Until recently, the main driver for domestic photovoltaic (PV) systems has been the avoidance of load-shedding and only secondarily, electricity cost reduction.
Invariably the people buying such systems took a view on their value for the time they would be rendered unproductive by being without power, and responded accordingly. Given the cost of such systems and the sharp ramp-up in demand, these tended to be the preserve of the wealthy. Total grid independence is expensive and so many homes equipped with solar panels may use the grid for limited peaking.
Because load-shedding was the main driver of domestic PV, growth depended on its continuation. The recent suspension of load-shedding may have been thanks to an improvement in Eskom’s performance, but it was certainly made possible by the vast amount of new gigawatt-hours brought on by self-generation efforts.
Having been encouraged by my exercise in modelling solar geyser economics, I asked Sean Shipalana of Specialised Solar Systems for guidance for generically modelling the economics of self-generation and compare them against the special case of solar geysers only. His instructive reply: “I have a solar geyser too, but remember that most solar geysers still have an element in them that is connected to the grid that will heat up water at night or in the early hours of the morning, based on how these are set up.
“The economics of any inductive load is that one needs to understand this load and see how to either eliminate or reduce it (for example, install a geyser controller or a gas geyser) and then model out this capex/opex cost against the prevailing grid energy costs. Each scenario is different, so it’s hard to give you a generic model on this.”
I can see his point, first because in self-generation bigger is better in terms of economics of scale, but also because a corporate that chooses to self-generate has a return booster in the form of being able to make a tax deduction, to which a private consumer generally may not have access. Still, many component costs have dropped handily in the past year, making a decent cost/benefit profile ever more possible.
Eskom’s escalation is a critical input. The latest tariff request is the kind of stress one can do without
Ultimately though, it is not the equipment cost that proves whether a solar-embedded generator is financially viable. It’s how the production of power in kilowatts or kilowatt-hours lines up to the customer’s consumption profile and relative to the customer’s tariff cost.
Just like countries, when you are self-generating you have the same challenge as the country — you must produce a persistent base load, and you need to manage peaking.
It’s on this particular point that I get frustrated when greenie purists castigate gas investment. Gas is superb for short-burst peak management (think of boiling a kettle or frying an egg) and would be less harsh on the environment than extensive storage investment and certainly coal power! Sorry, but green power outlay is not immaculate — it’s just cleaner over a long cycle.
So — solar panels will generate kilowatt-hours, whereas inverters and batteries will be used (possibly along with gas or mains) to smooth demand spikes. This, in turn, leads to the installer trying to guarantee a steady performance that, in turn, determines a levellised cost of energy. So capex divided by this power delivery over the equipment lifetime determines the self-generation cost relative to a grid supplier cost.
Clearly this is not as easy as installing a solar geyser, as a high technical competence is needed to tailor to the individual customer.
When doing a financial evaluation of a solar system, Shipalana says you should ask the following: How will the system affect my taxes? How many kilowatt-hours will the system produce daily? What will the system produce over its warranty period? What price am I paying for each kilowatt-hour, and how many kilowatt-hours do I consume daily? How many kilowatt-hours will I consume after the system is installed and how do I verify this? What Eskom escalation should I expect annually? What would be my breakeven point of capital?
Eskom’s escalation is a critical input. The latest tariff request is the kind of stress one can do without. Its stations are old with limited life, the grid is definitely fragile and choosing peace of mind is no longer exorbitant. Even if, for you, off-grid is uneconomic now, the numbers keep getting better — and self-generation is on track to be its own asset class.
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