Category: Solar Power Economics

Is managing a solar power installation to the point where it generates upwards of 10% return on investment the Holy Grail of solar power adoption? At that point the standard solar power installation would go from being something of an economic joke to becoming a worthwhile and in fact wise proposition for many NZ households.

But managing an installation to this point is not easy, and the claims involve assumptions. For that reason, my claims need to be fairly clinically examined.

To start with, I begin from the position that the solar power system in question will already be reducing net energy drawn from the grid by an average of 2.4 kWh per day. Given that a 1.5 kW system in my neighbourhood will generate on average of 5.4 kWh per day, this is not too much of a stretch – but it won’t be the case for every household. Most people who buy solar assume that every Wh that gets generated will get used, but it is often not the case. In fact, learning that the power generation needs to match power usage can be one of the most disenchanting things about investing in solar power, particularly given the variance between generation and usage during summer and winter months in the far southern hemisphere.

If so, a 2.4 kWh offset would work out to around a 4.4% return on investment on a $6000 system. Not good, but realistic.

This picture all changes with active management of the solar panels. With active management, you notice when the days of surplus occur, and plan ahead to intensify your energy usage on these dates. The best example is reserving the process of managing a weekly batch cook on the day of the greatest sunlight and then storing and reheating meals in a microwave throughout the week. This means you intensify your usage during daylight hours on one day in order to minimise usage on other more overcast days.

An example of this might be where a sunny day produces 7.4 kWh and you end up using 7 kWh of it for batch cooking. During the batch cook you end up making 14 servings at an energy cost per serving of 0.5 kWh.

A simple way of looking at that is that just an average of 1 kWh extra per day has been saved. But I would argue this does not reflect the true saving to the household. During a batch cook, you will often have three things on the go in the oven at once. This leads to efficiencies that are not reflected in the direct drawing from the power generated.

The real way to look at this is the average energy saving per serving per week under normal conditions, compared to the reduced cost of batch cooking and reheating meals.

A typical meal involves several different components separately prepared. There is often a ‘greens’ component, a ‘meat’ component and a ‘staple’ component. Each of these has an energy cost to produce. The energy cost can range depending on the meal, but it is not unusual for a single meal to ‘cost’ between 4 and 5 kWh. While a typical meal may make two serves, one for the meal and one for leftovers, this still results in between 2 and 2.5 kWh per serve. (I’m working the math from the perspective of a one person household, but the same principles apply for larger households. In fact my father visits me several days of the week, making it a two person household on those days, and at work I just make a salad, so it all evens out to 14 serves per week regardless.)

This energy will often be used in the early to mid evening, when there is peak energy use and solar is not often available.

Multiply that across 14 weekly serves and you have cut an extra 28 to 35 kWh from weekly consumption.

Even at the lower end of the spectrum, when added to the original 16.8 kWh, this would add up to a total of 44.8 kWh saved. At $0.262 + GST per kWh, this would add up to over $700 per year saved in direct electricity costs. This is without even including the cost of future retail energy price inflation, which I have at around 3.11% per annum. On a $6000 system, this works out to a return on investment of 11.7%. The efficiency here is achieved not so much through the panels themselves, but through the process of batch cooking – having an oven running at 170 degrees containing 3 separate dishes instead of 1 is far more efficient than cooking each meal steadily one at a time.

This does assume, however, that the cooking processes can be consistently managed. One reality that many families will have to face is that you may not always find a sunny day in the weekend to do a batch cook, and resources to do batch cooks during the working week may be scarce.

Next, you must consider the impact of microwaving the defrosted meals. A 1 kW microwave should consume 100 Wh per 6 minutes, and 6 minutes is usually sufficient to microwave most servings provided they have had overnight defrosting. This would result in 12 serves x 100 Wh, or 1.2 kWh, assuming that two of the serves are consumed on batch cook day. This would reduce weekly energy savings at the lower end from 44.8 kWh down to 43.6 kWh per week.

Also, while my batch cooks to date have been fairly efficient at drawing available solar energy, there is quite often an unavoidable overage. The exact amount drawn from the grid by an electric oven set at a certain temperature cannot be controlled. As a result, quite often I end up drawing a net of 2.6 kWh from the grid for the batch cook. For integrity’s sake, it makes sense to deduct this overage from the weekly savings figure, bringing it down to 41 kWh per week.

