Saturday 13 July 2013

Consumption Assumption – The Proportion of Solar Electricity Used in a Home

The answer is 50%, now what was the question?

Three very different distributions,
each with the same average - 50%
If you have a solar PV system fitted to your home, then the amount of electricity you generate is changing all the time as the sun travels across the sky and clouds come and go.  Your electricity use also changes as you switch electrical appliances on and off.  

If solar electricity production exceeds your electricity use at any moment, power flows out of your home to supply the electricity grid (called export).  If, on the other hand, your electricity use exceeds the electricity produced by the solar panels then all of the solar electricity is used in your home and supplemented by power drawn from the grid.

Over the course of the day your electricity meter will record the flows of electricity into your home (for which you will be billed). If you can meet your electricity needs with a unit of electricity from your solar panels, then you save yourself buying that unit from your supplier.  

This saving on electricity bought represents an increasingly large part of the financial benefits of owning a solar PV installation.

So what percentage of the electricity that is generated by a solar PV system is actually used in a building?

It seems that the UK solar industry has found a rather simple way to answer this question:

Q: Retired couple at home during the day, 1kWp system
A: 50%

Q: Working couple no-one at home during the day, 1kWp system
A: 50%

Q: Working couple no-one at home during the day, 4kWp system,
A: you guessed it, 50%

For smaller residential solar systems claiming the Feed in Tariff (FIT) , the government decided that it wouldn't measure exported solar electricity, only generated electricity.  However, the design of the scheme was to reward people with money for everything they generate, plus a little more for the energy that is exported.  So it came up with a way of calculating the exported energy. A figure of 50% is multiplied by the generated energy to calculate a value for the exported electricity. 

The industry has embraced that figure as if it represents some kind of truth written on tablets of stone. Every presentation of financial benefits from the FIT I have seen assumes that the household will use 50% of the energy it generates. 

When the UK FIT was paying people £0.43 for each unit (kWh) of solar electricity generated and electricity cost £0.14/kWh all that really mattered to the financial calculation was how much you generated, not how much of it you used yourself (called self-consumption). 

PV prices have fallen dramatically and to keep the financial benefits consistent the FIT now pays new installations much less, about £0.15/kWh generated.  In the meantime electricity costs have risen to around £0.15/kWh.  Self-consumption is becoming the greater part of the financial benefit. 

To illustrate this, let’s consider a house with a 2kWp system installed. To keep the maths easy, we'll assume its in a very good location and generates 2,000 kWh per year.  What happens to the financial return as the proportion of energy used in the home changes?

How the make-up of Feed in Tariff Benefits has Changed Since Launch
Savings on electricity bills forms a much larger proportion of the financial calculation

When the FIT launched, any inaccuracy in the self-consumption figure was much less significant than today.  The value of the savings on the electricity bill represented only 14% of the total benefits (assuming this figure of 50%).

Now the proportion of the benefit that comes through electricity savings is 30%.  Inaccuracies in the self-generation assumption have a much bigger impact on the financial returns calculated.  If solar prices continue to fall then the FIT will fall too, and this trend will continue.

As an aside, the table above is absolutely not an advert for so-called PV switches that divert solar electricity to an immersion heater in your hot water cylinder .  Once you ‘degrade’ high value electricity to heat, you reduce its value to that of the cost of the fuel would have used to heat the water.  In 80% of homes this is gas, so it’s not 15p/kWh you’re saving, but more like 5p/kWh. 

(See the outspoken guest blog from Tom Seppings of solaplug for more on this point).

Far better to use it to power electrical appliances if possible, or store it in a battery, an emerging technology already causing great excitement in the industry.

Your Guess is a Good as Mine

How good a guess is 50%?  What evidence was the government’s choice based on?  If anyone has information on this, I’d love to hear it. Please post a comment at the bottom of the article.

Let's pause to consider averages for a moment. The graphs above show three 'distributions', each of which has an average of 50%. Only the top one (1) would strongly justify using the average value for all customers. 

My hunch is that the reality is most like the bottom distribution (3), with two distinct groupings - households with people at home during the day, and households where people are out at work and school during the day. 

I also suspect that the 50% figure was arrived at when the average PV system size was much smaller than it is today. Falling prices have brought larger installations within the reach of more people (capped by the 4kWp tariff band limit). In 2011, the EST had the average system size as 2.75kWp.  Today it is 3.75kWp. The larger the system, the larger the midday energy peak, and the less likely it is that there's sufficient instantaneous electricity use in the home to mop up the solar electricity. 

Yet the industry persists with presenting financial benefits based on this 50% figure.  

Does anyone know of any work that has been done on the profile of electricity demand during the day in homes with differing types of occupancy?  How could the solar industry offer its customers a better prediction of how much solar energy they will consume themselves?

Do you think solar PV systems will become smaller to increase the proportion of self-consumption as levels of FIT support falls and electricity prices rise?

Let's hear what you think - post a comment below.