Solar energy is oft touted as a great way to save money. The benefits certainly don’t stop at your wallet, but it’s certainly a great drawing point for those who are looking at saving some money on their electricity bills. It’s also worth noting that not all forms of solar are created equal. Off-grid vs on-grid vs hybrid solar setups all have fairly significant differences in upfront payment, and also have significant differences in long-term value for the consumer. Hopefully this article will clear up some of the questions you may have around the value of different types of solar setups and help you make the right decision on what is right for you.
On Grid Solar setups are by far the most common form of solar that you will see for residential solar. Part of the reason for this is the simplicity of the process, as well as the low cost and time required to pay back the setup.
In relation to the defining factor in on-grid solar, as stated on the Solar Victoria website: “Any electricity produced by the solar electricity system but not needed by your house at the time it is produced is simply fed into the mains grid, with a feed-in tariff paid to the system owner.” In short, your grid connected system will feed any excess electricity into the grid, generating a credit with your electricity provider which is used to offset your monthly bill.
Solar Vic goes on to say: “Grid-connected systems have two main components, the solar panel array on the roof, and a grid-interactive inverter, connecting into the household’s switchboard and electricity meter.” This is the reason that grid connected systems are generally much cheaper than the alternatives. The framework required to get yourself connected with on-grid solar is already in place, due to a large portion of your usage still coming from the grid, depending on your exact circumstances.
As stated by Solar Choice in their Solar Choice Price Index, “the average cost of a 5kW solar system in Australia as of March 2022 is about $1.03 per watt – or about $5,170”
When looking at on-grid solar, a 5kWh hour system is often what you will be looking at. This is due to single phase power (the standard for most residential premises) being limited to 5kWh that can be fed to the grid at any given time.
In terms of time taken to repay, assuming an annual power bill of approx. $1600/year, you would be looking at an on-grid system paying back its value in a little over 3 years.
Hybrid solar can be a bit more expensive when compared to strictly on-grid systems due to one significant factor: batteries.
World Solar NZ defines hybrid solar by saying “A hybrid solar system is grid-tied with battery storage. They come with a special ‘smart’ inverter that can transmit direct current (DC) power to and from your batteries, and channel alternating current (AC) power between the grid and your home when necessary.” There are a number of reasons that one could find value in a hybrid system, but once again, a big factor in this can by tied back to cost.
Interestingly, the value of a hybrid system can be a bit harder to calculate. With hybrid systems, assuming that you balance your solar panels and battery storage requirements well, you can not only offset the cost of energy consumed by your household, you can actually be selling more energy back to the grid than you are consuming. When this happens, you will receive a credit on your electricity bill that will be paid out at the end of the quarter.
This then throws a bit of a spanner in the works when trying to calculate value, but let’s give it a go.
Solarcalculator.com.au states “Solar panel and battery systems cost a lot more than straight-forward solar panel systems. As a guide, a 6.6kW panel system with a 10kWh battery will cost anywhere between $16,000 – $21,000.”
Once again, we’ll work on an average power bill of $1600/year. Working from this figure alone, we’re looking at a pay back period of 10-13 years approx., however this doesn’t account for money generated from excess solar energy being sold to the grid.
Let’s assume that you are able to send 30% of the electricity generated by your panels over a 4-hour period (a period of peak sunlight) back to the grid. (These figures are effectively arbitrary. Though this could be correct for you, it is very situational, depending on your setup, where you are, cloud cover, angle of panels, etc.) Let’s also assume that an energy company will pay you 12c/kWh for your energy generated. This gives us a figure of an additional $2628 generated per year.
Working from this adjusted figure, that brings our total value of money saved/generated by our hybrid system to $4228/year. This gives us a payback period of 3.5-5 years or so.
Before moving on to the next session, I believe it’s important to reiterate that these figures are not a valid representation of what results you may see with a hybrid system. The actual excess electricity generated is going to be a result of your personal circumstances.
Where hybrid power combines the ability to connect one’s grid tie system to a set of batteries to store unused energy generated by your panels, an off-grid system forgoes this tie entirely. Instead, off-grid systems will utilise a higher number of batteries to store enough energy to power your house without the need to rely on the grid as a backup. This poses some issues in the form of increased cost. As high-quality lithium batteries are one of the more expensive components of an off-grid setup, and the storage requirements end up being quite high in order to account for unexpected circumstances, off-grid solar is still used more as a matter of necessity, than for the benefits that it provides.
This is not to say that off-grid solar is without its benefits. Firstly, it allows one to not be reliant on electricity companies in any way for their energy needs. These companies continue to use finite resources to push energy into the grid, which in turn cause a whole host of environmental issues that we won’t go into here. Off-Grid Solar can actually also be cheaper for some people in more rural areas, as the cost of running power poles to their residence can be huge when looking at particularly large properties.
Nonetheless, let’s look at the brass tax. What does it cost?
Looking at an example from our website, a 5.5kW off-grid board with 15x Sunpower solar panels would cost $12,820. For battery storage, you would be looking at a minimum of 20kWh, as an estimate. To achieve this storage, you would most likely look at 4x Pylontech US5000-Bs, coming in to an additional $11596.
This brings us to a total cost of $24,416 for a 5kVa off-grid system.
Again, working on an annual power bill of $1600. This gives us a repayment period of 15.26 years, not accounting for any rebates that you would be entitled to.
Obviously, this is much longer than the other two systems. Ultimately, we are hoping that at some point in the not too distant future a rebate will be provided for lithium batteries, which should significantly reduce the overall cost of off-grid solar.
As we can see, the cost of different solar technologies can vary significantly. At a glance, on-grid solar appears to be the cheapest overall, with a shorter payback period than the others and less upfront spend, however, this does not account for the on-going generation of a hybrid system. Depending on your system, even as soon as the year 4 or 5 mark, the income generated by a hybrid system can make the initial spend increase worthwhile for some consumers. Finally, off-grid solar is still a fairly expensive option for consumers. With that said, for customers who are unable to access grid-connected solar, off-grid can be invaluable and may be significantly cheaper than a grid connection even from the onset.