This article was written by Andrew Mitchell, Product Line Manager at Enphase Australia
As with any product or service, the age old saying generally holds true; you get what you pay for. Everyone likes a good bargain, and there is a lot to be said for shopping around to squeeze a few percentage points off the recommended retail price to arrive at the market price, but in an industry that is largely misunderstood by consumers, shopping around for the best price generally comes with some compromise on quality. This article seeks to highlight where the true cost of solar lies and how this should be considered when deciding to invest in your energy independence.
Entering a new market as a consumer can be quite overwhelming. Most of us don’t really have the time to educate ourselves on the finer points of the product or service we are looking for so will do a quick google search or phone a friend, but the less we know about a product or service, the less likely we are to consider our options. With a lovely touch of irony, I would like to draw a parallel between the 1980’s “oils ain’t oils” campaign that Castrol ran in an attempt to draw consumers attention to the importance of quality in an out of sight, out of mind commodity and the level of appreciation for the quality of rooftop solar which will sit on a roof for up to 25 years. Solar ain’t solar.
Let’s look at the main physical components of a rooftop solar system.
Photovoltaic (PV) modules
Fundamentally, they all do the same thing. They allow photons of light to transfer their energy to electrons which are the driving force behind what we call electricity. There are really no features that differentiate PV modules that are tangible to the consumer other than those that influence reliability and safety.
Module efficiency is somewhat debateable because all modules are rated (and priced) according to their generation capacity under standard test conditions. This essentially normalises any efficiency differences and just means that low efficiency modules will take up more space when compared to high efficiency modules. Nonetheless, higher efficiency modules are a good indication that the manufacturer values quality which is probably of greater importance to you than roof space.
Solar Inverters
Generally referred to as power electronics, solar inverters are more complex than PV modules and therefore have more of an opportunity to offer tangible value through feature sets such as module level power electronics (MLPE), monitoring and advanced grid functionality. But at the end of the day, all they are really doing is converting the direct current (DC) that is generated by the PV module to alternating current (AC) so that it can be used by your household appliances. So again, the main points of difference are reliability and safety.
Let’s take a moment to explore safety and reliability.
Safety
There are many aspects of a solar system that influence its safety, such as: the quality of workmanship, the quality of the protection devices, isolation and electrical components, and the electrical potential or voltage. While the industry is reasonably well regulated by product standards that dictate minimum requirements from manufacturers and installation standards and certifications that mandate a minimum level of diligence from the installer. Those of you who saw the ABC’s article however, will be aware that enforcing these standards can be quite difficult so it pays to do your due diligence when engaging an installer. At the end of the day, the level of quality you get will come at a cost. For further reading on safe solar I suggest you visit the Safe Solar website.
Reliability
Safety and reliability are closely linked. Most products are designed to be safe under normal operation, but it is more difficult and more costly to design products that are safe under fault conditions, or what we call “fail safe”. So, when reliability is compromised, it tends to introduce a risk to safety.
System performance is also a function of reliability and while the implications of underperformance are far less severe than safety, the likelihood of it occurring is much higher. Systems with a single point of failure, like the common DC string inverter, offer no redundancy; if the string inverter has a reliability issue then the entire system is compromised. Distributed systems like micro inverters offer nth level redundancy because the reliability of one inverter does not affect the rest of the system. To avoid surprise power bills, it is always a great idea to monitor your system performance proactively. All reputable inverters come with performance monitoring, but again, it comes at a cost so if you opt for the cheapest you may be subscribing to the “ignorance is bliss” philosophy.
While PV modules may all look very similar on a data sheet or when glancing up at them from street level, there are vast differences in quality which are reflected in the huge range in price (see table 2). A typical PV module has hundreds of potential points of failure, all of which must stand the test of time exposed to the elements on your roof. Quality controls on components and assembly all come at a cost so be wary of the cheaper option, it may be banking on the fact that your cheap inverter packs it in first, so you simply won’t know any better.
I hope now that the reader can appreciate that while an electron is an electron, the manner in which it is generated can vary significantly and consequently have a substantial impact on the long-term performance of the system.
But why would you pay twice as much for a quality solar system, can there really be that much difference? Australians are blessed with the most affordable solar in the world due to healthy government funded incentives and a highly competitive market and therefore find it hard to appreciate the true cost of solar. The median price in Australia for a fully installed 6.6kW system in 2019 is around one third of the price of an equivalent system in the United States or Europe.
Table 1. Median prices (after rebates) of solar in AUD 2019
To make this a little easier to digest, let’s break it down and see where the costs lie.
Table 2. Cost breakdown of a low and high end 6.6kWp solar system
Note: These figures are indicative of the national average and may vary from state to state.
