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Go solar now or later: A dilemma for households

18/03/10

One can presume that as solar technology advances rapidly, the renewable energy options available to Australian households will be vastly different within a decade.

A number of products are in the market, and more are close to commercialization thanks to the work of Australian universities and incubators, who are producing smaller, cheaper and more powerful technologies. This begs the question, given how much a household has to invest in solar technology and the clunkiness of most current installations, should consumers be investing now, or in a few years?

Purchasing a solar system is major decision. It is a large, obtrusive and expensive capital purchase that works like a mini power station on a household’s roof. A solar system purchase is a long term investment, with 20-25 year warranties and sophisticated metering and inverter equipment. With rebates available today, some vendors are talking about four year return on investment, but it could be argued that the current proliferation of solar panels is a knee jerk reaction (and a potential gamble) to generous government subsidies, when better solutions are just around the corner.

Former Professor from RMIT’s Ian Bates and his team claim to have developed solar panels four times more efficient and three times cheaper than currently available models. Similar technology efficiencies exist from products being developed by Australian National University and University of New South Wales. There is also now a growing residential wind turbine market that also promises to drastically lower costs of household renewables.  Does this mean that current systems will be obsolete in just a few years?

Compounding consumers’ confusion is the instability of Australia’s policy environment. In the past year there have been major reversals of rebates and feed-in-tariffs announced by the governments of Western Australia, the Australian Capital Territory, New South Sales (NSW) and Queensland. There is also the recently phased out SHCP, solar credits and RRPGP and Green Loans Federal Government schemes.

Despite the confusion, many panel vendors will point to a favourable market to purchase equipment, particularly in NSW. They argue that there will never be a better time to buy solar as the policy is likely to change. On current average pricing, a typical 1.5Kw system on a home can be installed with government rebates for as low as $3000 – and with a generous NSW gross feed-in-tariff on offer, we’re talking about a return on investment of about four years.

Given the longevity of the product you would think that this is clearly a very attractive proposition. But one needs to think about the future and not be constrained with an outdated product, which in its simplest terms today means buying the largest and highest quality inverter that you can. And this in turn means it costs more… so really your return on investment is pushed back to six or seven years. All of the sudden it feels like we are taking a gamble again.

The one constant amongst this is the (almost set in stone) fact that the cost of power to households will continue to increase. As population grows, so does pressure on the national grid.

My conclusion is that the decision to go solar is still a major one that requires considerable research and forethought for a family. To remember the lessons from Beta video recorders, segway riders, and pre-Ipod mini-disc players would be wise. Any decision needs to be taken in the context of existing rebate opportunities versus incoming technology efficiencies. We regularly hear that the “holy grail” of grid parity (where the cost of renewable power is equal to that of grid power) is just around the corner, but how far away that corner actually is remains a valid question. The best time to go solar may indeed be right now and you will be safe in the knowledge that you are taking an affirmative environmental and energy usage action. Just make sure you plan any purchase with an eye on the future.