!).
As a rule of thumb, if a system can maintain utilization above 75% it is adequately sized for the site’s requirements. If usage is seasonal, this figure may be lower when averaged over the year. In this case, you would have to decide if you would want to size for the higher consumption periods or the overall average consumption. There are many financial metrics that can assist in deciding what solar size is best for your business.
An example of the difference in payback for different solar sizes at a sample site is shown below:
| System Size (kW) | 10 | 20 | 30 |
|---|---|---|---|
| Site usage offset (%) | 91% | 64% | 48% |
| Feed-in to grid (%) | 9% | 36% | 52% |
| Cost ($) | $13,000 | $26,000 | $39,000 |
| Savings ($/year) | $3,344 | $5,223 | $6,556 |
| Payback (years) | 3.89 | 4.98 | 5.95 |
There are several reasons why over capitalisation of a solar system should be avoided.
As demonstrated in the example above, as the system size increases beyond the needs of the site, the site usage offset decreases and more energy is fed into the grid.
The payback period stretches out for systems when the percentage of energy feed-in to the grid increases. This is because the feed-in rate in typically significantly lower than the offset consumption rate. For example, Ergon Tariff 20 has a $0.19* difference between these two rates (*at the time of the blog post).
Depending on the location and size of a system, zero-export restrictions may be applied. This generally occurs for systems sized over 30 kW in many energy networks and may result in the inverter shutting down if exporting occurs. This means not only do you lose any feed in benefits, you also may have the inverter periodically shutting down whenever the export limit is breached! If the system is over sized this may frequently occur, resulting in lower energy offsets and more wear on the inverter.
Conclusion
In some cases, a larger system may be built to meet a site specific need. However, as a general rule, systems should be sized so that the offset an average of 75% or more of energy consumption on site.
Need help reviewing your potential solar sizing? We offer review services to make sure you have an independent expert on your side to help make sizing decisions – get in touch.