You can see that all the way through the value chain there is a cost associated to quality. We have already discussed where the value lies for PV Modules and Inverters so let’s now look at the other two main components.
Labour
While there are a few ways to reduce the cost of labour, the principal opportunity is to simply reduce the amount of time you spend installing the system. Quality workmanship that will result in a long lasting, safe installation takes a level of care that simply cannot be avoided. If an installer offers to save you a few bucks on labour by taking some short cuts you will inevitably pay for it in the long run.
Margin
This is a very important cost component to appreciate because on the surface it looks like the high-end system retailer is simply pocketing more of your hard-earned cash than the low-end retailer, but there are some very good reasons for this.
First of all, for a business to be sustainable it has to be profitable. The Australian solar industry is sadly notorious for its fly by night retail companies that are here today and gone tomorrow. Since 2011 there have been over 700 solar companies listed on the ASIC website as being closed, in liquidation, administrators appointed or proposed de-registration. When you purchase a solar system, it comes with a product warranty from the manufacturer, but it also comes with a workmanship warranty from the company you bought it from. If this company does not last as long as your solar system, then you could find yourself in a tricky situation. One of the down sides of a price driven market is the slippery slope to non-profitability. It may sound counter intuitive, but you want your service provider to be profitable.
The second consideration for margin is after sales support. Companies that truly value customer satisfaction will often factor in the cost of a return visit to service your system, or the cost of support staff to answer your calls if you need assistance in the future. If they cannot afford to allocate some of their profits to these services, then you can be sure that you will find it hard to solicit them when the need arises.
STCs, aka ‘rebates’
It’s now clear why a quality solar system can cost twice as much as the bottom of the range offering, but why is it that some systems can cost up to 3 times as much? Well, this is where the government incentives begin to distort things. Under the federal rebate program designed to achieve our renewable energy target (RET), renewable energy certificates (RECs)[i] are awarded ahead of time. In fact, when the paperwork for your system is submitted to the REC registry, you will be granted up to 15[ii] years’ worth of small-scale generation certificates (STCs) that can be liquidated immediately. These are called “deemed RECs” and by lowering the out of pocket cost of all systems, they are effectively increasing the percentage premium paid for a quality system. Instead of paying around twice as much ($14,795 versus $6,596) you end up paying around 3 times as much $11,297 versus, $3,478).
While this federally funded incentive has done a lot to nurture Australia’s booming solar industry, it is tied to energy generation that does not exist yet and quite frankly, is unlikely to ever exist in full. The biggest shortcoming of this scheme is that there is no accountability. You could install the cheapest system on offer which may stop working 6 months down the track with no support from your retailer who is no longer in business, or you could install the highest quality system that continues to generate energy for 15 years and beyond and you will receive exactly the same amount of STCs which you can convert in to the same amount of cash on day one. What makes this situation even worse is that the poor quality products that this program subsidises are ending up in landfill and being replaced by more poor quality products because it makes more financial sense to replace your modules and cash in on additional deemed STCs. By supporting low quality products, you are ultimately increasing your environmental impact which most likely contradicts the very reason for your purchase in the first place.
…compared with the USA
Things are different in the USA. Systems cost the consumer a lot more money and are therefore often sold with finance options or power purchase agreements where the ongoing performance of the rooftop solar system is imperative to the company selling or backing the asset. As a result, the cheaper products we see in Australia are not present in the market because the finance companies simply won’t take the risk. If they are not willing to risk investing in cheap products, why should you?
It is also worth mentioning here that safety driven regulatory requirements such as rapid shutdown have also excluded the cheaper products from the US market because they are unable to meet the requirements. In Australia however, the onus is on the consumer to voluntarily pay for the additional costs associated with the safety benefits of rapid shutdown.
Summary
The point I am trying to make here is that it is important to consider your solar investment over the medium to long term rather than just the upfront cost. On average, a 6.6kW solar system will deliver about $150 of savings a month to the system owner. At $1,800 of savings a year, a quality system will soon pay for itself and continue to deliver return on investment for up to 25 years, while a cheaper system will be lucky to last 5 years. A simple cash flow analysis will make your decision a no brainer.
Furthermore, the embedded energy of the system (the amount of energy it took to manufacture and transport) can sometimes take longer to pay off than the financial investment, so if you are purchasing solar for environmental reasons, quality should be your primary consideration.
There are many things to consider when it comes to purchasing a rooftop solar system and they will vary for each individual. I hope that this article has equipped you with some useful information that will give you the confidence to have the right conversations when entering the market.
[i] Renewable Energy Certificates are split into two types; small-scale technology certificates (STCs) (<100kW) and large-scale generation certificates (>100kW).
[ii] Up until 2015 you were awarded 15 years of deemed RECs, this is being reduced by one every year until it is completely phased out in 2030.