Solar: Does the industry overstate the cost-saving benefits?

Solar installers often over-promise on savings, but precise solutions are within reach.

The residential rooftop solar mania appears to be cooling off now that the country has gone more than 200 days without load shedding.

Now, the motivation for installing a rooftop solar system is cost savings.

The solar industry tends to overstate savings and power generation capabilities, which are often sold using inappropriate assumptions, such as inflated expectations of daily sunshine when solar panels are producing peak power.

The savings will also be influenced by where you live, as tariffs vary from municipality to municipality. The more expensive the electricity tariff, the bigger the potential savings.

“There is no doubt that some in the solar industry are overstating the cost-savings, leaving many customers disappointed with the savings they see post the installation,” says Marc du Plessis, executive head of LookSee, Standard Bank’s home efficiency platform.

“Load shedding is no longer a strong motivation for installing a solar system. Now, people want to see savings on their electricity bills and a compelling return on investment.”

LookSee has spent hundreds of hours developing a modelling system that allows for a level of detail not commonly available to households. This system allows for optimising a solar installation for maximum savings.

It starts with a desktop analysis of the customer’s address, using geospatial mapping to determine whether the roof can accommodate solar panels, the pitch of the roof, shading, and the radiance from the sun. That information is vital as it tells the customer how efficient the panels will be in generating electricity on their specific roof.

“What we’ve noticed over the past few years is people were putting up solar systems primarily to avoid load shedding, but these systems were not optimised for efficiency and cost savings,” adds Du Plessis.

“Now we can fine-tune the installation to maximise those benefits.”

Solving the hot water problem

For example, a house with two geysers and four occupants, each showering once per day, consumes roughly 460 litres of hot water daily. That amounts to 15.1 kilowatt hours (kWh) of electricity per month or about R1 260 in tariffs (depending on the suburb and city).

This means that producing hot water consumes about 50% of the electricity consumed in the house in this scenario.

This electricity bill can be reduced or eliminated depending on the solution chosen.

The most efficient way to solve this is to convert your existing geyser to draw power from solar panels.

Running the figures through the LookSee modelling software, three panels will replace 88% of the electricity consumed by the two geysers, while four panels will replace 100% of the electricity consumed.

That solves 50% of the home’s electricity consumption. The remaining 50% can be tackled with a modular solution. Adding another four panels and scheduling usage (such as timers for appliances) can further reduce consumption, up to as much as 70% of the household’s consumption.

For night-time energy usage, it may be necessary to install up to two additional 5kW batteries alongside a 5kW inverter. To support this system, five extra solar panels will also be required.

The total cost is about R163 000, of which the geyser conversions accounts for R46 000.

These figures will vary depending on the number of appliances required to run simultaneously, the time of usage, the location of the property, and other factors. The LookSee modelling system can then calculate an internal rate of return on the money spent.

The return on investment case

In the above scenario, the annual rate of return comes out to 31% if the solution is paid in cash, 34% if paid for with a LookSee Solar Loan, and much higher returns if this is financed through a mortgage bond.

Certain assumptions are made when arriving at these calculations, such as Eskom tariff increases declining from about 15% to 6% over the next 10 years. Should Eskom tariffs exceed this, the investment case for solar is even better.

The benefit of being “insured” against future load shedding is not factored into the calculation.

Financing through a mortgage loan – home buyers can now use the Future Use facility on their Standard Bank home loan to finance a solar installation – produces a positive return from the first month. The savings in electricity can go straight to paying off the mortgage, reducing the term of the loan and increasing the home equity.

In the above scenario, the solar system generates more than R300 000 in savings over 10 years, which can be applied to paying off the mortgage loan.

“There are instances we come across of solar installers over-selling the benefits, but there are ways that these very high savings can be achieved if we have a better understanding of the client, the home, the financing method and electricity usage in the home,” says Du Plessis.

“What we are now able to do is provide a level of accuracy and certainty on the investment case for solar, and we can guide the client to a more optimum solution that will maximise those benefits.”

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Brought to you by LookSee.

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