The Amount Customers can use Themselves now Matters More than Ever
When the UK Feed in Tariff (FIT) launched, people investing in solar were paid the equivalent of 48p/kWh in today’s money for solar energy they generated (irrespective of whether they used it themselves or exported to the grid). With electricity savings worth around 15p/kWh and export paid at 4.8p/kWh in today’s money the only number that really mattered was how much energy you would generate with your solar panels. Fortunately, solar professionals have accurate tools to forecast the annual yield for a solar, even relatively simplistic approaches such as the MCS calculation get pretty close.
As solar costs have fallen since the start of the FIT, the generation tariff has fallen too. Now the generation tariff is worth about a quarter of the starting value - 12.47p. If the government presses ahead with its reckless cutbacks on the FIT, then the generation tariff would be only 1.63p for domestic customers.
As these changes have occurred, the economic basis for installation of solar panels has become more and more driven by the value of the energy savings the system produces. With the generation tariff at only 1.63p, the energy savings dominate (see the graph below).
Most solar companies have been using a value of 50% to estimate the amount of energy generated by the solar that would be used in the property (and therefore offset energy bills), so called self-consumption. The justification for doing so is that this is a ‘government figure’ because the amount the FIT pays for export has to be deemed rather than metered, and government set the value of export at 50%. So logic says that if the export is 50%, then the self-consumption must be 50% too, right?
Just because the government says it is willing to pay the export tariff on 50% of the energy generated, this is not the same as saying that all houses will use 50%, irrespective of the size of the array and energy consumption patterns of the house during the day.
In the past, errors in the estimate of self-consumption have not really mattered to the presentation of the economics. Right now they are starting to matter. As the generation tariff is reduced further, they will really matter.
The industry is going to have to develop ways to more accurately assess and predict self-consumption.
So let’s start by having a look at a few examples of real homes with solar. Thanks to RBeeSolar and 4Eco for allowing me access to anonymised data on their systems.
Each graph shows a full 24 hour period running from midnight to midnight, with mid-day in the centre. The day is divided into 10 minute sections and the energy flows are shown in watt-hours per 10 minutes.
Blue is electricity pulled from the grid for consumption in the house. Orange is energy consumed in the house and provided by the solar panels. Yellow is energy that cannot be used in the house and that is therefore exported to the grid for others to use. The electricity consumption of the house is the sum of the blue and the orange.
House 1 has relatively low total annualised energy use 2,250 kWh per year. This figure represents about three quarters of the electricity use of a typical UK home (often taken to be 3,100kWh/year). The use pattern shows a small morning peak and a larger evening peak. There is little use above the baseload during the daytime on week-days, but additional electricity use at weekends, indicating a household where occupants are out during the working week.
Data was only available for July, August and September for this house, but the self-consumption rate during this period was only 22%, with 78% of generated energy exported. The solar system is not especially large at 2.5kWp.
House 1 Self Consumption: 22%
By contrast, house 2 shows a consistent pattern of electricity use during the working week and weekend, indicating a household that is occupied during daylight hours all week. The base load is a little higher than for house 1, and there are regular peaks of electricity consumption throughout the day.
The pattern of electricity use is similar in winter, perhaps with a higher evening consumption. The graphs clearly illustrate how on a gloomy winter day (Thursday), most of the solar is used in the house, but that there are still sunny days in winter and plenty of export going on.
Total electricity consumption over the year was 2664kWh, so still a little lower than typical (86%). The solar system on this house is 4kWp.
House 2 Self Consumption: 24%
House three has an annual electricity demand of 5,030kWh, comfortably higher than the typical UK house. It also has a use pattern that indicates people are at home during the working week. When coupled with a 4kWp solar system, this results in a higher self-consumption level, but still only 37%.
House 3 Self Consumption: 37%
The withdrawal of Feed in Tariffs (whether sudden or gradual) is the clear direction of travel. The result of this trend is that self-consumption of solar electricity becomes the dominant economic justification for installing solar PV. Any error in the predicted level of self-consumption will have a larger impact on the overall financial returns than has previously been the case.
Based on the small sample considered above, the industry-standard use of a value of 50% for self-consumption of solar generated electricity in domestic installations looks generous. With increasing availability of monitoring equipment householders will be able to check the accuracy of figures that were used in the sales process.
Products that divert excess solar electricity to water heating may have a role to play in increasing self-consumption, but the economic savings will depend on the replaced energy that would have been used to heat the water. The government’s announced intention to retrospectively pay only metered export once smart meters are installed means that if the house has gas-heating, the value of the gas use avoided is similar to the income from exporting the electricity.
Diversion of excess solar electricity to charge electric vehicles or to battery systems that can store energy for evening use will become more possible as the price point of these technologies continues to fall. In the meantime it could be that the economic optimum moves away from the current goal of maximising subsidy yield (aiming for 4kWp or as much as will fit) and we begin to offer slightly smaller solar PV systems that produce less excess on sunny days and a higher proportion of self-consumption.
This maturing market could involve the solar installer fitting monitoring equipment in the house for a short period before making a recommendation about a right-sized solar installation. From my experience of looking through data on these houses and others, the good news is that people appear to be real creatures of habit. One or two weeks' worth of monitoring should be enough to give a good indication of the timing of people's energy use.
The industry needs to do more work to understand the relationship between the proportion of self-consumption and the size of the solar installation relative to the size of the annual electricity demand. It may be that predictive tools, or at least rules of thumb can be developed to allow solar installers to size the solar system to achieve a level of self-consumption knowing the annual energy use of the household.