A solar system in Australia can pay for itself within 3-5 years and generate over $40,000 in potential savings over its 25-year lifespan.
However, it is not common for a solar system to completely eliminate a household's electricity bill due to various factors such as the feed-in tariff (FIT), supply costs, and optimal solar system size.
The FIT, which is the rate at which excess solar power is sold to energy retailers, is typically low, making it challenging to generate enough credit to purchase nighttime electricity. Additionally, energy retailers often charge a supply fee for being connected to the grid, which can add to the overall cost of electricity.
While it is possible to go off-grid and eliminate energy bills by purchasing a large solar system and battery bank, the upfront cost is often too high to make this a financially viable option.
Is a zero dollar electricity bill a potential reality?
Some nasty solar providers tempt customers during door-knocking or cold-calling situations with the promise that they will have a zero dollar electricity bill for decades. Unfortunately, too many customers still purchase crap solar and pay the price with unreliable systems and low long-term returns.
So, many customers still ask the question, can a solar system give me a zero dollar electricity bill?
The short answer is yes; it is possible in exceptional circumstances. However, it depends on several factors; overall, it is not that likely. So the cheap solar company claims are misleading.
The feed-in tariff (FIT) – how does it work?
When your solar system produces electricity, it is fed into the home directly to reduce your power bills. The excess power that is not used is then fed to the grid. This excess power is sold to your energy retailer at a set rate called the feed-in tariff (FIT).
While in the early days of solar in Australia, the FIT was as high as 60c per kWh, it is now much lower and in some States and under certain circumstances, the export of electricity might not even be allowed. So the renewable energy that the system generates is wasted.
In NSW, for example, the typical FiT payment ranges from 5 – 8 cents. However, it is possible with research to find a FiT that pays up to 12 cents.
If the price you pay for electricity from the grid is 35 cents for 1 kWh and you get 5c for your exported kWh, then you need to export 7 kWh during the day to earn enough to buy 1 kWh for use at night.
So if your solar system produced 36kWh and you only used 15kWh during the daylight hours, then you would be exporting the other 21kWh. So at night, you could purchase 3 kWh of electricity to break even. But it is much more likely that you will import as much as 10 to 15kWh during the night if your consumption mirrors the majority of Australian households. Therefore, reaching a cost-neutral position on electricity charges alone isn’t easy.
Optimal solar system size
To generate enough credit via daytime export to purchase nighttime electricity, one needs a bigger system than one’s typical consumption. This is why a solar system that can reduce your bill to zero is uncommon.
You also have to consider the supply cost
To achieve a zero dollar electricity bill through solar, you must also consider the energy retailer’s supply cost. This cost adds an extra fee to your electricity bill for maintaining a connection to the grid.
It usually costs around $100 per quarter, equaling an additional $1,10 per day or, at 5c FIT, another 22kWh of exported energy per day.
This ongoing charge by the energy suppliers is one of the key reasons why many homes will not reduce their electricity bill, despite having solar. Reducing their bill significantly -Yes, getting it to Zero or even credit is rare.
Of course, one could purchase a big battery bank and an extensive solar system and disconnect from the grid, then one’s electricity bill would be zero, and we would not have to pay the supply fee.
But then the upfront cost would be very high, so this solution does not make that much sense economically.
So, in summary – although a solar system can reduce a household’s electricity bill to zero ultimately, it only applies to specific circumstances which are not that common. Therefore, instead of aiming for a zero dollar electricity bill, homeowners should go for a lower bill in the 200 -300 range per quarter, which is much more reasonable whilst still allowing for massive savings in contrast to their previous bills.