Getting the best return on your solar PV investment

By Teresa Kok, Marketing Director of the One Energy Group

For many households and businesses, the investment into a solar PV system has revolved around beating the crippling impact of load shedding on productivity, generating an income and for many, the inherent safety and security aspects that come with having no power. Other important factors are also coming into sharp focus – collapsing infrastructure, untenable service delivery failures, and the rocketing costs of electricity which will only get worse as more properties defect from the grid. With the cost of electricity rocketing up beyond R3,50/kWh and increasing exponentially year-on-year, getting the best return and payback on your solar investment should also be a key motivator and objective.

It all starts by getting a thorough electricity usage and needs analysis done to determine the best system design to ensure that not only do you have enough back-up when you need it for power outages, but that your system can equally generate and supply enough power to reduce your grid electricity usage and cost, as much as possible.

One Energy provides the following guidance on how to scale your solar PV system to get the very best returns:

1. Match Demand with Supply:

Proper monitoring and analysis of your electricity usage will reveal when your peak electricity demand happens and how much you use, on various circuits. From here, you can design a system a system that generates as much as possible of what you would normally use from the grid.

Monitoring shows you which appliances or devices are pulling the biggest loads, allowing you to reconsider not only their time and duration of usage, but whether there are more energy efficient options to consider. For example, schedule energy-hungry appliances like pool pumps and geysers to only run when your solar generation is at its peak – typically between 10am and 4pm. Consider putting timers on your geysers to manage the time slots of when it will draw power for water heating – or better still, convert to a solar geyser.

2. Add Solar Panels for Electricity Generation:

Installing an inverter and battery system for back-up only without solar generation capacity (panels) means that you need to use the grid to recharge your batteries when the power comes back on. So, although you are in no better or worse off position in terms of cost of grid electricity, you are also not saving anything on your electricity costs.

By adding solar panels for self-generation, every kW that you generate from your panels is one less that you will need to draw (and pay for) from the grid. For businesses where your main electricity consumption happens during daylight hours, which is also when the sun is supplying the bulk of your electricity needs, this is an absolute win. When selecting panels, invest in the highest-grade monocrystalline panels you can – premium efficiency translates directly into better energy output and savings over time.

If your PV solar array produces more energy than you need, certain municipalities now allow feeding back into the grid, and the utility pays you for this excess power generated by your solar panels, essentially offsetting what you use from the grid, against what you feed-back in. However, many feed-in tariffs are not yet at a point where it is worth spending money or on a larger PV system, and often requires a costly upgrade to your electricity meter for your account. For now, the best savings you can make is by storing your excess generation in a bigger battery bank, and then using your own energy when you need it. Your best option remains to get as close to 90% or more of your electricity usage coming from self-generation.

3. Add Battery Storage

There’s every reason to bulk-up on battery storage not only for when the grid goes down, but to reduce your usage from the grid as far as possible as grid electricity costs soar. Essentially, your intelligent hybrid inverter will ensure that all the energy generated by your solar panels will first go towards powering your property and all the circuits that are connected to it, and then diverting any surplus or extra to charge your batteries up again so they are ready to carry you through the grid outages and when the sun is no longer shining. If you have enough battery capacity and your system is programmed correctly, when your property starts to draw from the grid when the sun goes down, the battery will step in and supply the energy saved in your batteries from earlier, instead of you drawing from the grid.

Understanding the Lifetime Cost per kW of your Lithium-ion phosphate batteries

There is a perception that Lithium-ion Phosphate batteries installed as a key component of a hybrid PV system are expensive. This is simply not true if one calculates the average cost per kW over the life of the battery. It is clear that the battery energy cost is significantly lower than the cost per kW than Eskom or your local council supply costs, and massively lower than the cost of a diesel genset KW.

Consider the following calculation based on a 5kW battery costing R30 000:

With a Depth of Discharge (DOD) of 80% (ie 80% of usable capacity which is a protective mechanism to extend the lifespan of your lithium-ion battery) – therefore 4kWh usable power per cycle.
Battery lifespan = 6000 cycles
Total Power over life of battery = 6000 cycles x 4 kWh per cycle = 24000 kWh
Average cost per kWh = R30000 / 24000 kW = R1.25 per KWh

Now compare this to the current Eskom residential cost of R3.51 (Ekurhuleni tariff B). Generator sets run at an insanely high average cost of between R6 – R8 per kWh, and need regular maintenance which adds to costs. Your strategy should be to cycle the Lithium batteries, and increase the battery capacity to maximise the installed inverter and panel array capacity as close to daily electricity consumption as possible. Every kWh of solar electricity generated is another knocked off your electricity bill. With today’s high energy prices, and the rapidly reducing costs of quality battery storage, more homes and business are better off looking at greater battery storage capacity.

4. A quality hybrid Inverter is key

The inverter you choose is an important aspect for realising the best solar ROI – opt for a reliable hybrid inverter with a 10-year warranty. Remember that your solar panels and have long life spans of up to 25-30 years and require little service and maintenance, while lithium batteries offer lifespans of anything from 6000-8000 cycles (16-22 years at 1 cycle per day), so choose a good quality inverter that will perform as dependably, for as long.

