Avoiding the Assets Test – Solar Power?

The Problem

If you are effected by the Centrelink or other Government assets test, you know your pension goes down the more assets you have. Unfortunately you have few options to solve this problem.  You can and should, revalue your assets often (like your car), you could go on a holiday, prepay for repairs, shuffle money to a spouse that’s under retirement age (or maybe you have to go and get one first which could be expensive) or you could spend money on something that will save you money in the future.

The first choice.

If you don’t have a solar system, my first choice would be to install one. I have had a solar system on my roof for 10 years now. My system is only a 2Kw system installed by a firm that went broke years ago. But since it has been quite reliable and since I haven’t paid for electricity in the last 10 years – it has paid for itself well and truly. It has saved me at least $1200 per year because my electricity costs used to be about $300 per quarter. So, I’m not overly concerned that it’s not covered by warranty anymore. However, I installed my system when the feed in tariff was 47c per kilowatt hour. That means, the power company pays me 47c for all the electricity I generate and don’t use in my home.

What does that mean?

Just before I go on let me explain those terms. The Electricity I use or generate is measured in watts (usually measured in Kilowatts kW or 1000 watts because we use so much). So, if I generate 1000 watts for one hour, that’s called a Kilowatt Hour kWh. My solar system generates between 50 and 80 Kilowatt Hours per week depending on the weather. My electricity bill says I use around 7 kWh per day (49kWh per week) in excess of the power I generate. But the fact is, during the day, I usually generate more power than I use in my house. The left over, is sent back down the wires to everyone else. I have a smart meter that can tell whether I’m using power from the grid or sending it back. I get paid for the amount I send back to the grid and I pay for the amount I draw from the grid. The amount I send back or the “feed in” attracts 47c credit for every kWh sent back. I currently send back around $3 per day more than I use.

The Problem.

Unfortunately, the 47c deal is no longer available and if I move house, I will lose the high feed in tariff as well. So the question is “would I still install a system with a lower feed in tariff?” Is it still possible to reduce my electricity costs on my usage?

Solar Panels on House
Solar Panels on House

The answer at the moment is YES. I may not be able to reduce my bill to nothing or make a profit but I can make a significant difference in what I am charged for electricity.

Why bother?

a. If I generate enough electricity to cover what I use in the day time, it will reduce my power bill by about 24c per kWh (depending on which power deal I get) because, what I generate and use, does not cost anything. So if I generate all the power I use during daylight hours, the power usage cost for that period of the day is $0. Of course, I will still need to use grid power during the night but if I can generate enough so I send some back during the day, I will reduce the cost of that power as well.  If I could get a feed in rate (say 18 to 20 cents per kWh) close to the rate I pay for the power I use at night it will be even better.

Today’s situation.

Today, I can install a 6.6kW system at the same price as my original 2Kw system. For me that means I will generate 3 times the electricity of my existing system. Logically, if my usage doesn’t change, I will export at least 3 times what I currently send back to the grid.  The actual amount exported will be MORE than 3 times that I send back now, because I currently use some from my 2Kw system. Don’t worry if that sentence doesn’t make much sense, just believe me when I say I will send back at least 3 times. So even though I can’t get 47c/ kWhr I can get the current feed in tariff of 15 to 20 cents in Queensland and parts of Australia. So, assuming I can get 15c, if I export 3 times as much as I send back now, I’m getting the equivalent of 45c (15×3). And if you can get more than 15c (some suppliers are currently paying around 18 to 20c to keep your loyalty when you go to another power provider) you will be better off again.  All the exported power will help pay the cost of the afterhours power and hot water heating you use.

Additional saving

In addition, every hour of electricity I generate and use at home, will save me around 24c off the bill. That is, I won’t have to pay the electricity company for anything I generate and use. So if I do the washing during the day, run the dishwasher, do the ironing (or better still, get someone to do it) during the day, I will use what is coming off the roof instead of from the grid and save 24c per kWhr. Note that with a higher feed in rate (say 15 to 20c/kWh and larger system (say 5kW and over) the value of using the power during the day does not make much difference.

So most solar companies say you can earn back the cost of a system in about 2 1/2 to 5 years. So, if it’s true that you can repay the costs in 5 years, it means the effective interest rate is 20%. That’s 10 times what the bank is offering in interest. Many solar providers are now estimating a payback period of down to 3.5 years. Either way it seems to be a short period of time.

