How Does Solar Work?
Solar Photovoltaic (PV) panels are generally fitted on the roof in a northerly direction and at an angle to maximise the amount of sunlight that hits the panels.
Solar PV panels on the roofs of homes and businesses generate clean electricity by converting the energy in sunlight. This conversion takes place within modules of specially fabricated materials that make up the solar panels. It is a relatively simple process that requires no moving parts. In most cases solar panels are connected to the mains power supply through a device called an inverter.
Solar panels are different to solar hot water systems, which are also mounted on household roof-tops but use the heat from the sun to provide hot water for household uses.
The technology to convert sunlight into electricity was developed in the 19th century, but it was only in the second half of the 20th century that development accelerated behind the need to provide reliable supplies of electricity in remote locations – from satellites in space to outback Australia.
Solar panels have been installed on the rooftops of houses and other buildings in Australia since the 1970s. Currently there are more than 100,000 solar panel systems safely and reliably delivering clean electricity across Australia.
Grid-connected solar PV systems
Most suburban homes in Australia are connected to the electricity grid, which uses alternating current electricity (AC). But the electricity generated by solar panels is direct current (DC). That means grid-connected (GC) solar PV systems need an inverter to transform the DC electricity into AC electricity suitable for ordinary household needs. Houses with solar systems use solar power first before sourcing electricity from the grid.
When the panels are not producing electricity at night, electricity is supplied from the existing electricity grid. For systems with a battery backup (optional), the inverter regulates the charge of batteries. The electricity stored in the batteries can be used at night or during blackouts.
What size system should I install?
The size of your solar PV system will depend on:
- the physical unshaded area available for the installation of your panels
- how much you are prepared to spend
- what portion of your electrical consumption you wish to generate.
To work out what size solar PV system you require, you need to analyse your household’s daily electricity consumption. Your monthly or quarterly electricity bill measures your household’s electricity consumption in kilowatt hours. From this figure, you can calculate your average daily electricity consumption, and the average amount of electricity your solar PV system needs to produce to cover your electricity needs. This process will be completed by your accredited designer during the design and specification stage, as part of their load analysis.
What are REC’s (Renewable Energy Certificates)?
Renewable Energy Certificates (RECs) are an electronic form of currency created by the Renewable Energy (Electricity) Act 2000 (also known as the RET scheme). One REC is equivalent to one megawatt hour of electricity generated by your solar PV power system. The price of RECs changes according to market conditions. As an owner of a solar PV power system, you can register, sell, trade or surrender RECs for systems up to 100kW.
There are two ways you can be paid for your RECs:
- Assign your RECs when you purchase your solar PV system to a registered agent in exchange for a financial benefit which may be in the form of a delayed cash payment or upfront discount on your solar PV panel system (most consumers take this option); or
- Create the RECs yourself by finding a buyer and then selling and transferring them in the REC Registry.
For a list of registered agents, contact the Office of the Renewable Energy Regulator
RECs may be created for solar PV systems in batches of either one, five or 15 year deeming periods. At the beginning of each successive one or five year deeming period, the Regulator (from the Office of the Renewable Energy Regulator) must be satisfied that your solar PV system is still installed and is likely to remain functional for the next deeming period. In order to claim RECs for the full 15 year deeming period upfront – which is the most common option – your designer/installer must be accredited by the Clean Energy Council. More information is available in the RET process for Owners of Small Generation Units (SGUs) guide published by the Office of the Renewable Energy Regulator click here.
The level of subsidy will depend on a number of factors, including the location (also known as the zone) of the solar PV system, the size of the system and the price of RECs at the time the system was installed. Australia is divided up into various zones based on how much renewable energy can be generated by a solar panel in a given area. So the same sized system installed in Melbourne or Hobart (Zone 4) receives fewer RECs than those installed in Sydney (Zone 3) or Darwin (Zone 2) because Melbourne and Hobart have less sunshine so less solar energy is produced. The table below shows the level of financial support available from RECs on solar PV systems in the major capital cities of Australia.
What are Feed in Tariffs?
Several states have introduced, or are in the process of introducing, feed-in tariffs. A feed-in tariff pays you for electricity generated by your solar PV system.
Under a net feed-in tariff, a premium is paid for any solar energy that goes back into the grid from your house. So if you have surplus energy generated by your solar panels, you get paid for it; and if you use all of the energy you generate it will be offset against your normal electricity bill.
Under a gross feed-in tariff you get paid for every unit of electricity generated by your solar panels, regardless of whether it goes into the grid or is used by your household.
You need to apply to your electricity retailer to receive the feed-in tariff. When signing an agreement with your electricity retailer, you need to be informed. In particular, you should check with your electricity retailer about any tariff changes that will occur as a result of installing solar and carefully weigh up the advantages and disadvantages before making a decision. This should be considered before you install tariff changes.
Important questions to ask about your feed-in tariff agreement include:
- What price will they pay you for your electricity (in cents per kWh)?
- What is the cost of the electricity you purchase from them (in cents per kWh)?
- Will you lose your lower off-peak rates by moving onto a higher Time of Use (TOU) tariff?
- Have you been signed onto a premium feed-in tariff or a standard feed-in tariff? If your electricity retailer signs you up to a standard feed-in tariff agreement you will receive less money for the electricity you feed back into the grid.
- What will be the form of payment for electricity you produce? It is likely you will receive the feed-in tariffs you earn by default as a credit on your electricity bill rather than cash.
- What will be the form of payment for surplus electricity you produce? Will it be cash, cheque or EFT on request?
Other important questions to ask when signing an agreement with your electricity retailer are discussed in further detail later in this document.
The table below shows the feed-in tariffs introduced, or in the process of being introduced, in the various states, and the savings that could be made on a 1.5 kW system. These savings are an estimate only and may vary depending on the size of your solar PV system, the products used, location of the system and how much electricity your household consumes. The actual savings you make may also vary depending on the electricity retailer you are with. For a more accurate estimate, your accredited designer/installer will be able to calculate your potential savings as part of their load analysis.