One of the key issues with cheaper, ‘off-grid’ inverters is that they are unidirectional so the solar power can only address the essential services circuits, and savings cannot be made on the higher load items that are not on the backup side of the distribution board (DB). More sophisticated hybrid inverters are bidirectional, so they allow savings both upstream and downstream of the inverter, drawing power from both the grid and battery storage in a coordinated exercise to maximise the power you use from self-generation, and only drawing from the grid when it’s absolutely necessary.

Cheaper off-grid inverters will also switch completely to grid power if the load exceeds the solar supply, and cannot only pull the portion of excess demand from the grid, while using your solar power first. This can dramatically reduce the savings from solar.

5. Convert your electric geyser to a solar geyser

An electric geyser typically accounts for 30-40% of your monthly electricity usage and cost, so this is the most crucial starting point to reducing your daily electricity load, and which means you can also buy a smaller and more affordable PV solution. On a R3000 electricity bill, you’ll save around R880 per month, amortising your outlay in just over two years, that’s without even taking annual electricity cost increases into account.

6. How Do You Calculate the Solar Payback Period?

The “solar payback period” is the time it takes to recoup your initial investment in a solar power system. Most residential renewable energy systems end up performing as a solid investment, in which you yield a return. The payback period length can vary due to differences in peak sunlight, solar array size, and other factors. Many homeowners report breaking even on their investment within 5-7 years, but with the skyrocketing cost of electricity each year, this payback period is coming down all the time. You can calculate the solar payback period with the following formula:

Initial system cost / annual electricity savings = payback period. (Break-even)

7. How Do You Calculate ROI for your Solar PV system?

Return on investment (ROI) is related to the solar payback period, but instead of calculating the time it takes to break even, ROI calculates the total amount of money and savings that a PV array will provide over its lifetime and the expected utility costs for the same period.

Consider the following example: On an electricity bill of R2450 per month, which is around 700kWh usage per month (23kWh/day) at a tariff of R3,50 per kWh (2023), the system spec and cost looks like this:

System spec:

5kW Inverter
10kWh li-Ion batteries (upscale your batteries for reasons explained earlier – its cheaper per kWh than Eskom/council)
4.3kW solar panel array

Price, fully installed with all materials and COC: R148 000

This size system will generate between 20-22kWh per day – 90%+ of your daily electricity needs.

On an upfront purchase:

Based on an 18,65% electricity tariff increase this year and 12,74% for the next year and then a very conservative 5%/pa thereafter after (this figure is going to be higher as it does not factor in the increases that local councils will add on top of this)
Your breakeven point is just over 5,5 years based on electricity savings.
Your ROI is based on a very conservative escalation of 5% in electricity tariffs from year 3. Your cumulative savings on electricity costs will be R350 000 after 10 years and R940 000 after 20 years – this is a savings multiple of 6,3 on your original investment of R148 000.

On a finance option:

Based on prime interest rate, with a finance term of 60 months with no annual escalation, your monthly repayment cost is going to be around R3580/pm. (Figures may vary based on your credit rating and rates applied)
Your savings on your monthly electricity bill is around R2200 per month in year 1 and which then escalates as does the cost per kWh of grid electricity – this saving will offset a significant portion of the monthly loan repayment.
Your system will be fully paid off in five years (60 months) and you will own it, and for the rest of the 15-20+ years of your system lifespan, you will be generating your electricity for free, with less than a 10% reliance on grid electricity.

8. Choose your solar energy partner carefully

Getting the best return on investment in renewable power, whether for your home or your business, will be based on the initial cost to install your system, the amount of energy it will produce and store, and what this will mean in terms of electricity bill savings, as well as the quality and performance of the equipment, installation and ongoing management of your system. Enlist the help of a renewable energy installer that can fully explain your options for you and show you the calculations. And remember with the right set-up from the start, you can expand your system capacity as your budget allows and your needs change.

Work with a credible, qualified and accredited renewable energy partner that will be around for back-up, support and ongoing consultation over the lifespan of your system – that’s a good 20-25 years. Far too many consumers are finding out that the result of going with cheap systems and questionable installers is poor system performance, outright failures of battery systems and a vicious cycle of constant ‘call backs’ and maintenance requirements – until the original installer simply does not come back to fix their shoddy work or goes belly-up, leaving you holding the can. In some of the worst cases, these fly-by-nights have disappeared with deposits, and the installations are an immediate fire and electrical risk to lives and properties.

The proper installation and management of a solar PV system is a complex undertaking that requires a deep understanding and experience of the various technologies on the market, that are suited to the specific circumstances of every client and site.

Download our comprehensive checklist of all the considerations you should be looking at and the important questions to ask of any prospective solar installer.

One Energy is a multiple award-winning and market leading solar energy installer franchise with a national footprint of franchises and almost 14 000 perfect installations completed to date.