There is the other issue that solar panels will gradually degrade in efficiency over 20 years, and dates of peak consumption will be most heavily affected. However, this is most often offset by the increase in the cost per unit of energy caused by inflation.

Even with these adjustments, I have it that a 1.5 kW system used in such a way can easily result in an annual saving of $642.37 inc GST. Assuming installation costs of $6000, this still results in an annual return on investment of 10.7% even before taking into account inflation.

So – it’s a lot of work – but you can make a set of solar panels achieve over 10% return on investment. Although the improved return on investment should not be viewed as a product of the panels themselves, but as a process of active management of facilities that looks at restructuring the household’s energy use around solar panels plus other available equipment, such as a freezer and microwave.

Is managing a solar power installation to the point where it generates upwards of 10% return on investment the Holy Grail of solar power adoption? At that point the standard solar power installation would go from being something of an economic joke to becoming a worthwhile and in fact wise proposition for many NZ households.

But managing an installation to this point is not easy, and the claims involve assumptions. For that reason, my claims need to be fairly carefully examined.

To start with, I begin from the position that the solar power system in question will already be reducing net energy drawn from the grid by an average of 2.4 kWh per day. Given that a 1.5 kW system in my neighbourhood will generate on average of 5.4 kWh per day, this is not too much of a stretch – but it won’t be the case for every household. Most people who buy solar assume that every Wh that gets generated will get used, but it is often not the case. In fact, learning that the power generation needs to match power usage can be one of the most disenchanting things about investing in solar power, particularly given the variance between generation and usage during summer and winter months in the far southern hemisphere.

If so, a 2.4 kWh offset would work out to around a 4.4% return on investment on a $6000 system. Not good, but realistic.

This picture all changes with active management of the solar panels. With active management, you notice when the days of surplus occur, and plan ahead to intensify your energy usage on these dates. The best example is reserving the process of managing a weekly batch cook on the day of the greatest sunlight and then storing and reheating meals in a microwave throughout the week. This means you intensify your usage during daylight hours on one day in order to minimise usage on other more overcast days.

An example of this might be where a sunny day produces 7.4 kWh and you end up using 7 kWh of it for batch cooking. During the batch cook you end up making 14 servings at an energy cost per serving of 0.5 kWh (or effectively nearly 0 kWh per serving, since it all came from the sun).

A simple way of looking at that is that just an average of 1 kWh extra per day has been saved. But I would argue this does not reflect the true saving to the household. During a batch cook, you will often have three things on the go in the oven at once. This leads to efficiencies that are not reflected in the direct drawing from the power generated.

The real way to look at this is the average energy saving per serving per week under normal conditions, compared to the reduced cost of batch cooking and reheating meals.

A typical meal involves several different components separately prepared. There is often a ‘greens’ component, a ‘meat’ component and a ‘staple’ component. Each of these has an energy cost to produce. The energy cost can range depending on the meal, but it is not unusual for a single meal to ‘cost’ between 4 and 5 kWh. While a typical meal may make two serves, one for the meal and one for leftovers, this still results in between 2 and 2.5 kWh per serve. (I’m working the math from the perspective of a one person household, but the same principles apply for larger households. In fact my father visits me several days of the week, making it a two person household on those days, and at work I just make a salad, so it all evens out to 14 serves per week regardless.)

This energy will often be used in the early to mid evening, when there is peak energy use and solar is not often available.

Multiply that across 14 weekly serves and you have cut an extra 28 to 35 kWh from weekly consumption.

Even at the lower end of the spectrum, when added to the original 16.8 kWh, this would add up to a total of 44.8 kWh saved. At $0.262 + GST per kWh, this would add up to over $700 per year saved in direct electricity costs. This is without even including the cost of future retail energy price inflation, which I have at around 3.11% per annum. On a $6000 system, this works out to a return on investment of 11.7%. The efficiency here is achieved not so much through the panels themselves, but through the process of batch cooking – having an oven running at 170 degrees containing 3 separate dishes instead of 1 is far more efficient than cooking each meal steadily one at a time.

This does assume, however, that the cooking processes can be consistently managed. One reality that many families will have to face is that you may not always find a sunny day in the weekend to do a batch cook, and resources to do batch cooks during the working week may be scarce.

Next, you must consider the impact of microwaving the defrosted meals. A 1 kW microwave should consume 100 Wh per 6 minutes, and 6 minutes is usually sufficient to microwave most servings provided they have had overnight defrosting. This would result in 12 serves x 100 Wh, or 1.2 kWh, assuming that two of the serves are consumed on batch cook day. This would reduce weekly energy savings at the lower end from 44.8 kWh down to 43.6 kWh per week.

