We have encountered numerous individuals and companies interested in installing a photovoltaic system to produce electrical energy. Although, in principle, this installation serves one purpose, namely converting solar light into electrical energy, people’s motivations for installing the system vary. If we were to categorize them broadly based on the reasons for installing these systems, we would have the following types of individuals:
- People who aim to derive material benefits through self-consumption of energy or selling surplus energy and are interested in economic feasibility calculations.
- Individuals who desire, for psychological reasons, to be independent of distribution network services.
- People who fear interruptions in energy supply from national providers and want a backup source.
- There are unique cases, such as remote locations without the possibility of connection to the grid, where economic calculations no longer apply, and the need for energy at any cost takes precedence, and these situations are treated completely differently.
In this article, we will primarily focus on the first category because if you don’t fall into the fourth category, where you don’t have access to a grid, then economic profitability calculations should be the main motivation, if not the only one.
So, we will go through several chapters:
- Chapter 1: How a Photovoltaic System Works
- Chapter 2: Production Curves
- Chapter 3: Utilizing Energy in Relation to the Electricity Bill
- Chapter 4: Subsidies, Financial Assistance, and Depreciation
Chapter 1: How a Photovoltaic System Works
A photovoltaic system captures solar radiation and converts it into electrical energy, which is then distributed:
- For self-consumption;
- Into the national distribution grid;
- For storage in your own batteries or in the electric vehicle’s battery.
Chapter 2: Production Curves
The production of electrical energy depends on the presence of solar radiation. Therefore, we say that production has a day/night curve and a summer/winter curve. In practice, we produce during the day and summer to cover consumption at night and in winter when production decreases.
It should be noted that when there is abundant snow covering the solar panels, production becomes zero. At that moment, without the ability to rely on another source (national grid, diesel generator, batteries, etc.), the location is left without electricity.
Chapter 3: Utilizing Energy
To understand how the electricity bill is reduced, we need to understand what exactly we pay on an electricity bill. If we analyze an electricity bill, we will see that we pay for three things:
- The price of energy;
- The price of transporting energy through the network from energy producer (hydroelectric, solar parks, nuclear power plants, etc.) to our consumption location;
- The cost of green certificates and other taxes.
Starting from the idea that we have the following costs: Energy – 0.8 lei/kW, Transport – 0.2 lei/kW, and Green Certificates – 0.07 lei/kW. Depending on how the produced electrical energy is used, we will have three ways to utilize the energy.
1. By using electrical energy for household consumption, we will reduce the bill by the price we would have paid to the electricity provider.
The price I pay consists of the energy price + the network transport price + the green certificates and other taxes.
- With 500 kW consumed from the panels, we will have a bill reduction of 500x(0.8+0.2+0.07)=535 lei without VAT.
2. By injecting electrical energy into the national grid, we should receive compensation in energy or money equivalent to only the energy component, excluding the network transport and green certificates.
- Thus, if I deliver 500 kW to the grid, I am entitled to receive 1000 kW for which I only pay the transport and green certificate components, or the cash equivalent of 500×0.8=400 lei without VAT.
We can say that the bill has decreased by 400 lei.
3. In the case of storing energy in batteries or in the electric vehicle’s battery, there will be a technological loss in the charging and discharging process of the battery, which we estimate at 10%.
- The stored energy will no longer be consumed from the grid, so the next benefit for 500 kW produced will be 500×0.9(0.8+0.2+0.07)= 481.5 lei/kW without VAT.
Chapter 4: Subsidies, Financial Assistance, and Depreciation
In many countries, there are various tax incentives for those who produce green energy. In Romania, the Environmental Fund Administration (AFM) program supports individuals, and there are numerous lines of non-reimbursable financing for companies. In practice, all these are material benefits resulting from the installation of a photovoltaic system. Thus, we find ourselves in a situation where a 3 kW system installed by an individual and financed through AFM is amortized from the first day of operation.
The payback period for the investment varies greatly, but we can estimate the following intervals:
- With non-reimbursable financing: 0 – 4 years;
- From own sources with a minimum self-consumption of 70% (it is important to have active electrical consumers during the daytime when the panels produce energy): 4-6 years;
- From own sources with a minimum self-consumption of 30% (when we are away from home during the day and consume energy in the evening and at night, outside the period when the panels are producing): 6-10 years.
Conclusion
It is essential to think of installing a photovoltaic system as a long-term investment. Although initial costs may seem high, they can be amortized over time through savings on electricity bills. By calculating the payback period of the investment, you can gain a clearer perspective on how your electricity bill will decrease over time and how quickly you will profit from this investment.
In addition to immediate financial savings, installing a photovoltaic system can add value to your home and contribute to reducing your carbon footprint. Homes with photovoltaic systems are often considered more attractive in the real estate market and can command higher prices when sold. They also convey a message of commitment to the environment and sustainability, which can be important to many homeowners.
Article written by Cătălin Stanciu, Managing Partner Silkat Electric Grup. For more details or a personalized offer, you can contact catalin.stanciu@silkat.ro
