You’re putting too much solar on your roof

How many solar panels should you be putting up on your roof? The question is surprisingly complicated.

The roughly 95 per cent decline in the cost of solar cells over the past 15 years has been so precipitous that the modules themselves are a barely significant share of what you spend.

Almost every component is more expensive these days than the sheets of polysilicon that generate your power — the inverter that converts electricity into the alternating current in your plug sockets, the racking that attaches panels to your shingles, scaffolding, labour and your installer’s marketing expenditure.

More than 4 million Australian homes are producing their own power from the sun via their rooftop panels.Credit: Louise Kennerley

As a result, solar retailers in many countries will tell you to upsize far in excess of your needs. A colleague was recently quoted $13,390 for a 22-kilowatt system on her roof in the northern suburbs of Sydney.

On paper, such a huge array makes no sense. She typically uses about 50 kilowatt-hours a day. The proposed system would produce almost twice that amount — a bit more in summer, a bit less in winter. Even if she were to buy an electric car and charge it from her roof, she’d be consuming only an extra 5 kWh to 10 kWh a day, at typical mileages.

Before you fulminate about unscrupulous tradespeople pushing the cost of building work through the roof, it’s worth considering the reasonable case for such excess.

The extra expense my colleague will incur to put up 22 KW, rather than the 13 KW needed to cover her own usage, is fairly marginal — probably about $1,600 for the panels, at current wholesale prices.

Meanwhile, her utility will pay her for the electrons she exports to the grid, which could earn about $400 a year, on one of the better tariffs of 4 cents. That additional money could drastically shorten the amount of time it takes for the installation to pay itself off.

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That’s the theory, at least. The problem comes when you consider a whole nation of people doing the same thing at the same time. Thanks to its abundance of sunlight and single-family homes, Australia has one of the highest penetrations of home solar panels in the world. Somewhere in the region of four in 10 households have them.

In the country’s main grid, small-scale systems produce 15 per cent to 20 per cent of electricity during the summer months. For a brief period before midday on Saturday, when renewables were providing 79 per cent of power, rooftop panels accounted for more than half of total generation.

When all those modules are working simultaneously in the middle of the day, the result is typically an excess of power. Instead of receiving money for the electrons they provide, generators are charged for it — something that currently occurs about one-fifth of the time during daylight hours. Shifting such penalties from professional utilities to households is a politically risky move, but the sheer quantities of rooftop solar mean it has become inevitable.

Since the start of July, people in NSW exporting more than about 6.8 kWh a day to the grid during the midday solar peak are having to pay for the privilege. On a back-of-the-envelope calculation, my colleague could be paying $130 a year for her exports, cutting the promised $400 of revenue by almost a third. That solar tax is likely to get steeper as home generation keeps growing and the excess deepens.

There are ways to avoid this penalty. Adding a home battery allows you to shift your exports to the evening peak, when the sun sets and prices spike back into positive territory. Better still, buy an electric vehicle and connect it to a two-way charger that allows it to feed the grid — its battery is far better value than the stand-alone version, and you get a car as part of the bargain.

There’s also automated home-energy-management systems, which use software and apps to move your daily usage to the hours when the sun is high, and even switch off your panels’ grid connection when it starts looking costly to export.

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From the perspective of the entire country, such oversizing might be a good thing. An increasing number of studies in recent years have argued that it’s cheaper to get a clean grid by connecting excess wind and solar and switching them off when there’s too much generation, rather than installing a smaller amount backed up with batteries.

The problem is that few commercial players will volunteer to build such money-losing generators — but households, which are less sophisticated and cost-sensitive than utilities, might be the ideal providers of capital.

Still, those considerations all point to picking a system that’s sized based on what you need, rather than projections of profit and loss on your utility bills.

Turn your home into a power station, and you’re changing your role from that of customer to speculator in one of the most volatile, cutthroat commodity markets on the planet.

Electricity buyers, and sellers, should beware.

David Fickling is a Bloomberg Opinion columnist covering climate change and energy. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.

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