Also, while my batch cooks to date have been fairly efficient at drawing available solar energy, there is quite often an unavoidable overage. The exact amount drawn from the grid by an electric oven set at a certain temperature cannot be controlled. As a result, quite often I end up drawing a net of 2.6 kWh from the grid for the batch cook. For integrity’s sake, it makes sense to deduct this overage from the weekly savings figure, bringing it down to 41 kWh per week.

There is the other issue that solar panels will gradually degrade in efficiency over 20 years, and dates of peak consumption will be most heavily affected. However, this is most often offset by the increase in the cost per unit of energy caused by inflation.

Even with these adjustments, I have it that a 1.5 kW system used in such a way can easily result in an annual saving of $642.37 inc GST. Assuming installation costs of $6000, this still results in an annual return on investment of 10.7% even before taking into account inflation.

So – it’s a lot of work – but you can make a set of solar panels achieve over 10% return on investment. Although the improved return on investment should not be viewed as a product of the panels themselves, but as a process of active management of facilities that looks at restructuring the household’s energy use around solar panels plus other available equipment, such as a freezer and microwave.

Nobody lies in the bathtub at 5.50am reading management theory textbooks. Nobody, that is, but me.

A recent management theory textbook introduced me to the concept of the Gantt Chart. It definitely did not leap out at me as revolutionary. It was the sort of thing that anybody with a modicum of organisational skills would look at and go ‘ho-hum, so this is what they are passing off as management to justify the price of an MBA qualification.’

The magic came when I started applying this newly discovered (for me, anyway) methodology to my recently avowed process of organising weekly batch cooks during peak sunshine hours so as to maximise the return on investment from my solar panels.

Batch cooking for a week is not a simple process. I envy the soulful spirits who have been organised enough to do this for years. There are a lot of logistics involved. Logistics and a degree of jeopardy.

It adds an extra stage to your organisation that often reveals, and in this case did reveal, the gaps and deficiencies in the planning process.

The Gantt Chart is organised along two dimensions – on the x axis, the list of tasks to compete, thoroughly broken down. On the y axis, you include the resource limitations, most notably time. The Gantt Chart will force you to think through each of the stages that need to be completed, and the time allocation to each, as well as the points where the various tasks need to overlap. The Gantt Chart eliminates the demotivational complexes that flow from simple disorganisation and project cluttering. It uninhibits motivation.

It can reveal the exposure of tasks to resource limitations beyond the resource of time. For instance, in my kitchen I have a cast iron skillet, a Dutch oven, some trays for baking. I also have only three (yes, I know) functional elements on my stove top and limited shelf space and height in my oven.

The steps to arrive at a proper Gantt Chart are equally important. Any fool can write a shopping list. And just about anyone can list out a sequence of activities and then map them from first to last. It’s what happens when you list out these items, then attach them to a particular time use or resource, that you can begin to see where the gaps lay in your planning.

You think you’ve got it all mapped out. You think you’ve included every last item on your list. Believe me, you haven’t. Particularly with cooking. When I went through and attached every cooking and reading stage to a particular 15 minute time slot, I realised: I hadn’t soaked the beans.

These are black-eyed beans and rajma beans we are talking about. Basically, the most incendiary of beans for delicate digestive systems. What was perhaps worse, the recipe for black-eyed beans is to boil them, then let them sit for a full hour, before draining and rinsing and recooking. I hadn’t allowed time to let them sit.

The great thing about the Gantt Chart is it allows you to see in advance just how best laid your best laid plans really are.

Apart from that little disaster, however, the batch cook was a resounding success. The Gantt Chart enabled me to map out the entire day of cooking and food production, tying the most energy intensive processes to the peak sunshine hours. It even led me to totally reorder the day for maximum energy efficiency, as the task I had left until last was the biggest solar guzzler, and when I saw it I realised I had to go back to the drawing board.

They say little about Gantt Charts in your classic Jamie Oliver cookbook. But every kitchen should have one.

More for my own use (I do not expect anyone to ever download an actual Gantt Chart from my blog), I have included the Gantt Chart that I used today as a template spreadsheet which can easily be customised to a billion different occupations, only some of which need apply to dramatically reducing household energy consumption and increasing the ROI of solar panels.