In addition, everything I spend on house repairs or renovations should not count as an asset because it’s on the house I live in, which is exempt from the assets test. Centrelink seems to only be interested in the profit you make from the system and unless you can get a better feed in tariff than what’s on offer, or really minimise your usage, you won’t make much profit!

The same seems to be true for the taxation department.

I have included a spreadsheet here.

You can use to try some scenarios out to see what difference you might get by changing your power deal. Note that the spreadsheet calculates possible scenarios only. It may not match your accuracy requirements or your circumstances and is not financial advice.

Types of Solar Systems

Today there are three main types of solar systems available. Each of them has set/s of solar panels. As an example, I will use a 6.6kW capacity. Note that 6.6kW of panels will produce less than that when sunlight strength is restricted.

First type: The traditional string inverter system is the most common and has panels set up in groups (strings) on the roof where there is room. Usually one group of 20 to 22 panels or two groups of 10 to 11 panels. The two groups occur regularly when there is not enough room on one area of the roof and they have to be in two groups. Each group will be separately controlled in the inverter. They will typically be attached to a 5kW feed in limited inverter (current maximum allowed for two phase in Australia). The 6.6kW solar panels are larger than the 5kW inverter. This is so that they will produce the 5kW of power for longer periods during the day than if you installed 5kW of panels. If a solar panel in a group fails or is reduced in capacity the entire group reduces output.

Advantages:

  • Considerably less expensive than other systems.
  • Is far more common than other types.
  • Less technology used.

Disadvantages:

  • If one panel under performs, all in the group under perform.
  • More difficult to fault find.
  • No individual panel performance monitoring.
  • You may not know if the system is under performing for some time unless you regularly check the output.
  • Most inverters have what is required to show the solar power produced at any time of the day so equipment may be needed to connect to the inverter and some software provided by the inverter manufacturer.

Second type: DC Optimised System

Advantages:

  • DC power optimisers are installed on each panel so if one panel under performs the rest of the panels still perform at full capacity. This is good where some shading or soiling occurs on the system. It also prevents manufacturing variance in one panel from affecting the output of the rest.
  • Performance of the system is able to be remotely monitored down to panel level.
  • With monitoring included, when a problem occurs you know about it as apposed to waiting until you read the inverter display or worse – ‘your bill’.
  • The same cables and connectors as traditional systems.
  • If the power is off, the panels DC voltage is controlled down to a safe wattage.
  • Usually carries a longer warranty period.

Disadvantages:

  • Significantly higher capital cost compared to traditional system.
  • More technology is used.
  • The monitoring needs to remain reliable during the life of the system to gain the monitoring benefits.

Third type: Micro Inverter System

Advantages:

  • Micro inverters are installed on each panel so if one panel under performs the rest of the panels still perform at full capacity. This is good where some shading occurs on the system. It also prevents manufacturing variance in one panel from affecting the output of the rest.
  • Performance of the system is able to be remotely monitored down to panel level.
  • If a problem occurs you know about it, as apposed to waiting until you read the inverter display or worse ‘your bill’.
  • Problem panels can be identified directly from the monitoring system.
  • If the power is off the panels DC voltage is controlled down to a safe level.
  • Usually caries a longer warranty period.
  • Is arguably more scale-able than other systems. Say if you are thinking of going to an electric car or putting in a pool.

Disadvantages:

  • Each panel must have it’s own micro inverters.
  • Higher capital cost compared to the other systems mentioned.
  • Other solar panels of different types can be added later.
  • More technology is used.
  • The monitoring needs to remain reliable during the life of the system to gain the monitoring benefits.
  • Micro inverters must be of good quality and be a good match to the solar panel it is connected to.

Summary/Points you might consider:

  • Watch out for large price variations for the same type of system.
  • Solar system purchases are subsidised by many Governments.
  • Your solar system production usually only attracts a tax or social security income disadvantage if you are returning a profit.
  • Solar systems can require minor modifications to your roof.
  • Consider installing your system on a shed roof if the shed roof is big enough and more suitable.
  • Know that there are large variations in the cost of power supply including solar plans and the best deals are often offered under a loyalty program when you make it known that you intend on changing providers. Some of the providers you are with will only offer the best plan when you sign to a new provider and your existing provider receives the transport order for the new provider and you are in the cooling off period for the new provider.

Confused?

Hang in there. Any reputable solar systems seem to provide a good return at the time of writing (at least in Australia).

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